HKSAR v. CHAN PAK TAO, KEITH (aka CHAN HUNG KEI)

DCCC 1096/2021

[2023] HKDC 190

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 1096 OF 2021

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REASONS FOR SENTENCE

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1.  The defendant was charged with one count of dealing with property known or believed to represent proceeds of an indictable offence, contrary to section 25(1)  and (3)  of the Organized and Serious Crime Ordinance, Cap 455. The defendant pleaded guilty to laundering proceeds of an indictable offence in a total sum over $3.6 million between December 2016 and April 2017, he admitted the facts and was convicted accordingly.

FACTS

2.  In this case, 5 victims were deceived to pay various sums of money as “guarantee fees” for fake low interest rate loan.  As a result, they suffered monetary losses.

3.  In November 2016, Mr Tang received a call from a female claiming to be staff of Standard Chartered Bank, introducing low interest rate mortgage loan.  He shown interest and was arranged to attend the office of Anson Enterprise Service Limited at Chinaweal Centre (“the Office”). On arrival he was received by one Mr Leung.  Later he was accompanied by this Mr Leung to apply a loan of $1 million from Wealth Asia Credits Limited. Thereafter on 9 January 2017 a male claiming to be Chan Hung Kei, director of Anson notified him the loan has been approved and cheque was ready for collection.  That Mr Chan also told him the Standard Chartered Bank offered much lower interest rate, successfully talked him into drawing out a cheque of $ 1 million as guarantee for his loan application with the bank.  No loan from the bank was applied, he was being deceived.

4.  In January 2017, Ms Hung received a call from a male claiming to be staff of Hang Seng Bank, introducing low interest rate mortgage loan.  She shown interest and was arrange to attend the Office on 13 January.  On arrival she was received by one Mr Lam and being talked into drawing a cheque of $850,000 to Chan Hung Kei, CFO of Anson to facilitate her loan application.  No loan was being applied and she was being deceived. 

5.  In early January 2017, Ms Wong on two consecutive days received calls claiming to be staff of Anson introducing low interest rate mortgage loan.  As she owed credit card debts of $400,000, she shown interest and was arranged to attend the Office for debt restructuring. Eventually she was being talked into obtaining a loan of $392,800 from Unique, and drawing a cheque of the same amount to Chan Hung Kei, the CFO of Anson to facilitate the debt restructuring.  Her credit card debts were never settled; she was being deceived.

6.  In 2016 Mr Wong had a mortgage loan of $1.4 million with a finance company.  In early 2017, he received a call introducing low interest rate loan.  Later he attended the Office to discuss financial re-arrangement by getting mortgage loan from DBS Bank.  In the course, he was persuaded to borrow a total of $2.8 million from Master Finance, $1.4 million was used to settle his existing mortgage loan, and issued two cheques for $500,000 and $800,000 respectively to a Mr Lee of Anson for repayment to the Master Finance. No bank loan was applied and the loan of Master Finance was not paid off, he was being deceived.

7.  In early January 2017, Mr Tang received a call claiming to be staff of Anson introducing low interest rate loan.  He attended the Office on 13 and 21 January 2017 for the matter and was received by Max and Alex respectively.  He was told in order to have a low interest loan of $2.2 million, he had to first borrow $2 million from Golden Rich Finance Company, and draw a cheque of $880,000 to Chan Hung Kei.  No low interest rate loan was obtained; he was being deceived.

8.  The abovementioned sum of $1 million, $850,000, $392,800, $500,000 and $880,000 were all deposited into the defendant’s bank account with Bank of China in January 2017 (as illustrated by the table as per para.21).  The account was opened on 22 December 2016 and closed on 20 April 2017.

9.  The defendant was arrested for conspiracy to defraud on 12 June 2017.  Under caution, he admitted that a friend introduced Ah B, who was in trading business, to him.  Upon the request of Ah B, he opened the account with BOC for the use of Ah B.  However, the cash withdrawal card and the PIN were all along kept by himself.  Ah B notified him by WhatsApp after money deposited into the account.  Upon instructions of Ah B, he withdrew cash in the respective sums of $1 million, $850,000, $392,800, and $880,000 and passed the same to Ah B and received $1,500 reward on each occasion.  Since March/April 2017 Ah B could not be located.  He was notified the account was closed in April 2017.  He was not a staff of Anson and never met the victims.

10.  The defendant made a deed poll on 13 December 2017 to change his name from Chan Hung Kei to Chan Pak Tao Keith.

MITIGATION

11.  The defendant aged 29, single, living with his parents in public housing.  He has a clear record and completed a professional diploma in accounting and finance in 2015, equivalent to an associate degree and achieved “A” grades in many of the subjects.  In June 2016, he started working as an insurance agent on full-time basis, earning about $15,000 per month. 

12.  The defendant knew nothing about the predicate refinancing intermediary fraud.  He only acted according to the instruction of Ah B, open a bank account for his use in exchange for $7,500.  He was on bail throughout and has taken steps to rehabilitate himself.  He has participated in programs designed to develop his personal awareness and enhance his teambuilding and leadership skills.  He continues to work as an insurance agent, and has changed to work for Convoy since 2019, earning around $20,000 per month.  He makes no excuses for his conduct and is genuinely remorseful. 

13.  To further improve himself, he completed a part-time course in construction safety supervision in August 2022.  Six years has passed since his arrest in 2017, he is now a different man.  He promises he will not offend again.  Since his arrest, his mental health has deteriorated because of the prolonged investigation.  2019 was a breaking point, he was diagnosed with attention deficit and hyperactivity disorder and prescribed with medication, he was last seen by his psychiatrist in August 2019.  Since then he has been able to better manage and cope with his stress and ADHD condition.  The defendant consulted his psychiatrist again on 14 February 2022 and was confirmed still suffering ADHD but no medication was required.

SENTENCE

14.  In HKSAR v Hsu Yu Yi [2010] 5 HKLRD 545, Cheung JA has set out the amounts of the money involved in the sentences imposed in a number of money-laundering cases in the past.  It can be seen that the starting point is 3 years or so when the black money involved is between 1 million and $2 million; 4 years or so where it is between $3 million and $6 million; and could be over 5 years where it is above $10 million.  The Court of Appeal has further elaborated on the relevant factors to be considered in HKSAR v Boma [2012] 2 HKLRD 33.

15.  The Court of Appeal in Boma made an observation that given the highly variable circumstances in which the offence might be committed, it was difficult and undesirable to offer guidelines.  This was a category of offence which called for the sentencing judge to engage his “feel” for the case and his sentencing experience bearing in mind always the mischief at which the legislation was directed.  The best one could do was to draw the attention of judges to relevant considerations.

16.  It has been said in Boma that one must first recognize that for the offence of money laundering, the maximum sentence is 14 years’ imprisonment and that deterrence is the paramount sentencing principle; that the amount laundered, though not the be-all and end-all of a case, is nonetheless a significant feature.  Further, a sentencing court should take into account the following non-exhaustive list of features:-

(a)  The nature of the predicate offence;

(b)  The state of the offender’s knowledge;

(c)  Where the operation involved an international dimension, this would be a significant aggravating feature;

(d)  The sophistication of the offence, including the degree of planning;

(e)  Where the offence was committed by or on behalf of an organized criminal syndicate would be an aggravating feature;

(f)  Whether there was one transaction or many and the length of time over which the offence was committed;

(g)  Whether the offender continued to launder funds after he had discovered the nature of the funds were proceeds of an offence or a serious offence was involved; and

(h)  The role of the offender and the acts performed by him (in the case of a person down the chain, whether a benefit has been received and if so the nature and size of the benefit).

17.  The predicate offence here is refinancing intermediary fraud.  Fraud is serious offence, any person convicted upon indictment is liable to imprisonment for 14 years.  For the same reason, there is no tariff for fraud, all depending on the facts of the case.  Loan application fraud targeting people who are already in some kind of financial difficulty or look for a way to ease their financial burden.  Exploiting the need or even desperation in the victims and imposed more hardship on them by tricking them into borrowing more money from finance companies so as to steal from them.  The loss suffered by the victims not limited to the intermediary fee, guarantee, consultant fee, premium, but also the extortionate interests involved.  Depending on the role of the offender, the starting point of fraud by a refinancing intermediary is between 4 to 6 years.

18.  HKSAR v Lai Kin Hang Erwin & Others DCCC312/2016 is a classic illustration.  There were 20 victims in 18 cases being deceived of about 2,800,000 by way of consultancy fee to the defendants’ company.  They also had to pay for the bridging loans at extortionate interests.  The judge put the defendants into 3 groups: first, director and shareholder of the company, a starting point of 6 years; second, supervisor or actively involved member of the frontline fraudsters, 4.5 years; third, frontline perpetrators such as cold callers or salespersons not taking an active role, 4 years.

19.  A clear distinction should be made between defendants participating in the fraud and those charged with money laundering while only having some “sketchy idea/understanding” about the predicate offence.  In Secretary for Justice v Ngai Fung Sin, Apple [2013] 5 HKLRD 104, the Court of Appeal held that:-

“44. Generally speaking, the sentence passed in a “money laundering” case is primarily to reflect the amount of the “illicit/black money” involved. Neither the fact that the “illicit/black money” was actually not derived from an indictable offence nor the defendant’s ignorance of the actual source of the “illicit/black money” is necessarily a valid mitigating factor. On the other hand, if there is evidence which can prove from what serious crimes the “illicit/black money” was derived and if the defendant was aware of the origin of the “illicit/black money”, that would be an aggravating factor … ”

20.  There was no evidence that the defendant knew the money came from fraud, the defendant said he had no connection with Anson.  According to the defence, Ah B was introduced to the defendant by a friend, they had no previous dealing, yet Ah B had confident to have millions of money deposited into an account of which he had no control.  I considered this to be inherently improbable.  In any event, all the deposits were in large sum, no one engaging in legal business in that scale would not have his own bank account but to borrow a bank account which he had no control. 

21.  Upon learning the first $792,000 and then the following $1 million deposited into the account, at time the defendant dealt with the first $1 million, he should already have reasonable grounds to believe the money was in whole represented the proceeds of an indictable offence, the scale of the syndicate and the operation were substantial.  Yet the defendant continued to let Ah B to use his account and deal with the deposit as instructed with reward.  The account was closed in April 2017 by the bank, there were further transactions after January 2017 but these were not subject matters of the charge and I would disregard these transactions.

22.  The defence referred me to HKSAR v Lam Ka Sin [2021] 2 HKC 493, the defendant pleaded guilty to conspiring to launder the proceeds of an indictable offence, by lending her bank account to an acquaintance, to bank a cheque of $1.1 million.  The appeal court considered the appropriate starting point should be 24 months’ imprisonment.

23.  The defence also referred me to Secretary for Justice and Wan Kwok Keung [2012] 1 HKLRD 201, the defendant pleaded guilty to money laundering and bookmaking.  Between 2002 and 2009, there were 2,222 withdrawals from and 1,696 deposits into the defendant’s account involving a total of about $14 million. The Court of Appeal was of the view that the appropriate starting point should not be lower than 4 years’ imprisonment.

24.  The defendant in the present case opened a new account for the specific purpose, he made withdrawals as instructed for reward.  It is clear that he had allowed the Account to be used as a temporary depository for substantial sums of money, and he took the proactive step to withdraw the money in cash and handed over the cash to Ah B.  Within a month in January 2017, he dealt with 5 large deposit in total $3,622,800.  He had reasonable grounds to believe the operation was substantial.  Bearing in mind all the circumstances of the case and the various factors mentioned above, I considered that a proper starting point in the present case is that of 3.5 years’ imprisonment.  The defendant was granted the full one third discount for his guilty plea.

25.  The defendant was all along able to study and work steadily.  There is no evidence that his ADHD condition diagnosed in 2019 had any to do with this offence.  And despite he was diagnosed with ADHD, he was able to continue his work, made plan for continuous education to improve himself.  The defence, however, submitted there was a delay in this case and this had adverse effect on his mental stress and illness. 

26.  I was referred to HKSAR v Lin Yung Kwan DCCC 329/2010, the defendant pleaded guilty to money laundering: proceeds of illegal gambling. The offence took place over a period of 4.5 years, money over $5.2 million was deposited into the defendant’s account by 422 deposits.  The sentencing judge adopted 3 years as starting.  The defendant was not charged until 22 months after his arrest, he was given an additional discount of 4 months in additional to the usual discount of one-third.

27.  The Court of Appeal in Ho King Nang & others CACC 445/2010 reiterated the general principle related to unreasonable delay in prosecution as summarized by Cross and Cheung in Sentencing in Hong Kong page 381.  The defendants in that case were convicted of conspiracy to defraud after trial, the starting point of 4 years’ imprisonment was upheld.  Further while recognizing that further investigations might be required in that case after the arrest of the defendants, the court of appeal considered that the 2.5 years taken to charge the defendants was unduly lengthy and also upheld the 3 months’ discount given by the sentencing judge. 

28.  Taking into account of the scale of the syndicate and operation, the number of victims, and the Covid-19 epidemic in the last 3 years, additional time required for investigation is understandable.  Yet the defendant was arrested in June 2017 and his case was only brought to court on 30 September 2021. Having considered the chronology provided by the prosecution, I found there was a delay in the prosecution.  The delay would inevitably affect the defendant’s planning for his future and generate additional pressure on him.  Time being he was put on medication for his ADHD in 2019.  I allowed an additional 4 months’ deduction to reflect the length of time this matter has been hanging over his head and the impact on the defendant incidental to the delay. 

29.  The delay in this case has given him the opportunity to rehabilitate himself and with this conviction it is unlikely that he would be able to continue his insurance job.  He has already completed a course in construction safety, he could make use of his time in prison to take up further courses to prepare himself for a new career.  A reduction of 4 months has been given for the delay.  He was only 23 with clear record at time of the offence, on this I allowed a further deduction of 1 month.  However, I did not consider there to be any exceptional circumstance to suspend his sentence.

ORDER

30.  The defendant is sentenced to 23 months’ imprisonment.