HKSAR v. LAU SIU WAN

DCCC 1291/2023

[2024] HKDC 944

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 1291 OF 2023

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REASONS FOR SENTENCE

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1.  The defendant pleaded guilty to 4 counts of dealing with property known or believed to represent the proceeds of an indictable offence, contrary to section 25(1)  and (3)  of the Organized and Serious Crimes Ordinance, Cap. 455 (hereinafter referred to as “money laundering offences”).

Facts

2.  All the details of the case have been set out in the Amended Summary of Facts dated 5 June 2024 admitted by the defendant.  I am not going to repeat all the facts here.

3.  In gist, this case involved a syndicate operating a local vice website “sex141.com”.  Between 2006 and 2013, over 70 suspects were arrested. 

4.  Investigation revealed that there was substantial fund flow in 4 local bank accounts held under the name of the defendant, which did not commensurate with the defendant’s reported income.  There were large number of deposits into the accounts.  While the funds deposited were not withdrawn with strict mirror pattern, there were frequent deposits and/or withdrawals:  

(1)  Charge 1: between 3 December 2006 and 20 August 2010, the amount involved was around HK$6.25 million;

(2)  Charge 2: between 20 May 2010 and 9 July 2013, the amount involved was around HK$6.67 million;

(3)  Charge 3: between 17 March 2010 and 30 November 2013, the amount involved was around HK$9.99 million; and

(4)  Charge 4: between 1 August 2006 and 31 December 2013, the amount involved was around HK$ 5.62 million.

5.  The defendant left Hong Kong on 4 December 2013.  On 25 February 2023, the defendant was arrested when he arrived Hong Kong from Taiwan.  The defendant remained silent under caution.

Mitigation

6.  The defendant, aged 56, is married with 2 children.  Since 2013 and prior to the arrest, the defendant has been living with his family in Taiwan and has been working for several years in a business which operates Escape Rooms. 

7.  Mitigation letters mentioned the defendant was hardworking, kind-hearted and caring.  He was eager to help others and frequently took part in charitable work.

8.  Other defendants involved in the syndicate was dealt with in the case DCCC Nos. 991 and 1007-1010 of 2016.  The trial of that case was completed in May 2019.  The first defendant in that case, Chan Pau Chi (“Chan”), was described by the trial judge as the boss of other defendants. The syndicate operated a vice website which provided advertising services for sex workers.  The syndicate’s conduct constituted living on the earnings of prostitution of others.  It was submitted that the criminality of that offence was at the lower end as the sex workers were not victims of the offence and they chose to promote their services by using the services of the syndicate.  The defendant’s role was to arrange photographs to be taken of the sex workers and have the photographs later uploaded onto the website.  He also organised transport to the studio.  For these services, he was only paid a monthly salary. 

9.  The defendant confirmed that the cash deposits in the 4 bank accounts were advertising fees paid by the sex workers.  Both the cheque and cash withdrawals from the accounts were to cover expenses.  It was pointed out that in respect of the HSBC account in charge 3, the cash deposits into the account amounted to around HK$7.23 million.  The non-cash deposits into the account related to some share transactions in which the defendant was involved so that only the cash component constituted the proceeds of the predicate offence.

10.  The defence submitted that Chan, the boss of the syndicate, was convicted after trial of 3 money laundering offences involving a total sum in excess of HK$35 million.  Given the defendant played a lesser role than Chan, this court was urged to adopt a lower starting point than those adopted for Chan.  

11.  The defence also submitted that at the time the defendant left Hong Kong in 2013, he was not aware of the investigation of this case.  He later heard of the convictions of Chan and other defendants in 2019.  He intended to return to Hong Kong to surrender himself in 2019 but was only able to do so in February 2023 due to Covid-19 and the social events in Hong Kong in 2019.  

12.  Defence submitted one of the factors to be considered is the nature of the predicate offence.  In this case, while the predicate offence is living on the earnings of prostitution of others, the sex workers are not victims in the sense that they have used the services to which the defendant contributed, for the purpose of promoting their sex services.

13.  Whilst the defendant played a role in the operation of the website and his bank accounts were used to launder the proceeds of the predicate offence, his personal benefit was limited to his monthly salary and expenses.  

14.  Given the defendant’s guilty plea and voluntary surrender, this court was urged to grant him the usual 1/3 discount.  Further, this court was urged to adopt a lower starting point than those of Chan and impose total concurrent sentences on all 4 charges. 

Sentence

15.  The defendant has 4 previous conviction records, none of them is similar to the nature of the present offences.  In sentencing, I will not consider the defendant’s previous conviction records.

16.  There is no sentencing guideline in respect of money laundering offence.  The Court of Appeal has on many occasions expressed that money laundering is a very serious offence and deterrence is paramount as the criminality in laundering arose from the encouragement and nourishment it gave to the crime in general[1] .  In HKSAR v Wan Kwok Keung [2012] 1 HKLRD 201, the Court of Appeal stated that the sentence for money laundering offence should mainly reflect the amount of money laundered and not the benefit obtained by the offender.  If the “black money” was proved to have originated from serious and organised indictable offences, including drug trafficking, kidnapping and blackmail, and human trafficking, or the defendant’s benefit was huge, the sentence should be adjusted upward[2].  In HKSAR v Boma [2012] 2 HKLRD 33, the Court of Appeal said the amount of money laundered is a significant feature[3].  It also elaborated on the relevant factors to be considered and provided a non-exhaustive list of such factors[4]:

(a)  the nature of the predicate offence;

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

(c)  where the operation involves an international dimension, this will be a significant aggravating feature, and Mainland is included for the purpose of international dimension;

(d)  the sophistication of the offence;

(e)  where the offence is committed by or on behalf of an organised criminal syndicate, that is an aggravating factor;

(f)  the number of transactions and the length of time over which the offence was committed;

(g)  it will be an aggravating feature where the offender continues to launder funds after he has discovered the funds are the proceeds of an offence or after he has discovered the nature of the offence which is serious; and

(h)  the role of the offender and the acts performed by him.

17.  The fact that the defendant did not receive any benefit or only received a small amount of benefit is not a mitigating factor[5] .

18.  In the present case, the predicate offence was living on earnings of prostitution of others by way of providing advertising services to sex workers for a fee.  A criminal syndicate was involved.  Judgment of the Court of Appeal[6] regarding the application for leave to appeal against conviction and sentence of Chan and his wife contained some details about the syndicate.  It mentioned that Chan was the boss of the website, with someone responsible for acquiring bank accounts from others to deal with proceeds of the offence, someone was assigned as editor and providing technical support, while others were employed to administer the website.  Chan and his wife laundered some of the proceeds.  It would appear that the degree of organization of the syndicate is not low. 

19.  The defendant was actively involved in the operation of the advertising service of the website.  He used 4 bank accounts to receive the proceeds, i.e. the fees paid by the sex workers.  The amount of funds laundered in the 4 charges are around HK$6.25 million, HK$6.67 million, HK$9.99 million and HK$5.62 respectively.  The total amount of funds laundering is around HK$28.53 million.  I note the submission from the defence that the amount of funds laundered in respect of charge 3 should be limited to the cash deposits in the total sum of around HK$7.23 million given there was transfer deposit of proceeds from sale of shares.  While I accept there was deposit from proceeds of sale of shares in that account, I cannot ignore the fact that money used for the purchase of the shares was from the proceeds of the predicate offence.  For each of charges 1-3, the offence period spread over 3-4 years.  For charge 4, the offence period spread over almost 7.5 years.  In all 4 charges, the defendant was actively involved in effecting the withdrawals/transfers of the money from the accounts to some third parties.  In committing the offences, it was conceded that the defendant knew the work he undertook was illegal a few months after he started working for the syndicate but he continued to undertake the work thereafter.  

20.  In HKSAR v Lam Hing Wan[7] referred by the defence, the appellant was convicted after trial of 2 counts of money laundering offences.  The first one involved funds of over HK$15 million, the second one involved funds over HK$4 million.  All the funds flowed from illegal gambling operation over a period of 3 years and 4 months.  On appeal, the Court of Appeal considered the appropriate starting point for the two charges to be 5 years and 2 years and 10 months respectively. 

21.  Defence referred to the sentence imposed on Chan and urged this court to adopt a lower starting point given the defendant’s role.  The amount of funds laundered by Chan was around HK$9.39 million, HK$20.88 million and HK$5.1 million respectively.  The starting point for the 3 charges was 28 months, 32 months and 27 months respectively.  It is well established the sentence imposed by another District Judge is not binding on me.  While I accept the predicate offence is in the category with lower seriousness, given the amount laundered and Chan’s role, I consider the starting point adopted in Chan’s case was much lower than the usual starting point appropriate in the circumstances. Therefore, I will not adopt similar starting points as Chan’s case. 

22.  Having considered the circumstances of the offences as stated above, the defendant’s background and mitigation, the sentences for the 4 charges are as follows:

(1)  Charge 1: starting point 36 months, reduced to 24 months for plea

(2)  Charge 2: starting point 36 months, reduced to 24 months for plea

(3)  Charge 3: starting point 39 months, reduced to 26 months for plea

(4)  Charge 4: starting point 39 months, reduced to 26 months for plea

23.  As the defendant returned to Hong Kong to surrender himself, I am prepared to grant him a discount of 3 months.  Given the defendant has actively undertaken charitable work, I am prepared to grant him a further discount of 1 month.  Thus, the sentence for each charge is reduced by 4 months.  The sentences for the 4 charges are 20 months, 20 months, 22 months and 22 months respectively.

24.  Given the total amount of funds laundered is over HK$28 million with the offence period spread over several years and the defendant’s active role in the predicate offence as well as the laundering of funds, I consider a total sentence of 38 months to be sufficient to reflect the criminality of the defendant’s act.  To achieve this sentence, 6 months of the sentence of each of charges 2, 3 and 4 will run consecutively to the sentence of charge 1, making a total sentence of 38 months’ imprisonment.