HKSAR v. YANG PU

DCCC 991/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 991 OF 2014

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Reasons for Sentence
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1.  In this case the defendant Yang Pu pleaded guilty to the following three charges:

(1) 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 Crimes Ordinance, Cap 455;

(2) 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 Crimes Ordinance, Cap 455; and

(3) Attempting to Deal with Property known or believed to represent proceeds of an indictable offence, contrary to section 25(1) and (3) of the Organized and Serious Crimes Ordinance, Cap 455 and section 159G of the Crimes Ordinance, Cap 200.

2.  He is convicted as charged upon his plea and admission of facts.

Background

3.  (i)    On 26 March 2013, JSC HK Management Limited (“JSC”) was incorporated and registered in the Hong Kong Company Registry.

     (ii) On 13 May 2013, the defendant was nominated as JSC’s sole director.

     (iii) On 13 June 2013, the defendant attended the office of China Construction Bank (Asia) Corporation Limited (“the bank”) for a meeting previously arranged by an intermediary with the staff of the bank, PW3. He opened an account under the name of JSC (“the JSC account”).

     (iv) According to the bank’s record, the defendant was a director of JSC and the sole signatory of the account. JSC had a registered Hong Kong office but its correspondence address was in China. The bank offered e-banking services for the JSC account. Only two sums (ie those referred to Charge 1 and 2), had been paid into the JSC account.

Charge 1

4.  On 28 July 2014, upon email instructions from its Hong Kong business partner K K Toys, a Russian company caused to be paid into the JSC account the sum of US$55,000.

5.  On 29 July 2014, a total sum of HK$95,000 was transferred from the JSC account to an overseas account by two e-banking withdrawals. 

Charge 2

6.  On 30 July 2014, upon email instructions from its Hong Kong business partner K K Toys, another Russian company caused to be paid into the JSC account the sum of US$176,364.45.

7.  On the same day, a total sum of US$150,000 was transferred from the JSC account to three overseas accounts through e-banking withdrawals.

8.  The email instructions had not been authorised by K K Toys.  The JSC account had never been held by K K Toys.  K K Toys reported to the police upon discovery of the fraud.

9.  On 30 July 2014, the JSC account was frozen with its balance at US$27,180.  After the account was frozen, the defendant had called PW3, the staff of the bank, enquiring about changing e-banking password.

Charge 3

10.  On 18 August 2014, the defendant appeared personally at the bank trying to withdraw the balance of all the money left in the JSC account.  He was arrested on the same day.

Admissions

11.  Under caution, the defendant admitted that he personally attended the bank to open the JSC account.  He was aware of the withdrawals made at the end of July and he had called to make enquiries about changing the e-banking password for the JSC account.

Others

12.  The three cellular phones found on the defendant contained text messages about the withdrawals from the account and the meeting the defendant had with PW3. 

Sentencing considerations

13.  The offence carries a maximum of 14 years; of course the fact that it is tried in this court would put a cap of 7 years. 

14.  The present case involved two different fraudulent schemes carried out within a short period of time. There were three victims, of which two were Russian companies.  A total sum of US$272,180 had been defrauded.

15.  For the widely varied circumstances of its commission (hence the different degrees of culpabilities of its players), the Hong Kong Court of Appeal has labelled the offence as “one of those categories of offences in which it was neither realistically possible nor desirable to attend guideline[1].”

16.  Although the amount involved is not the only consideration, it is a significant factor to be considered[2]. 

17.  The authorities are clear on this: the paramount consideration in sentencing is one of deterrence[3].

18.  Both in the Shu Yu Yi[4] case and the Boma Amaso case, the Court of Appeal has set out a list of factors relevant for the consideration of the sentencing judge.  I will not repeat the whole list. Those which are relevant to the present case are as follows:

(i) The maximum sentence for the crime is 7 years in the District Court.

(ii) The total loss suffered by the victims was the equivalent of HK$2,123,000.

(iii) The predicate offence is a commercial fraud. Although there is no evidence to show the defendant was involved in the predicate commercial frauds, it is clear that the defendant was privy to the collateral matters vital to its success. Arrangements such as the setting up of the Hong Kong company, being nominated as its director, the opening of JSC account and the subsequent movements of the monies are not possible without involving the defendant. There is also evidence to show that the defendant sought to circumvent the freezing of the account by trying to change the e-banking password. In my view, the defendant played a vital role in the scams.

(iv) There is an international dimension to the crime. Two victims were from Russia and one from Hong Kong. The monies were transferred to and out of a bank account in Hong Kong.

(v) The scheme involved the theft of information from its Hong Kong victim’s computer, the fraudulent use of emails, the setting up of a limited company, the nomination of the defendant as a sole director, the opening of a company bank account in Hong Kong and the use of e-banking. It is a relatively sophisticated crime involving detailed planning and the practice of deceit on victimised companies and the bank.

(vi) After the crimes were discovered and the account frozen, the defendant had tried to milk the remainder of the ill-gotten gain by attempting to clean out the JSC account.

(vii) Although there is no evidence to suggest that the defendant was the mastermind of the scams, the defendant’s role is definitely not peripheral. Without the part played by the defendant, the monies could have been traceable or might even be recoverable.

19.  The present case is definitely not the kind of account lending cases in which the culprits lent the account for the use of others without knowing what was going on behind the scene or the activities in the account. 

Cases of comparable magnitude

20.  The Court of Appeal in the aforementioned Shu Yu Yi case has listed a number of decisions setting out the amounts involved and the starting points adopted.  The followings are some of those referred to in the judgment and which are of comparable magnitude.

HKSAR v Javid Kamran[5]

One count of money laundering.

Total amount involved; over a million.

The defendant used his bank account to launder the proceeds for drug trafficking activities over a period of 18 months. The Court of Appeal considered a 4 years’ starting point manifestly excessive and reduced it to 3.

HKSAR v Lee Ka Ki (transliteration)[6]

Two counts of money laundering.

Total amount involved, HK$11,570,000.

The defendant opened two accounts to receive illegal bets for a monthly remuneration of HK$8,000. All monies paid into the account were withdrawn or transferred to another account shortly after the same were deposited. The Court of Appeal considered the overall sentence 5 years upon conviction after trial was manifestly excessive and substituted it with an order of 3 years’ imprisonment.

HKSAR v Zhan Jianfu[7]

Two money laundering charges.

Total amount involved: over 2 million Hong Kong.

A Taiwanese resident deceived by a lottery fraud was induced to remit a total of $2 million on two bank accounts held by the defendant. The defendant was a mainland resident who withdrew money from the accounts from time to time. The trial judge adopted 3 years as the starting point for each charge, reduced to 2 to reflect the guilty plea but ordered 8 months to run consecutive, making a total of 32 months. The Court of Appeal upheld the sentence ordered.

HKSAR v Poon Lok Man[8]

Three money laundering charges.

Total amount involved, HK$2,042,120.47.

Two foreign residents deceived by investment or lottery fraud were induced to remit funds on four different occasions into the three Hong Kong bank accounts held by the defendant. The monies were then withdrawn in cash or transferred via ATM from the defendant’s accounts within one or two days of the remittance. In return, the defendant’s friend who asked him to let him use the account as a favour viewed the defendant’s debt of HK$50,000 to HK$60,000.

Under caution, the defendant admitted to have allowed a friend to whom he was indebted to use his bank accounts for the purpose of remitting monies. He withdrew the money and passed them to this friend. The trial judge accepted that he had no knowledge of the predicate offences and adopted a 3-year starting point for each charge, reduced to 2 to reflect the guilty plea but ordered 8 months on the 3rd charge to run consecutive to the rest. The total sentence was 2 years and 8 months.

The sentence was reduced to 2 years by the Court of Appeal which pointed out that the original sentence (reflective of a notional 4-year starting) was excessive in the absence of other aggravating circumstances. It also stated that the sentence order made in the case of Zhan Jianfu was justified by the aggravating factor that the defendant specifically came to Hong Kong to open accounts to receive proceeds of fraud.

21.  Having considered the above cases, I am of the view that the present case is similar on the facts and culpability to Zhan Jianfu, I would adopt a starting point of 3 years for each count. 

Mitigation

22.  The defendant is aged 26, a mainland resident, educated up to P4 level in China.  He has no previous criminal record in Hong Kong.  He worked as a security officer in China.

23.  According to his lawyer, the defendant opened the account in Hong Kong at the request of a friend and was promised the reward of 50,000 RMB.  He did so under financial pressure.  He himself did not know how to operate computer, nor did he know about the account. 

24.  I have reservation on his plea of ignorance.  He had come to Hong Kong to open the JSC account as part of the groundwork for the fraud.  After the JSC account was frozen, he had tried to change the password for the account and had even come to Hong Kong to withdraw the remainder of the cash.   That was obviously not consistent with his contention.

25.  From his background and submissions from his lawyer, I did not find any valid mitigating factor.  As he had pleaded guilty, the sentence of each count is reduced to 2 years to give credit to his plea. 

Totality

26.  Charge 1 and 2 are part of the scheme; they happened within a short period of time and therefore they should run concurrently. 

27.  In respect of Charge 3, I am of the view that it was an attempt on the defendant’s part to further deal with the proceeds of the ill-gotten gain. 

28.  I also take into account the aggravating factors listed above.

29.  Having considered the case as a whole, I would order 6 months of Charge 3 to run consecutive to the other sentence orders. In all, the defendant is to serve a total of 30 months.