HKSAR v. TSOI CHIT TSANG

DCCC 1240/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 1240 OF 2010

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REASONS FOR SENTENCE

1. D1 was one of five defendants facing a total of 7 charges of dealing with property known or reasonably believed to represent proceeds of an indictable offence contrary to section 25(1) and (3) of the Organised and Serious Crimes Ordinance Cap 455. D1 pleaded not guilty to two charges, Charges 1 and 7, and I convicted him after trial.

Charge 1

2. The amounts referred to in the charge (HKD192,273,353.14 and USD3,874,314.80) relate to funds passing through nine bank accounts held in D1’s sole name during the material period, 1 February 2005 to 7 January 2009.

Charge 7 against D1 and D2

3. The amounts referred to in this charge ( HKD17,121,961.56 and USD196,373.68) relate to funds in 2 DBS bank accounts in the name of Yantex for which D1 and D2 were the account signatories.

4. D2 pleaded guilty to three charges (Charges 2,6 and 7). D3 pleaded guilty to two charges ( Charges 3 and 6).

5. I granted the prosecution application that the offences facing D4 and D5, Charges 4 and 5, should remain on the court file, not to be proceeded with without the leave of the court.

6. D1 absconded on day 4 of the trial and I acceded to the prosecution application to proceed in his absence. His counsel withdrew from the case.

Background

7. The 5 defendants are related either by marriage or by birth.

8. D2 is the sister of D1 and is married to D3. D4 the mother of D1 and D2. D5 is the wife of D1.

9. The prosecution case against the defendants was that they were involved in laundering huge sums of money through 28 bank accounts which they controlled either personally or through two companies under their control, namely, Hong Kong Anshun Fuel Co Ltd (Anshun) and Yantex International (Asia) Company Ltd (Yantex). The total amount deposited into the 28 accounts during the relevant period exceeded HKD975 million nearly all of which was withdrawn during the same period.

10. The defendants were individually charged with offences relating to monies deposited into their personal accounts or into corporate accounts controlled by them.

11. Yantex was incorporated on the 28 September 2006 with an issued share capital of 10,000 and shares of $1.00 each. D1 held 5,100 shares and D2 held 4,900 shares. It traded in swimming goggles. D1 was the sole director, D2 the company secretary. The company filed a tax return, signed by D1, for the financial year 2007/08. This showed that for the period from 29 September 2006 (the date of incorporation) the turnover was HKD1,690,802 and the reported loss before taxation HKD1,906,089. The loss to be carried forward was reported as $1,984,887.00

12. Anshun was a limited company incorporated on the 17 July 2007 with an issued share capital of 10,000 shares of $1.00 each. It engaged in the oil trade. D2 was the sole director and shareholder. D3 was the company secretary. The company filed a tax return for the financial year 2008/09 with a reported profit of $855,229.00. The loss brought forward from the previous tax year was HKD2,016,509.

13. The 28 bank accounts were examined by a forensic accounting expert who gave evidence in the trial of D1 as PW2. PW2 prepared schedules and analyses of the accounts.

14. In respect of all bank accounts there were large cash transactions and large deposits which were subsequently withdrawn showing that such accounts were used as temporary repositories of the funds. There were large amounts flowing between the various accounts of the various defendants and the companies which created complex layers of financial transactions. Substantial deposits were received from and amounts transferred to third parties who could not be identified.

15. Large amounts were transferred in or out of the various accounts using remittance agents which made it difficult to trace the origin of the funds or their destination.

16. Substantial sums of money were transferred from the bank accounts and used for subscription of IPO’s and as consideration for other securities and later refunds of similar sums were received back into the accounts of the defendants or the companies they controlled.

17. Analysis of the deposits of cash into the respective accounts show multiple deposits were made on the same day into different bank branches or multiple deposits at different times of day on the same day at the same branch.

18. There were also unusual transaction patterns in all the relevant bank accounts which showed layering and integration of funds received into the accounts.

19. The sums handled by the various defendants were out of all proportion to their reported income for Inland Revenue purposes.

20. Clearly these offences involved substantial and detailed organisaton and very careful monitoring of funds flowing through the various accounts. I had no doubt that D1was aware of the source of the funds.

Mitigation

21. D1 has a clear record.

Sentencing Considerations

22. Yeung JA in HKSAR v Javid Kamran CACC400/2004 observed:

“30. Money laundering is a very serious offence as it is an attempt to legitimize proceeds from criminal activities.

31. Serious criminal offences are very often motivated by financial gains and those who assist criminals in laundering money, indirectly encourage them in their criminal activities…..

32. Successful deterrents against money laundering could be effective measures against crime.

33. The maximum sentence for a money laundering conviction on indictment is a fine of $5 million and 14 years’ imprisonment, which is perhaps a reflection of how such an offence is viewed.”

23. No tariff exists for money laundering offences, but such offences are invariably treated seriously and substantial sentences of imprisonment are regularly imposed. The amount of money laundered will inevitably be relevant to sentence.

24. In HKSAR v. Leung Wai Wah and Anr CACC 201/2011 the Court of Appeal were referred to a number of authorities. The court stated that :

“From various cases cited to this court [HKSAR v Hsu Yu Yi [2010] 5 HKLRD 545, Secretary for Justice v Herzberg [2010] 1 HKLRD 502, HKSAR v Javid Kamran (supra)], it appears that the following factors are relevant to sentence in “money laundering” cases:

1. The amount of money laundered, which was described as the major consideration.

2. The nature of the offence that generated the “laundered money”.

3. The extent to which the offence assisted the underlying crime or hindered its detection.

4. The degree of sophistication of the offence.

5. The defendant’s participation, both in the underlying offence and in the “money laundering” activities.

6. The length of time that the offence lasted.

7. The benefit that the defendant had derived from the offence.

8. Whether there was an international element in the commission of the offence.”

25. The total amount involved in the charge1 is HKD192,273,353.14 and USD3,874,314.80. In respect of charge 7 the amounts involved are HKD17,121,961.56 and USD 196,373,680.

26. The amount of money involved in this case is very substantial. This is the major consideration. The nature of the underlying offence is not known. I was sure D1 knew the source of the funds. D1 played a significant role in the money laundering activities which involved laundering money through a large number of accounts controlled by him, his family or companies controlled by them. The offences would have involved detailed management of the fund flows and very careful monitoring of all the accounts. The offences were committed over a period of three years.

27. In sentencing D2 and D3 I took the view that sentences of 8 years imprisonment were appropriate in respect of charges 2, 3 and 6. In respect of charge 7, I took a starting point of 4 years imprisonment, the sentence to run concurrently with the other sentences. I reduced those sentences to reflect their guilty pleas and ordered that both defendants would serve a sentence of 5 years and four months in respect of charges 2,3 and 6 and that D2 would serve a concurrent sentence of 32 months in respect of charge 7.

28. In my view, D1 was a central figure in this money laundering enterprise. Notwithstanding that the amounts involved in the two charges for which he was convicted were less than the amounts involved in the offences to which D2 and D3 pleaded I took the view that an appropriate sentence in respect of charge 1 would have been imprisonment for 8 years. My powers of sentencing are limited so I impose the maximum sentence I can impose, namely, imprisonment for 7 years. In respect of charge 7 I impose a concurrent sentence of 4 years imprisonment.