HKSAR v. CHI YAOXU

DCCC 113/2017

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 113 OF 2017

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REASONS FOR SENTENCE

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1.  The present case is one of money laundering involving the equivalent of HK$28,860,000. The story, sadly, is all too familiar. The defendant, Chi Yaoxu, is a resident of China. Apart from being the sole director-cum-shareholder of a Hong Kong registered company, Plenty Heart International Limited (hereinafter referred to as “Plenty Heart”) since 8 December 2014, he had no connection to the territory.

2.  On 24 June 2015, the defendant opened an account with DBS Bank in Hong Kong under the name of Plenty Heart (hereinafter referred to as “the bank account”).  The defendant was the sole signatory and had the token for carrying out Internet banking.

3.  On about 7 September 2016, a company in Canada received instructions by email purportedly from its acquisition lawyer to deposit US$3.7 million into the bank account for the purpose of intended private acquisition. The Canadian company acted in accordance with the instructions before discovering the email was fraudulent. 

4.  Prior to 8 September 2016, the defendant contacted Plenty Heart’s company secretary in Hong Kong to inquire if there had been a remittance of US$3.7 million into the bank account.  

5.  Between 8 and 9 September 2016, there had been three attempts to transfer via Internet banking moneys out of the bank account to two different Hong Kong companies.  The total sum of three attempted transfer was US$952,372.

6.  On 29 September 2016, the defendant was arrested upon his entry to Hong Kong.  Apart from the above fund transmission and the attempted transfers, the activities of the bank account have been nominal since its inception. 

7.  According to the profit tax return filed for the assessment year 2015/16, Plenty Heart had no business activity.

8.  On the above facts, 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 Organised and Serious Crimes Ordinance, Cap 455, Laws of Hong Kong.  He is convicted on his own plea and admission of facts. 

Discussions

9.  The offence is liable to a term of imprisonment of 14 years.  Of course, the fact that the trial is carried out in the District Court means that the maximum term is confined to the jurisdiction of this court of 7 years.

10.  Money laundering is a criminal activity which is designed to legitimise ill-gotten gain.  So although the offender might not be involved in the underlying offence, he or she had assisted criminals to deposit, to dispose of or retain the proceeds of their crimes.  Such offence could also tarnish the reputation of Hong Kong as an international financial centre if international elements were involved.  The crime of money laundering has been treated as a serious crime: see the judgment of Court of Appeal in HKSAR v Javid Kamran (unreported) CACC 400/2004 and HKSAR v Xu Xia Li & Another [2004] 4 HKC 16.

11.  The emphasis is on the money handled rather than the amount the offender stood to gain or the actual loss suffered by the victim.  See HKSAR v Chen Zhen Chu [2007] 5 HKC 505 at page 513, D - E.

12.  In the present case, according to the defence counsel, the defendant was only given RMB4,000 for “selling his account”.  This is not a relevant consideration.  What is relevant was his involvement in the handling process. It has been also submitted that the victim has suffered no loss.  That was a result of the built-in defence mechanism in the Hong Kong banking system (which necessitated in the defendant’s fateful trip to Hong Kong and resulted in his eventual arrest) rather than anything attributable to the defendant’s credit.

13.  Owing to the myriad of circumstances in which the offence can be committed, the Court of Appeal has refrained from setting guidelines in sentencing.  However, previous decisions have set out examples of factors which are relevant for assessing the culpability of the persons accused.  See HKSAR v Boma Amaso CACC 335/2010 and HKSAR v Leung Wai Wah alias Liang Wei Hua CACC 201/2011.  I would not repeat the judgment in full.

14.  The followings are what I consider relevant in the present case:-

(1) The underlying offence involved a fraudulent scheme against an overseas company, the commission of which had an adverse influence on the reputation of Hong Kong as an international centre of finance.

(2) The amount defrauded is equivalent to HK$28,860,000, a sizeable sum by any standard.

(3) The active part of the offence took place within the timespan of about three weeks but as will be apparent in the next point, the groundwork had been laid much earlier.

(4) The defendant had no connection to Hong Kong. He entered the territory for the perpetuation of the crime.

(5) The defendant had played a proactive part in the scheme. Assuming he was not involved in the fraud against the Canadian company, the defendant had taken the trouble to form a limited company in Hong Kong, contracted another company to provide secretary service and opened the bank account. He had also personally called his secretary company to confirm that the moneys had been transmitted to the bank account. After attempts to transfer moneys out of the bank account failed, he came to Hong Kong personally. All these led to the inevitable conclusion that he was well aware the moneys had been deposited into the bank account and that he was instrumental in their disposal.

(6) The offence involved knowledge in the Hong Kong banking system, the registration of a company and the use of Internet banking.

(7) The defendant was paid RMB4,000 for his trouble.

15.  While there is no clear guideline for sentencing, there is no lacking in precedents.  In my view, these decisions are relevant for my consideration as they provide gauges for arriving at a sentence order that is consistent with previous decisions and the expectation of all parties affected and the society in general.  It would be, however, futile to compare the factual matrix of the cases cited in order to arrive at a proper sentence.

16.  The facts of Leung Wai Wah case (supra) involved almost 40 million representing proceeds from illegal gambling.  The defendant was actively involved in the underlying offence and the money laundering over a period of 18 months.  He also derived substantial benefit from the illegal activities.  The Court of Appeal considered 5 years and 3 months an appropriate starting point.

17.  In this case, I take into account of the defendant’s involvement, the amount defrauded and the nature of his activities and also the fact that an international company and an overseas company was also involved.  I will adopt 4 and a half years as a starting point to reflect his culpability.  

Mitigation

18.  I turn to consider the mitigating factors in this case.  The defendant is a 67-year-old man.  He is retired and living in the mainland.  He has two children, and also before his retirement, he is said to be a salesperson. 

19.  The defence submitted that he formed the company with the original intention of carrying out some food business, that is, importing food into Hong Kong.  I was also told that apart from forming the company, a company secretary, opening a bank account, he had done virtually nothing in furtherance of this so-called business project.  For reasons stated earlier, I do not believe in what he said, and I take the view that he formed the company in perpetuation of the present offence. 

20.  I take into consideration of the fact that he was paid very little money for his trouble.  I accept that although I had my grave reservation on this contention, in any event, the amount the defendant received from his criminal activity is one of the factors but not the most relevant factor in my consideration.

21.  The only relevant factor in this case is the fact that he pleaded guilty, and he will be accorded worth the usual one‑third discount.  So the starting point after deduction of one-third would amount to 36 months.

22.  I also take into account of his age and that he is not a Hong Kong resident.  I would accept that people who are not Hong Kong residents and who came to Hong Kong and serve a term of imprisonment would suffer additional difficulties, I have also taken into consideration his health conditions. Although these matters are strictly speaking not relevant mitigation factors, I would as an act of clemency exercise my discretion to reduce another 3 months from the total 36 months of imprisonment.  In all, he has to serve 33 months’ imprisonment.