HKSAR v. CHEUNG CHOI HING AND OTHERS

­­­­­DCCC 458/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 458 OF 2013

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Reasons for Verdict

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Introduction

1. Originally there are three defendants, D1 to D3.  D2 and D3 have absconded since May 2014. Prosecutor asks for the trial to proceed against D1.  Counsel for D1 has no objection.

2. There are four charges but D1 faces Charges 1 to 3 only.

3. At all material times, D1 was a bank manager of the Standard Chartered Bank ‘SCB’.  D2 was a Malaysian national, purportedly a merchant.  D3 was D2’s assistant.  D2 opened some overseas companies including Sunny Drive Limited ‘SDL’ which was incorporated in the Marshall Islands and Glocal Billion Management Limited ‘GBML’ registered in the British Virgin Islands.  These two companies opened accounts with SCB.  D1 looked after those accounts. 

4. Prosecution allege D1 conspired with D2 and D3 to launder the money in the said accounts. (Charge 1)

5. In the course of helping D2, D1 conspired with D3 to withhold from SCB SDL’s change of shareholders by intentionally failing to disclose that in a document called “Customer Due Diligence Checklist” ‘the Checklist’. (Charge 2)

6. Prosecution also allege that D1 accepted a cheque of HK$30,000 from D2, when D1 was only entitled to a total of HK$25,596 as reimbursements for four sums he had paid on behalf of D2.  Prosecution say the balance or the surplus of $4,404 was accepted by D1 as reward for or inducement to his handling of the accounts of D2 and D2’s many companies including SDL and GBML. (Charge 3)

Charge 1

7. Charge 1 alleges that D1 between 7 July 2011 and 22 October 2012 conspired with D2 and D3 to launder the money in four accounts of SDL and three accounts of GBML.  The accounts of SDL are called Accounts 1 - 4 in the trial and those three of GBML are called Accounts 5 - 7.  Charge 1 alleges that D1 to D3 conspired to deal with the money knowing or having reasonable grounds to believe it represented proceeds of an indictable offence. But in the course of the trial, Prosecutor makes it clear that he only relies on the second limb, ie the having reasonable grounds to believe limb.

8. In his opening, Prosecutor alleges D2 used SDL’s accounts to deal with jewellery and gold trading business in Malaysia with the suppliers and/or clients (Paragraph 4 of Prosecution Opening).  D2 also set up GBML and opened accounts with SCB.  On the dates stated in Charge 1, D2 caused SDL’s clients to remit transfer and/or deposit their payments of goods ranging from several tens of thousands to millions of dollars, totalling about HK$174 million into SDL’s accounts.  In the same period, D1 as instructed by D3 assisted D2 to remit about 30 sums totalling HK$160 million from SDL’s accounts to some overseas accounts and those of GBML (Paragraph 6 of Prosecution Opening).  In Paragraph 7 of the Opening, Prosecutor alleges that D2 between March and October 2012 caused SDL’s clients and his business associates to remit, transfer and/or deposit about HK$34 million into GBML’s accounts.  In the same period, D1 as instructed by D3 assisted D2 to remit and transfer all the money to some overseas accounts and SDL’s accounts.

9. It is said that the purpose of the three defendants’ exercise was to avoid D2’s paying profit tax in Malaysia concerning his jewellery and gold trading business (Paragraph 6 of Prosecution Opening). That is reiterated in Paragraph 9 of the Opening.  It is also said D1 was aware of that but he failed to report to his employer, ie SCB.  D1 continued to assist D2 and D3 in that circumstance.  The money is suddenly described in Paragraph 9 of Prosecution Opening as “proceeds of tax evasion”. Previously it is called payments from D2’s clients and business associates.

10. Dealing with business income to evade tax is not money laundering; dealing with proceeds of tax evasion is.  From his opening, it seems Prosecutor tries to prove D1 to D3 conspired to deal with proceeds of D2’s tax evasion from the Malaysia Government.

11. In the evidence adduced by Prosecutor, there is indeed some reference of tax evasion or avoidance on the part of D2. 

12. Nevertheless, Prosecutor in the course of the trial makes it clear that he would only rely on the having reasonable grounds to believe limb.  Apparently Prosecutor does not seek to prove the money represented proceeds of D2’s tax evasion or that D1 conspired with D2 and D3 to deal with the money with knowledge of the nature of the money as proceeds of tax evasion.  Under the less onerous limb (the having reasonable grounds to believe limb), Prosecutor only has to prove that D1 conspired with D2 and D3 to deal with the money having such grounds that anyone looking at those grounds objectively would believe the money represented proceeds of an indictable offence.

13. Yet in his closing submission, Prosecutor again submits that D1 was aware of D2’s tax evasion and knowingly assisted D2 to launder the money for such purpose (Paragraph 67 of Prosecution Final Submission). It is also said that D1 was well aware the money was related to tax evasion (Paragraph 68 of Prosecution Final Submission).  SDL was used by D2 to avoid tax (Paragraph 77 of Prosecution Final Submission).  D1 even told his colleague, Mark So, that D2 wanted to avoid tax (Paragraph 78 of Prosecution Final Submission). Nevertheless, in Paragraph 82 of his final submission, Prosecutor again states that he only relies on the having reasonable grounds to believe limb to prove Charge 1.

Charge 2

14. Charge 2 alleges D1 conspired with D3 on or about 27 April 2012 with intent to deceive SCB for D1 to use the Checklist relating to SDL.  The document contained a material statement which was false, erroneous or defective in that D1 intentionally did not disclose the full details of SDL’s shareholders, thereby failing to update SDL’s information.  Prosecution say D1 did that to mislead SCB.  27 April 2012 was the date D1 filled the Checklist.

Charge 3

15. Charge 3 alleges D1 on or about 5 September 2012 accepted a sum of money as inducement or reward for or otherwise on account of his handling the accounts of D2 and D2’s companies including SDL and GBML.  5 September 2012 was the date D1 received a HK$30,000 cheque from D2.  D1 was only entitled to part of it. The rest, Prosecution say, was accepted by him as an advantage. Originally Prosecution say D1 had only paid $6,250, $10,296 and $8,750 (totalling $25,296) on behalf of D2.  D1 was entitled to reimbursement to that extent. However, in the course of the trial Prosecution agree that D1 had paid another $300 for D2.  The said advantage amount is therefore reduced to $4,404 from the original alleged amount of $4,704.

Issues

Charge 1

16. D1 contends that he provided service to D2 in the discharge of his duties as a Relationship Manager with SCB. He denies he knew or had reasonable grounds to believe the money in the accounts of D2’s companies represented proceeds of an indictable offence.  D1 says he believed D2 was a proper merchant with many businesses and the transactions in those accounts were all business or investment-related. 

17. D1 also denies he knew D2 wanted to evade tax from the Malaysia Government.

Charge 2

18. D1 admits he filled the Checklist on 27 April 2012. He did not report to SCB on the change of SDL’s shareholders because he was not aware of any existing or impending change of that nature.

19. The change was actually executed on 8 May or 9 May 2012.  D1 contends that SDL’s structure in fact had not been changed by 27 April 2012 so the statement or answer of “No change” was neither false, erroneous nor defective.

20. D1 further contends that even if he had known of the impending change, he need not and should not report that on the Checklist as a bank officer would only act on information confirmed by written proof.

21. D1 denies he had any intent to deceive or mislead SCB.

Charge 3

22. D1 says any surplus from the 30,000 cheque was received by him only as future expenses for services to be rendered to D2 upon his request. It was not an inducement or reward for his handling of the accounts of D2 and his companies.

Prosecution Case

23. Prosecutor calls eight witnesses to testify in the trial.

PW1, Lydia Lee, was a staff of a secretarial services company called the Offshorer Businesses Services (HK) Limited ‘Offshorer’.

PW2, Maria Lee, was D1’s supervisor in SCB.

PW3, Mark So, was a Treasury Service Specialist with SCB.

PW4, Mr Ahmed, was a director of the Gempro Hong Kong Limited. He was a gems trader.

PW5, Joy Yuen, worked in the Financial Crime Intelligence Operations of SCB ‘FCIO’. That was a compliance department.

PW6, Terry Ng, was Head of FCIO.

PW7, Kevin Tsui, was a colleague of D1.

PW8, Mr Cheng, was a Forensic Accountant of ICAC.

24. Defence Counsel does not challenge the credibility of all prosecution witnesses except for Mark So’s saying that D1 had told him D2 wanted to avoid tax.  Counsel put to Mark So that D1 never told him so.  Mark So disagrees.

25. Defence Counsel does not attack the credibility of PW8 (the Forensic Accountant) but he does comment on his lack of banking experience when analysing the situation.  Counsel also says Mr Cheng lacks full information of the case to make a comprehensive analysis.  Mr Cheng agrees that he does not have any banking experience.  He also agrees that he does not have full information on the case. He just analysed the transactions on the materials he was provided with by the investigators.

26. There are many exhibits (see Exhibit List). They include among others two video statements voluntarily made by D1 (Exhibit P389 and P390), the full set of records kept by SCB in respect of SDL and GBML (P382) and records of communication by WhatsApp, email and SMS between D1 and D3 as found in D1’s and D3’s mobiles and also in D1’s computer (P363 to 369). Prosecution set out a total of 1,444 entries in Schedule 1 in a chronological manner.

27. There is no dispute on the chain of exhibits or the authenticity of the documents.  Prosecutor has helpfully laid out the main exhibits in bundles.  There are actually 14 bundles.  The pages in Bundles 1 to 10 are clearly numbered.  I shall refer to the relevant exhibits by their exhibit number but where only part of an exhibit is worth mentioning, I shall only cite the pagination number in the bundles.

28. Defence Counsel also does not challenge the general accuracy of the document exhibits. However, he says Prosecutor’s arrangement of the 1,444 entries in Schedule 1 calls for questions and scrutiny.  Schedule 1 is not an exhibit itself but an aide mémoire prepared by Prosecution from the communication records as found in the devices belonging to D1 and D3. Counsel says some entries in Schedule 1 may be misplaced and thus lead to misunderstanding or misinterpretation.  Counsel also points out that not all the entries found in D3’s mobile phone can be found in D1’s devices.  He also says the time stamps of some entries may not be correct because D1 and D3 were often in different time zones. The two might not be responding instantly to each other. If there was a delay in response, it would not be always easy to be sure which item was replying to which one. 

29. Defence Counsel has prepared Schedule 3 which contains the same 1,444 entries.  Counsel highlights there the questionable entries and endorses his comments in his written submissions on the special issue.

The Companies

30. Although Charge 1 only names SDL and GBML, the prosecution case contains proof that a company by the name G7 Asia International Limited ‘G7 Asia International’ was also involved in three deals (Deals 130, 178 and 179). The evidence also shows that D2 was associated with or even had control in this company though on record the sole shareholder-cum-director was a Malaysian, Mr Low Aik-meng.

SDL

31. Lydia Lee worked in Offshorer.  This secretarial service company helped people to set up overseas companies. 

32. SDL was incorporated in Marshall Islands in March 2011.  In May 2011, D2 bought SDL from Offshorer and became the sole shareholder-cum-director.  D2 paid a certified public accountant to certify the documents for the purpose of opening bank accounts in Hong Kong.

33. D1 was working in the Small and Medium Enterprises Section of SCB.  Lydia Lee referred D2 to D1 to open bank accounts.  Previously she had also introduced clients to D1 to open bank accounts. 

34. SCB had run checks on SDL and D2.  Nothing unusual was revealed.  In June 2011, D1 opened an integrated account for SDL which consisted of:

Account 1, a Hong Kong dollar savings account,

Account 2, a Hong Kong dollar current account,

Account 3, a US dollar savings account, and

Account 4, a US dollar current account.

D1 remained as Relationship Manager of SDL until he was arrested by ICAC on 22 August 2012. D2 and D3 were also arrested on that day.

35. The overseas registration of SDL had to be renewed annually.  The fee required for the year of 2012 - 2013 was HK$6,250.  D1 on 20 March 2012 paid this sum to Offshorer with his own cheque (B35).  “B” stands for bundle page number.

36. Emails between D3 and Lydia Lee (B59 - 64) show that D3 on 20 April 2012 asked Lydia Lee to help transferring 75 per cent of SDL’s shareholding to a China man, Zhao.  We now know this man was  Mr Zhao Hongbing.  Zhao was also made a director of SDL.  D3 asked for the change of SDL’s structure to be backdated to 1 June 2011.  Lydia got the instructions and prepared documents.  She emailed the documents to D3 for signature.

37. D1 was not a party in those emails between D3 and Lydia. However, he subsequently sent a courier packet to Lydia.  Lydia cannot remember the date she got the packet. She said it was likely to be 2 May 2012. [1 May was a Public Holiday.]  That packet contained documents signed relating to the change in SDL’s structure. It also contained a cheque dated 28 April 2012 issued by SDL in the sum of HK$1,600 as payment for the amendment.  Lydia banked in that cheque on 3 May 2012 but soon discovered that the requisite sum should be $1,900.  She contacted D3 for the shortfall of $300.  D3 asked her to contact D1.  Lydia then wrote D1 an e-mail. The time of that e-mail was 1717 hours; the date was 3 May 2012 (B2741).  In that e-mail, Lydia asked D1 to pay the $300.  At 8.25 pm on the same day, D1 replied to Lydia by e-mail (B2742), “OK, no problem, I will arrange it from the client”.  The next day, D1 did pay $300 into the account specified by Lydia.  D1 emailed the payment slip to Lydia and cc copied to D3 (B65). 

38. In court, D1 admits he paid the $300 but he was not sure which company he was dealing for D2 as D2 and D2’s friends had many companies.  D1 says he did not type in the subject title of his own e-mail ie. “Re: Sunny Drive Limited”. He was just replying to Lydia’s e-mail. He says he did not pay attention to the subject title of Lydia’s incoming e-mail which was “Sunny Drive Limited”.  D1 says before he was arrested he had not known of the change in SDL’s structure.

39. After receiving the money, Lydia continued with processing the change in SDL’s structure.  That work was completed on 8 May 2012.  The next day, Lydia emailed D3 telling her that the completed documents would be sent to Malaysia by registered mail.  Lydia did post those documents to D3 on 10 May 2012.

GBML

40. Documents B86 - 126 show that in March 2012 D1 helped D2 to acquire a BVI company called Glocal Billion Management Limited ‘GBML’. D1 paid the cost to the secretarial service company involved a sum of $10,296 (B102). D2 was registered as the sole shareholder-cum-director.  GBML was incorporated in the British Virgin Islands on 7 March 2012.

41. In the same month, D1 helped D2 to fill documents to open accounts in SCB (B699 – 708).  However, D1 let his colleague Kevin Tsui process the opening. Thus on the bank’s record Kevin was the manager of GBML’s accounts which consisted of:

Account 5, a Hong Kong dollar current account, and

Account 6, a Hong Kong dollar savings account.

42. In court, D1 says D2 was a low revenue generating client so he let Kevin look after this new company of GBML as a Portfolio Manager.  D1 was a Relationship Manager. He says a Relationship Manager would focus on high revenue generating clients.

43. Kevin Tsui tells the court he was merely a Portfolio Manager of GBML looking after the general affairs of the accounts.  He says D1 as Relationship Manager could still help GBML to make investments.  Kevin said it was not abnormal for a Relationship Manager to pass clients to a Portfolio Manager for account opening.  The Relationship Manager could remain in contact with the client.

44. Kevin says D1 had passed to him not only GBML but also G7 Asia International.  Kevin himself had not provided any service to these two companies. 

G7 Asia International

45. This company was incorporated in the British Virgin Islands in January 2012.  It was acquired by a Malaysian, Mr Low Aik-meng, as the sole shareholder-cum-director (B824 – 847).  We can see from the evidence in Schedule 1 that Low was an associate of D2 and that D2 had say or control in this company.  D1 and D3 occasionally communicated on matters in relation to this company.

46. In March 2012, G7 Asia International opened bank accounts with SCB.  D1 filled the forms (B815 – 823) and then passed them onto Kevin Tsui to deal with the processing of G7 Asia International.

47. A Compliance Officer of FCIO, Ivan Tam, raised an enquiry of G7 Asia International’s activities on 11 September 2012.  He sent an e-mail to Kevin Tsui, who on record was G7 Asia International’s accounts manager (B384).  On 13 September, Kevin replied to Tam (B385).  In court, Kevin says he himself had not verified the information in that reply. The information was passed onto him by D1.  Kevin thought the information came from the client. He would trust the client’s integrity.  He also says that it was hard to check on the information to see whether it was true or not. 

The $30,000 Cheque

48. Kevin Tsui says he and D1 went to Shenzhen on 5 September 2012 to meet D2 and two others, a woman and a man.  He cannot tell who those two were.  There D1 asked him to give some documents to someone to sign. Again, Kevin cannot remember who that person was and what the documents were.  Kevin says he saw D1 write his name on a cheque.

49. Prosecution say that cheque was the $30,000 cheque (B400).  It was issued by SDL to D1. The date on the cheque was 5 September 2012.  When D1 was arrested on 22 October 2012, this cheque was found in his wallet.

Maxigold Limited

50. There is another company that should be mentioned although it was not involved in any of the transactions. That is Maxigold Limited.

51. In August 2012, D3 requested Lydia Lee to register another offshore company for Mr Zhao Hongbing, the Chinese man who had become a shareholder and director of SDL.  Lydia finally got a Seychelles Islands company for D3, the Maxigold Limited.  That company was incorporated in August 2012.  Zhao Hongbing was registered as the sole shareholder (B127 – 159). 

52. In August 2012, D1 helped D3 to pay the set-up fee of Maxigold Limited in the sum of $8,750.  That payment was made to Lydia (B133).

The Transactions

Transactions in Accounts 1 - 4 of SDL

53. Between 7 July 2011 and 19 October 2012, there were 155 deposits by remittance, cash, cheque or transfer into Accounts 1 - 4 of SDL.  In the same period, there were 33 withdrawals by remittance, cheque or transfer out of those four accounts. The 188 transactions are tabled chronologically in Annexes A1 - A4 (Exhibit P387).

54. Annex A1 is related to Account 1 of SDL, a Hong Kong dollar savings account.  There were 151 deposits and 31 withdrawals.  The in-sums were in US dollars, British Pounds and Hong Kong dollars. The total was equivalent to HK$173,823,616.47.  The out-sums were in US dollars, British Pounds and Hong Kong dollars. The total was equivalent to HK$159,714,531.72. 

55. Annex A2 is related to Account 2 of SDL, a Hong Kong dollar current account.  There were two in-sums and two out-sums, all in Hong Kong dollars. The in-total was HK$749,935. The out-total was HK$719,935.

56. Annex A3 is related to Account 3 of SDL, a US dollar savings account. There was one ‘in’ and one ‘out’.  The in- amount was US$150,001.90, the out-amount was US$150,004. 

57. Annex 4 is related to Account 4 of SDL, a US dollar current account.  There was one ‘in’ and two ‘out’s.  The in- amount was US$349,994.40. The out-total was US$349,963. 

Transactions in Accounts 5 - 7 of GBML

58. Account 7 was opened in August 2012.  It was a GBP savings account (B773). 

59. Between 11 May 2012 and 15 October 2012, there were 21 deposits into Accounts 5 and 6 of GBML by remittance cash and transfer.  In the same period, there were 5 withdrawals by remittance or transfer out of those two accounts.  These ‘in’ and ‘out’ transactions are tabled chronologically in Annexes B1 - B2 (Exhibit P387).

60. Annex B1 is related to Account 5 of GBML, a Hong Kong dollars current account.  There were 9 ‘in’s totalling HK$4,989,180 and one “out” in the sum of HK$4,989,180.

61. Annex B2 is related to Account 6 of GBML, a Hong Kong dollars savings account.  There were 12 ‘in’s totalling HK$30,422,155.02 and 4 ‘out’s totalling HK$30,422,216.47.  One of the withdrawals was a remittance into Account 7 of GBML (Deal 209).  The HK$26 million were converted into British Pounds for a premium deposit.  The transaction took place on 3 October 2012. The deposit was to mature on 11 October 2012 (B808 to 812).

Schedule 4

62. Defence Counsel has no dispute with the transaction records.  Prosecutor has helpfully prepared Schedule 4 as a summary of the total 209 transactions, which have been listed out in Annexes A1 - A4 and B1 - B2.  Each transaction is given a distinct deal number for easy reference - Deals 1 to 209. Schedule 4 is not an exhibit. It is just an aide mémoire.

63. Schedule 4 shows that of the 155 deposits in Accounts 1 - 4 of SDL and the 21 deposits in Accounts 5 - 6 of GBML (the total being 176):

a) 61 of which were made by identified remittance agents in Hong Kong, Indonesia and Singapore. They acted on behalf of a number of identified instructing parties in Hong Kong, Indonesia, Malaysia, Singapore and Thailand. However, four instructing parties, namely Komtar Fancy Store SB (SB stands for Sdn Bhd which means limited companies in Malaysia), Mecca Store SB, Isle Makmur SB and BM Money Changers SB, all licensed money changers in Malaysia, said that they actually had no knowledge of the 12 remittances attributed to their names. Thus the origin of these 12 deals (Deals 183, 5, 11, 16, 21, 22, 23, 24, 18, 20, 187 and 31) was unknown. There were three other deals (Deals 8, 9 and 10) by identified remittance agents but the origin was also unknown.

b) 7 deposits were made by identified Hong Kong companies. Two of which were made by identified instructing parties in Indonesia, two by an identified instructing party Mohammed Bakeer Ali but Mr Mohammed’s address was unknown. (We hear from PW4 Mr Ahmed of the Gempro Hong Kong Limited in court that Mr Mohammed had sold diamonds to Gempro but he instructed Gempro to pay SDL. Mr Ahmed says Gempro in Thailand often traded with Mr Mohammed but this was the first time he had traded with the Hong Kong side. Mr Ahmed also says it is not uncommon in the trade for a seller to instruct the buyer to pay to a third party.) There were three other deals made by unidentified instructing parties from unknown places (Deals 51, 52 and 193).

c) 92 deposits were made by identified depositing parties in Indonesia, Hong Kong, Malaysia and unknown places while 4 other deposits were made by unknown parties in Hong Kong (Deals 2, 3, 4 and 17). The profile of the depositors of these 96 transactions was unknown. It is not clear whether they were depositing for themselves or on the instruction of others.

d) 12 deposits were transferred between accounts of SDL, GBML and G7 Asia International.

Schedule 2

64. The withdrawals were mainly related to Account 1 of SDL.  They were basically all remitted to Captivate Realty in Malaysia (see Annex C1), Glocal Billion SB in Malaysia (Annex C2), QOQ Capital Holdings in Malaysia (Annex C4) and Property Maintenance and Consultancy Limited in UK (Annex C3).  These four companies were all associated with D2 in that D2 either had shares in them and/or was an account signatory of the company. 

65. Prosecution allege that D1 was a bank manager looking after SDL’s accounts and also handling the accounts of GBML and G7 Asia International. He would have good knowledge of the activities in those accounts.

66. D1 says in court that he had about a thousand clients to take care of.  He could not and would not know all the activities of a particular account of a particular client.  He says those transactions known to him or he had been involved in  were not strange to him because in his many years’ working as a bank manager he has seen more weird transactions involving even larger amounts. 

67. Prosecution say D1 had been involved or had known of at least 38 transactions of the many transactions in the said accounts. Those 38 transactions were set out in Schedule 2.  Again, that is not an exhibit itself but just an aide mémoire. There are three tables there. 

68. D1 admits he had been involved in processing the 21 transactions in Table 1 of Schedule 2.  Those 21 transactions were all remittances out of Account 1 of SDL to QOQ Capital Holdings in Malaysia, Captivate Realty in Malaysia and Property Maintenance and Consultancy Limited in UK.  The remittances were in US dollars, British Pounds and Hong Kong dollars.  The total was equivalent to HK$114,687,232.60.

69. As to the 6 transactions in Table 2 of Schedule 2, all in US dollars totalling US$2.45 million or the Hong Kong dollar equivalent of HK$19,069,055.60, D1 says he was not involved in Deal 42 and he probably was not involved in the other five (Deals 45 - 49).

70. Table 3 of Schedule 2 contains 11 transactions. They were inter-account transactions between SDL, GBML and G7 Asia International.  Deal 209 was the transfer of HK$26 million from Account 6 of GBML to be converted into £2.08 million put on premium deposit in Account 7 of GBML.  When the deposit matured on 11 October 2012, it was converted back to HK$25,784,077.51.  There was a loss of over HK$200,000 (Deal 170).  The money was then transferred to Account 1 of SDL.  On the same day, two sums each of £1 million were remitted out of Account 1 to Property Maintenance and Consultancy Limited in UK (Deals 171 and 172).

71. D1 has no dispute about the transactions in Table 3 of Schedule 2. He explains that the client pooled the money for the premium deposit. The purpose was to gain though it turned out to be a loss.  D1 says he had relied on financial advice from his colleague, Mark So.  D2 was dissatisfied with the loss and D1 finally had to compensate D2.

The Forensic Accountant’s Report (Exhibit P398)

72. PW8, Mr Cheng, is a Forensic Accountant with ICAC.  He has studied transactions relating to the account of SDL and GBML.  He reduces his analysis, observations and conclusions into a report (Exhibit 398). The conclusions are in Paragraphs 95 - 104 there.  According to Mr Cheng:

a) The transactions involve large amounts inconsistent with the profile of SDL and GBML, which seem to have no real business in Hong Kong. It is incomprehensible why those companies had to open bank accounts in Hong Kong and channel the funds.

b) The deposits into the accounts of SDL and GBML came primarily from Indonesia, Singapore, Hong Kong and Malaysia. Many parties seemed to be on a one-off relationship or lasting for less than one month. Some did make deposits for several months. Some names of the depositing parties on the bank records were too brief for identification. Some deposits were by cash. Many were made by remittance agents.

c) Some remittance records did not contain information on the originator of the funds. Mr Cheng points out the facts stated in Paragraph 12 of the Agreed Facts (P386) in that of the many remittance agents, four in Malaysia namely Komtar Fancy Store SB, Mecca Store SB, Isle Makmur SB and BM Money Changers SB were licensed money changers in Malaysia but they were not licensed to conduct remittance or transfer services. These four companies did not make those 12 transactions attributed to their names. (See Schedule 4 for reference.)

d) Many deposits and withdrawals were in round sums. On record, a number of depositors only provided brief names that are not sufficient for identification. Mr Cheng says such brief profile does not appear to be consistent with the depositors being customers of business operations.

e) Some deposits were made on the same day or consecutive days or being close to others, by the same party or different parties. The same also happened in the case of withdrawals.

f) Some deposits were of the same amount, even on the same day or consecutive days or being close to others. The same also happened in the case of withdrawals.

g) The average overall daily account balance was merely 4.8 per cent of the deposits. That means the funds did not stay long in the accounts.

h) Significant withdrawals were made to Captivate Realty, QOQ Capital Holdings and Glocal Billion SB in Malaysia, and also to Property Maintenance and Consultancy Limited in UK.

i) On 3 October 2012, there was a premium deposit of £2.08 million in Account 7 of GBML (Deal 209). That was equivalent to HK$26 million. 20 million of which came from SDL (Deal 155). The British Pounds Premium Deposit matured on 11 October 2012. Then it was converted back to Hong Kong dollars and transferred to Account 1 of SDL. There was a loss of over $200,000 (Deal 170). On the same day, SDL remitted two sums each of £1 million to Property Maintenance & Consultancy Limited in UK (Deals 171 and 172). Mr Cheng comments that such exercise was only adding layers to obscure the originator of the funds.

Communication between D1 and D3 via WhatsApp, SMS and E-mail

73. Prosecutor wants to tender the following records of WhatsApp, SMS and e-mail communication between D1 and D3.  They are:-

P363 - emails between D1 and D3 from December 2011 to October 2012 as found in D1’s Smartphone;

P364 - WhatsApp messages between D1 and D3 as found in D3’s Smartphone, such messages are partially mirrored in P367 and P369;

P365 - emails between D1 and D3 as found in D3’s Smartphone;

P366 - SMS messages between D1 and D3 from June 2011 to June 2012 as found in D1’s computer, such messages are partially mirrored in P368;

P367 - WhatsApp messages between D1 and D3 from December 2011 to June 2012 as found in D1’s computer, such messages are partially mirrored in P364;

P368 - SMS messages between D1 and D3 from November 2011 to October 2012 as found in D3’s Smartphone, such messages are partially mirrored in P366 and P369;

P369 - SMS and WhatsApp messages between D1 and D3 in October 2012 as found in D1’s Smartphone, such messages are partially mirrored in P364 and P368.

74. Communication involves utterances by at least two parties.  Defence Counsel does not object to the admissibility of D1’s own utterances. He only objects to those made by D3 as hearsay who is now absent from the trial.  Prosecutor seeks to adduce D3’s utterances as evidence under the co-conspirator’s rule to be used as evidence in relation to Charge 1 and Charge 2 but not for Charge 3, which is not a conspiracy charge. 

75. Defence Counsel refers to the law stated in Oei Hengky Wiryo FACC 4/2006 and Alick Au Shui Yuen CACC470/1992.  In the latter case, the court viewed that for the co-conspirator’s rule to apply, Prosecution must establish a foundation to show there was independent evidence which linked the accused to the conspiracy.  That evidence must be independent in the sense that it was evidence other than that admissible only pursuant to the co-conspirator’s rule.

76. Various courts have called the requisite foundation evidence “substantial independent evidence”, “prima facie case”, “proof of a conspiracy by a preponderance of evidence” or “reasonable evidence”.  The court in the Alick Au case preferred the term “prima facie case”, saying such term does not imply a final determination.  However, I would adopt the term “reasonable evidence” so as not to confuse with the term “prima facie case” normally reserved for general issue determination.

77. It is clear that the law requires the trial judge to first find that there is independent reasonable evidence of a conspiracy before he can allow evidence to be admitted under the co-conspirator’s rule as further proof of the alleged conspiracy.  Counsel submits that in the present case there is simply no or not enough independent reasonable evidence regarding either conspiracy, namely Charge 1 and Charge 2.

78. Counsel also complains about the way Schedule 1 is presented.  That schedule lays out 1,444 entries of D1 and D3’s communication.  They came from P364, 367, 368 and 369; actually mostly from P364 and P368.  P364 and P368 are records found in D3’s Smartphone.  Not all the 1,444 entries can be found in any single record (see Schedule 1).  Some entries are mirrored in the others (refer to paragraph 73 above).  The 1,444 entries in Schedule 1 are purported to be in a chronological order.

79. Defence Counsel points out that Schedule 1 is presented basically from the records found in D3’s mobile phone.  Those records found in D3’s device do not exactly mirror D1’s.  Counsel says some items appearing in D3’s record are absent from D1’s.  Counsel also says that the order of the entries, some if not all, in Schedule 1 may not be correct.  The time stamps of the entries were sometimes unclear and the arrangement might be misleading.  The confusion might be due to the fact that D1 and D3 were in different time zones when they were talking to each other and they might not be responding to the other instantaneously at times.  It might also be a network delay problem or due to other reasons.  Counsel says if the entries are misplaced, misinterpretation will arise. 

80. Counsel highlights the questionable entries in Schedule 3 and makes his remarks in his submission on the special issue. Schedule 3 is an aide mémoire prepared by the defence side.  It actually contains the same 1,444 entries as Schedule 1 in the same order.

81. Defence Counsel further complains that the ICAC had never questioned D2 or D3 over those entries.  Now these two defendants are absent from the trial, D1 would not have any chance to seek explanation from D3 or D2 on those records. Even though D1 was a party to those communications, he cannot speak on behalf of D3. After all, the communications took place more than two years ago.  Counsel says D1 cannot be expected to explain everything there.  He submits D1’s position is therefore highly prejudiced. 

Special Issue Hearing

82. I hold a special hearing by alternative procedures to determine whether there is reasonable evidence of the two alleged conspiracies for the co-conspirator’s rule to apply over Exhibits P363 to P369. 

83. After Prosecutor has adduced all evidence, Defence Counsel makes no submission at this stage on the special issue.  I find there is a prima facie case for D1 to answer on the special issue.  He elects not to give evidence.  There are no defence witnesses or exhibits on the special issue.  Both sides then make their final submission on the special issue. Basically Prosecutor says that there is enough reasonable evidence for the rule to apply while Defence Counsel says otherwise.  In addition, Counsel says it is unfair to admit the utterances made by D3 in the circumstance. 

Reasonable Evidence

84. I find:

a) D1 was the Relationship Manager of SCB who opened bank accounts for SDL and assisted in opening bank accounts for GBML and G7 Asia International. SDL and GBML were D2’s companies. G7 Asia International was associated with D2 and D3. D1 had handled some transfers or remittances involving the accounts of these three companies.

b) D1 paid the annual renewal fee of HK$6,250 for SDL in March 2012. He also paid part of the fees for the change in SDL’s structure, ie. the $300. That was in May 2012. D1 also footed the setting up fee of GBML in the amount of HK$10,296. D2 later reimbursed D1 these amounts plus the further sum D1 had paid in relation to Maxigold Limited. D1 got a $30,000 cheque from D2 on 5 September 2012.

c) Regarding the change in SDL’s structure, D1 delivered a packet of documents to Lydia Lee containing documents relevant to the change.

d) On 20 April 2012, FCIO of SCB informed D1 of a Suspicious Activity Report ‘SAR’ concerning the account activities of SDL. D1 replied to the bank in favour of SDL. On 27 April 2012, D1 filled the Checklist but he failed to inform SCB of any change or impending change of SDL’s structure.

e) In September 2012, SCB queried the account activities of G7 Asia International. Again, D1 helped to smooth the matter for G7 Asia International.

85. The facts above considered together prima facie show that D1 was extending extraordinary service to help D2 and D3 to maintain and run the accounts of SDL, GBML and G7 Asia International, which accounts had some activities suggesting money laundering.  D1 had knowledge of some of the transactions.  I rule there is sufficient reasonable evidence of the conspiracy alleged by Charge 1.

86. The evidence also shows D1 had been trying hard to exonerate SDL of the SAR suspicion.  He had been quite involved in handling SDL’s matters for D2 and D3.  It is reasonable to infer for the sake of the special issue that he knew of SDL’s change or impending change in the company structure by the time he filled the Checklist on 27 April 2012. Yet he failed to inform or alert SCB of that on the document.  That matter was not something which an experienced Relationship Manager would ignore so the failure prima facie was a deceit rather than an inadvertent failure.  I thus rule that there is also enough reasonable evidence of the conspiracy alleged by Charge 2. 

The Arrangement of the 1,444 Entries in Schedule 1

87. I note Defence Counsel’s complaints regarding the arrangement order of the 1,444 entries in Schedule 1. I have read them carefully and many times.  I find the order is logical.  All the entries are in context, I am sure there is no misplacement. 

The Absence of D2 and D3 from Trial

88. It is common ground that the communication records in question were not readily available when ICAC questioned D2 and D3 after their arrest.  It is not the case that ICAC intentionally did not clarify D3’s utterances with D3 or D2.  Now D2 and D3 have absented themselves on their own volition. Prosecution cannot be held to be responsible for that. Furthermore, even if D2 and D3 are here, they are defendants only.  Whether they would elect to testify and explain on those utterances is beyond anyone’s guess.  One simply cannot assume that D2 and D3 must come up with an explanation on those utterances favourable to the case of D1.  Defence cannot say that the situation is so unfair that the communication records cannot be admitted.  Counsel has not made any application for the proceedings to be stayed due to the absence of D2 and D3.  Even if he has that application, it is likely to fail. 

Lapse of Time

89. It is true that the communication between D1 and D3 was made more than two years ago. One can hardly expect the makers to remember accurately what was said or meant at that time.  A reasonable jury would make allowance for that. It is a consideration of weight but not admissibility.

Ruling on the Special Issue

90. For the reasons stated above, I rule Exhibits P363 - P369 all admissible.  The relevant 1,444 entries have been set out in Schedule 1.  It is more convenient for me to refer to those utterances by their entry number in the schedule and I shall do so.

SAR on SDL

91. On 20 April 2012, Joy Yuen of FCIO raised a Suspicion Activity Report ‘SAR’ on SDL. She informed D1 who was the Relationship Manager of the company (B2431). Joy told D1 that an SAR was filed to Joint Finance Investigation Unit ‘JFIU’ because of some suspicious activities in SDL’s accounts.  She said FCIO would arrange for the termination of the accounts after receiving consent from JFIU if D1 had no comment to make but should D1 decide to retain the customer, he should perform a CDD, Customer Due Diligence Review, and complete the Checklist within 30 days of the report.  D1 should obtain satisfactory explanation with documentary evidence from the customer.

92. That SAR said that between 11 December 2011 and 12 February 2012, SDL received HK$16.682 million via cash of 6.04 million and TT (telex transfer) remittance of 9.312 million from Golden Dragon Remittance Property Limited ‘Golden Dragon’, Shun Shing Trading Company ‘Shun Shing’ and Gempro Hong Kong Limited ‘Gempro’.  Golden Dragon was a remittance agent in Singapore. Shun Shing was a registered remittance agent/moneychanger and Gempro was an exporter of gems and jewellery.  These companies held accounts in Singapore and in Hong Kong.  The report also said that the cash deposits were made by United Exchange Limited, which was also a registered remittance agent/moneychanger.  After receiving the funds, SDL wired part of the money to Captivate Realty in Malaysia.

93. Joy stated these suspicions in the SAR:

a) The source/integrity of cash deposits/incoming TT were in doubt;

b) The relationship between SDL and the fund originators could not be ascertained; and

c) The accounts of SDL seemed to be used as temporary repositories of funds.

94. The last part of Joy’s e-mail reminded D1 that he should not tip off the customer about the bank’s investigation. 

95. Two days later, ie. 22 April 2012, D1 sent D3 an e-mail (B2309) titled “Periodically client’s background review”.  He did not inform D3 that SCB was investigating SDL.  He just stated it as a periodically client’s background review and asked D3 to provide details for:-

a) Relationship with Golden Dragon, Shun Shing and Gempro which held accounts in Singapore and Hong Kong;

b) The major business of SDL; and

c) Why there were large remittances recently.

96. Schedule 1 Entries 491 - 496 show that on 23 April 2012, D1 asked D3 to check e-mail.  D3 sounded surprised and asked D1 why he raised those questions in his e-mail.  D1 told D3 to call him, apparently for some discussion.  There is no evidence of what they talked on the phone.

97. Schedule 1 Entries 497 - 511 show that on 24 April 2012, D3 asked D1 which countries Golden Dragon and Shun Shing were in.  D1 replied both were Singapore companies with accounts in Singapore and Hong Kong.  He asked D3 to keep it in secret.  D3 said the Malaysian Bank HSBC had kept calling.  She asked D1 who caused the enquiry.  D1 said it was internal staff of SCB and the matter was related to Malaysia.  D1 reminded D3 not to tell HSBC what he had told her.  D3 promised.  D1 further told D3 that it was easy to solve the problem. He would convince SCB that D2 was a good client but D3 had to provide him some proof.  D3 replied she could say SDL was doing gems jewellery with Gempro but she did not know what Golden Dragon and Shun Shing were although she had searched for those two companies online. 

98. In Schedule 1 Entries 527 - 531, D1 said the main thing was the relationship of the three companies (referring to Gempro, Golden Dragon and Shun Shing).  He asked D3 why Golden Dragon and Shun Shing sent money to SDL.  D3 replied they used moneychangers.  D1 then asked D3 to call him.  Again, we do not know what the two talked on the phone then. 

99. More than an hour later, the two were back on WhatsApp communication.  Schedule 1 Entries 532 - 535 show that D3 expressed her fear that the accounts of SDL and Captivate Realty would be frozen.  She asked D1 if the money should be transferred out of SDL’s account.  D1 did not make any suggestion. Nevertheless, he said he would help.  He asked D3 to follow his instruction.  He would deal with the staff of SCB and let D3 know if he got any updates.  D3 thanked him.  She said she wished Malaysia and Hong Kong (referring to banks on both sides) would not communicate much.

100. Later that day, D3 sent D1 an e-mail (B2309) stating that SDL had no business with Golden Dragon and Shun Shing.  She also said SDL was doing jewellery business with Gempro.  Golden Dragon and Shun Shing were remittance agents used by Gempro. 

101. From the evidence of PW4, Mr Ahmed, the director or the Gempro Hong Kong Limited, we know Gempro had no business with SDL.  The two sums of money Gempro sent to SDL (Deals 12 and 15) were only on the instruction of a customer, Mr Mohammed Bakeer Ali.  Mr Mohammed had sold two diamonds to Gempro earlier.  Instead of getting payment himself, he asked Gempro to pay SDL those two sums.  This sounds odd but Mr Ahmed says in court that it was not uncommon in the trade for this to happen.

102. In that e-mail on 24 April 2012 (B2309), D3 also told D1 that SDL had birdnest, jewellery and arowana fish businesses. The money SDL sent to Malaysia was to buy land there.  D3 attached the land title documents in her e‑mail. 

103. Soon after D1 got the e-mail, he asked D3 to provide more information on the said businesses of SDL (B2313).

104. On 25 April 2012, D3 sent D1 an e-mail (B2315) with attachments relating to three lots of land bought by Captivate Realty in Malaysia.  She also sent D1 an e-mail (B2326 – 2329) containing website information of three companies relating to D2:

a) EBNI SB in birdnest business

b) MYCN Venture SB in arowana fish business; and

c) SDL in jewellery business.

D3 said that SDL supplied gems exclusively to Gempro. She attached documents as proof in her e-mail.

105. In light of PW4 Mr Ahmed’s evidence, we know Gempro and SDL had no business.  That Authorised Distributor Letter (B2326) was a false statement. However, there is no evidence that D1 knew of the incorrectness of D3’s statement or the falsity of that letter.  In fact, D1 really believed D2 was in the gems trade.  On 9 and 10 May 2012, he asked D3 to quote him the price for a diamond because he wanted to buy one personally (Schedule 1 Entries 631 - 643).

106. Schedule 1 Entries 548 - 553 show that on 26 April 2012, D3 asked D1 if he had seen her emails with the proof of income. She asked D1 whether he was able to handle the Hong Kong side (referring to SCB). D3 said in Entry 550, “I hope Hong Kong side will not reveal anything and also Sunny Drive is belongs to Mr Tan as Sunny Drive is an offshore company”. I understand D3 to be saying that she wished SCB would not reveal anything to let the Malaysia side know D2 owned SDL as an offshore company.  D1 then replied in Entry 551, “Okay, I will search it tomorrow for you” and in Entry 552, “I will solve it, no problem”.  I understand D1 was saying here that he would find it out and solve the matter. D3 then expressed relief.

107. Later that day, ie. 26 April 2012, adopting the information supplied to him by D3, D1 sent an e-mail to Joy Yuen SDL’s explanation on the matters raised in the SAR (B380).

108. On 27 April 2012, Joy replied to D1 that should he decide to retain the client he should perform a CDD review and complete the Checklist within 30 days of the SAR report with a satisfactory explanation and documentary evidence (B380).

109. Later that day, D1 informed Joy that he had done so (B379).  The Checklist was B435 a – c.

110. On 3 May 2012, D1 asked D3 to send him further proof of D2’s business to be submitted to SCB.  D3 agreed. (See Schedule 1 Entries 596 - 602.)

111. On 4 May 2012, D3 sent D1 emails with attachment on MYCN’s arowana fish business and EBNI’s birdnest business (B2330 to 2351). Both companies seem to be related to D2.

112. On 7 May 2012, D3 sent D1 another e-mail with attachment on SDL’s gemstone business (B2352 - 2362).

113. On 8 May 2012, D3 sent D1 information on three plots of land bought by D2 in Malaysia (B2363 – 2366).

114. Later that day, D1 told D3, “Fixed, all approved”.  He told D3 he had helped D2 to solve all in the bank, “Means 99 per cent safe”.  D3 thanked D1 (Entries 618 to 627).

115. On 9 May 2012, Joy communicated with Daffy Wong, Head of FCIO.  Joy told Daffy that the Head of Sales Small Business had approved to retain SDL’s account (B379).

116. On 14 May 2012, D1 asked Daffy whether SDL’s case was closed.  Daffy replied that they had no further questions (B376).  On the same day, D1 told D3 that the case was closed.  He said “100 per cent safe now” (Schedule 1 Entry 652). 

The Checklist

117. The Checklist which D1 filled for the purpose of retaining SDL’s accounts was B435 a - c.  On B435c, there were Check Point questions.  Check Point 1 asked, “Is existing CDD information up to date and relevant, CDD information includes company structure, business nature, identity, information of company officers such as directors, principals, shareholders, beneficial owners, etc”. D1 ticked the answer “Yes”, effectively telling SCB that there had been no change in SDL’s company structure including those relating to the shareholders and the directors. 

118. Prosecution rely on Schedule 1 Entries 512 - 526 to say that D1 had been aware of the change before he filled the checklist. Those communications were made on 24 April 2012 where D3 told D1 that 75 per cent of SDL shares belonged to a China man.  Hearing that, D1 immediately said to D3 that SDL was still 100 per cent owned by D2.  D3 then said she had already told HSBC in Malaysia of the change.  D1 said in Entry 518, “It is separate, if Hong Kong side knew there are two shareholders and then why Hong Kong side ask q to u, thus keep saying there is only one shareholder (Mr Tan only)”.  In Entry 519, D1 said “Make the thing as simple as possible”.  In Entry 520, Grace said “We had said tat how”; Entry 521, “We had ask Lydia to change d share holder into two person right? Did I tell you before? How?”.  The record then shows D1 said “You did told me before.  Is it changed or you just plan to change it?”  That is Entry 522.  In Entry 523, Grace said “In the process of changing cox, cannot let Malaysia government know that Tan is rich. Tax very high”.  In Entries 524 and 525 she further said, “Transfer of share I backdate to last year”; “Signatory is either one”.  Then D1 said in Entry 526, “Okay” and in 527 “It is not a matter, the main thing is the relationship between these three companies”. 

Enquiry on G7 Asia International

119. On 11 September 2012, Ivan Tam of FCIO emailed Kevin Tsui to enquire on the recent activities in the account of G7 Asia International (B386).  Tsui was G7 Asia International’s account manager on record.  Tam pointed out in the e-mail that between June and September 2012, G7 Asia International received six telex transfers totalling more than HK$4 million from individuals and companies including BCA Finance Limited (a remittance agent) and Rainbow Force SB (a paint dealer in Malaysia), then G7 Asia International transferred $3 million to SDL.  According to the bank’s record, G7 Asia International was engaged in securities investment.  The beneficial owner was Mr Low Aik-meng.  Ivan Tam suspected the accounts of G7 Asia International were used as temporary repositories inconsistent with the known profile of the company.  He asked Kevin Tsui to find out the updated business of this company, the background of the payment counterparts and the purpose of the payments in and out of the accounts of this company.  He further said that if the matter could not be explained, the accounts would be closed. 

120. The Head of FCIO, Terry Ng, knew about this.  He says in court that it was just an enquiry. At that time, no SAR report had been raised against G7 Asia International. 

121. Two days later, ie. 13 September 2012, Kevin Tsui relied to Tam (B385) to say Mr Low Aik-meng was also a director of a company called G7 Asia Trader in Malaysia.  That Malaysia company had business with G7 Asia International in Hong Kong including paints, etc.  Rainbow Force SB was a customer of the Malaysia company.  Due to his personal obligation, Mr Low requested some of his customers to pay him in Hong Kong into G7 Asia International’s accounts.  Some customers had chosen to use remittance agents and that was beyond the control of Mr Low. Kevin Tsui had attached documents relating to G7 Asia Trader and Rainbow Force SB in his e-mail (B388 – 393).  In that e-mail, Kevin also told Tam that G7 Asia International transferred $3 million to SDL because there was a loan agreement between the directors of the two companies and Mr Low now repaid the director of SDL, ie. D2.  Kevin also attached the loan agreement in his e-mail (B394).

122. Kevin Tsui says in court that he referred Tam’s enquiry to D1.  D1 later passed him the above information.  Kevin simply adopted the information as a reply from the client. He says he trusted the integrity of the client and the information supplied.

123. We know from the communication between D1 and D3 on 12 September 2012 (Schedule 1 Entries 1074 – 1110) that D1 brought the matter to the attention of D3.  D3 said she got D1’s e-mail.  She said in Entry 1075 “Problem again”.  D1 asked D3 if she had forgot his advice.  He asked D3 why they used remittance agents again.  D3 said the paint company (referring to Rainbow Force SB) was not a remittance agent.  She said they had hardware investment with business proof and invoices.  D3 said Rainbow Force paid G7 Asia International in Hong Kong in order to escape tax (Entry 1094).  In Entry 1095 she said, “No choice using remittance agent”.  D3 said Rainbow Force sometimes used remittance agents.  D3 also told D1 that finance limited was a remittance agent.  [D3 must be talking about the BCA Finance Limited. Refer to Paragraph 119 above. Ivan Tam mentioned the name of this finance limited in his e-mail to Kevin on 11 September 2012.] 

124. On the next day, ie. 13 September 2012, D1 asked D3 to send him all the business proof and related documents.  D3 said she had already done so.

125. Apparently D1 then passed the information he got from D3 for Kevin to answer Ivan Tam on the enquiry. (See Paragraph 121 above.)

126. The FCIO men accepted the explanation given. They considered there was no need to report G7 Asia International to JFIU.

127. The Head of FCIO, Terry Ng, agrees with Defence Counsel that they had no means to verify what the client said if the explanation and proof sounded genuine. The bank manager and even the FCIO would rely on them.

D1’s Statements to ICAC

128. After arrest, D1 gave two voluntary statements to the ICAC (P389 and P390); both on 22 October 2012, the day he was arrested.

129. In the first interview, D1 had a lawyer accompanying him.  He refused to answer a number of questions and did not say much on the others which he just briefly answered. But he did say D2 carried on actual business.

130. A few hours later, D1 told ICAC that he had something to clarify. That led to the second interview.  This time D1 was without any lawyer.  D1 told ICAC that D2 gave him the $30,000 cheque to reimburse him what he had spent on D2’s behalf on past occasions.  D1 said he would just get back what he had spent for D2 (實報實銷) and there was no advantage to gain.  He said the $30,000 was more or less what he had spent on behalf of D2 previously.

131. In this latter interview, D1 told ICAC that he knew he had to report money laundering activities to the bank.  He said he had to serve many clients and deal with a lot of transactions.  He said he did not find any serious problem with SDL though he did notice some transfer amounts relating to this company’s accounts were large.  He said he had thus enquired with D2 and D3.  They told him that D2 had many businesses including birdnest, diamonds and arowana fish.  D1 also told ICAC that he had enquired with D2 and D3 about the money transfer to UK.  D2 and D3 explained to him that it was for property investment there.  D1 said he had searched the websites relating to D2’s business and the bank was also aware of the information but found no problem with it.  D1 said the bank’s compliance team would be keeping guard and judging the client’s situation. He himself was just a Relationship Manager. He could only provide information to the bank.  D1 said he did not suspect D2 to be laundering money. He denied he had assisted D2 to do so.  He also denied he had received any advantage from D2. 

Case to Answer on Charges 1 - 3

132. After closing his case, Prosecutor is asked in relation to Charge 1 whether he would rely on both limbs or just one.  Prosecutor knows he need not choose but he must make his position clear.  He tells the court unequivocally that he would only rely on the having reasonable grounds to believe limb.

133. Defence Counsel has no submission to make on Charges 1 to 3 then.

134. I rule D1 has a case to answer on Charges 1 to 3.

D1’s Case

135. D1 elects to give evidence.  He says Lydia introduced D2 to him. When he first opened an account for SDL, the bank had checked on D2 and evaluated this client as a low-risk one.  The bank’s checking systems - Norkom and Hogan - had given the client clearance.  There were other colleagues in the bank double-checking and they would also be doing subsequent reviews on the client.  There was also a good reference letter from Citibank in Malaysia (B427) to certify D2 was their premium client and so far D2’s accounts there had been operating satisfactorily.  D1 says he really believed D2 and his companies were fit and proper.

136. D1 says although he was Relationship Manager, he would not be checking on all the transactions of his clients.  He knew he had to combat money laundering but normally bank officers would not ask the client what the purpose of the transaction was.  D1 says he would be mainly concerned with the verification process. That is, the transactions were really authorised by the client.  He says he had nearly a thousand clients and he had to deal with many transactions. Some transactions were of even much larger amounts and there could be reasons for transactions of the same or similar amounts made on the same day or close to the others.  D1 says he did not know or suspect D2 was laundering money.  D1 emphasises that SCB has its own checking systems.  He as a Relationship Manager would not take initiative to check on his client. That could hardly been done actually.  He says he did not find the account activities of SDL, GBML or G7 Asia International suspicious. Nor did he have reasonable grounds to believe there was some money laundering there. 

137. D1 admits he had helped D2 to set up GBML.  He had assisted in the account opening procedures by filling out some forms and doing the same for G7 Asia International.  He passed them on to Kevin Tsui for the latter to process the actual account opening. 

138. D1 explains that he did not consider D2 to be a high revenue generating client so he passed GBML onto Tsui and G7 Asia International as well.  He remained as Relationship Manager for SDL because it would be quite a trouble for him to make any change on the record.

139. D1 admits he was involved in the 21 transactions in Table 1 of Schedule 2.  At that time, he believed they were for D2’s investment in Malaysia and the UK.

140. As to the 6 transactions in Table 2 of Schedule 2, D1 says that although there were communications about those with D3 as evidenced in the entries in Schedule 1 and in some emails, he was sure he had not received the signed remittance form for Deal 42, the US$700,000 one.  He says he also probably had not been involved in the other five deals either (Deals 45 to 49, each of US$350,000).  D1 says those remittance forms might have been mailed directly to the payment centre and be processed there without involving him.

141. As to the inter-account transactions in Table 3 of Schedule 2, D1 does not deny he had known or been involved in them.  He says the client pooled the money into SDL’s account for investment purpose.  D1 had got advice from his colleague, Mark So, to advise D2 to make a short-term premium deposit so HK$26 million were converted into British Pounds.  When the deposit matured, it was converted back to Hong Kong dollars. D1 says the arrangement was to earn though it finally lost due to a wrong forward booking of exchange rate.

142. D1 denies he assisted D2 to deal with the money for the purpose of money laundering.  He says he believed D2 was doing legitimate businesses because D2’s assistant, ie. D3, was always quick to come up with proof of businesses which documents SCB would also accept.  D1 said he believed D2 to be a rich merchant doing many businesses.  He denies he knew D2 wanted to evade tax from the Malaysia Government. Nor did he assist D2 to do so.  About those tax references in his communication with D3, D1 says he understood D3 to be talking about legitimate tax avoidance.  He says he knew many people would set up offshore companies for that purpose.  He did not know if D2’s companies had any real business in Hong Kong. 

143. D1 said he had paid four sums on behalf of D2:-

a) $6,250 for the annual renewal of registration for SDL;

b) $10,296 for the setting up of GBML;

c) $300 for the change in SDL’s company structure regarding shareholders and directors; and

d) $8,750 for the setting up of Maxigold Limited for D2’s friend, Zhao Hongbing.

D1 says he had also spent some miscellaneous costs like travelling expenses in providing services to D2.

144. D1 agrees that there was a surplus of $4,000 odd left of the cheque amount of $30,000. However, he says he did not receive any surplus as a reward for or inducement to handle the accounts of D2 and his companies.  The surplus was supposed to be used as expenses that would be incurred in future services to be rendered to D2 upon his further requests.  D1 says D2 often asked him to help D2 or D2’s friends.

145. As to the change in SDL’s company structure, D1 says he was not aware of that until he was arrested in October 2012. 

146. In the WhatsApp communication with D1 on 24 April 2012, D3 said in Schedule 1 Entry 512, “Sunny Drive 75 per cent is belongs to a china man and 25 per cent is Mr Tan”.  D1 says in court that he thought D3 was talking about SDL in Malaysia so he replied in Entries 513 and 514, “No”, “Sunny still 100 per cent owed by Mr Tan.  I can explain apart from 燕窩.  Mr Tan had business on jewellery as well.  You has to explain why other companies send you moneys (can’t pretend to be innocent)”.  Later in Entry 518, he told D3 to “keep saying there was only one shareholder”. And in Entry 519, he asked D3 to “make the thing as simple as possible”.  D1 says in court that he was just talking about SDL in Malaysia.  D3 in Entry 521 said this, “We had ask Lydia to change the shareholder into two person, right?  Did I tell you before? How?”.  The record of Entry 522 reads like this: “You did told me before.  Is it changed?  Or you just plan to change it?”  D1 says there should be the word “not” in Entry 522 so it should read, “You did not told me before.  Is it changed or you just plan to change it?”  D1 says the word “not” was probably missed during the input process.  This sometimes happened. 

147. It is pointed out in Schedule 1 Entry 1318 that the same problem occurred where D1 should be saying to D3, “I did not steal Mr Tan’s money” and in Entry 1347 where he should be saying he “did not deposit the $30,000 cheque”.

148. There are exhibits D1 to D16.

149. Exhibits D1 to D3 are documents showing recognition of D1’s distinguished performance in sales.

150. Exhibit D4 to D5 show D1 had a busy schedule in his work as a bank manager.

151. Exhibits D6 to D9 are about D1 and Mark So trying to target D2 for investment.

152. Exhibits D10, D11 and D15 show examples of FCIO just closing some bank accounts without requiring the relationship manager to make any enquiry.

153. Exhibits D12, D13 and D14 show there were occasions when the bank required the relationship manager to clarify with the client over some suspicious activities.  Some clients would simply not answer the relationship manager and disappear.

154. Exhibit D16 is a name card.  It was given to D1 by D2. The front stated D2 as President of EBNI, a group of companies based in Malaysia.  D2 had phone contacts in Malaysia, Hong Kong and China on the back of the card.  There were the names of Captivate Realty SB, Construct and Trading of Swiftlets House 燕屋建設及買賣, EBNI Industries SB, EBNI Bio Nexus SB, EBNI Biotech SB, Edible Birdnest Products Specialists 燕窩產品專家, Swiftlets Farming Design and Research Management 養燕培植研究管理, MYCN Venture SB, Arowana Breeding Cultivation Trading and Export 龍魚培植及出口貿易.

155. D1 says he had come across suspicious or SAR cases previously and on those occasions he dutifully helped the bank to make enquiries with the clients.  Some clients would answer to the bank’s satisfaction. Some could not, and some clients would just evade answering and disappear.  D1 says, in D2’s case, D3 always came up with prompt explanations with proof of businesses or investments.  D1 says bank officers would normally rely on the client’s information and proof on their face value because they could hardly make independent checking on the information.  He believed D2 to be a rich and proper merchant doing many businesses in different places. He did not know or suspect D2 was laundering money.

Final submission

156. Prosecutor and Defence Counsel make detailed submissions. Basically they are repeating their own position on the respective charges and emphasise on the salient features of their case.

157. While saying he just relies on the having reasonable grounds to believe limb, Prosecutor still alleges in his closing submission that the underlying activity of the transaction was D2’s tax evasion and D1 must have known this (Paragraphs 67 - 68, 77 - 78 of Prosecution Closing Submission).

158. At the end of Paragraph 84 of his closing submission, Prosecutor alleges that D1 had turned a blind eye to the true nature of the funds in question.

159. At times, Prosecutor describes the money as D2’s business income. Yet at other times, he terms it as proceeds of D2’s tax evasion.  It seems even Prosecutor himself is not sure of the nature of the funds so he turns to the less onerous limb.  Under that limb, ie. the having reasonable grounds to believe limb, Prosecutor only has to prove that D1 had reasonable grounds to believe the money represented proceeds of an indictable offence. There is no need to prove any underlying offence. 

160. Defence Counsel points out that according to the recent decision in Pang Hung Fai FACC 8/2013, the previous two- stage test is no longer valid.  The proper test now is looking objectively at the grounds the defendant had at the material time, anyone would believe the money represented proceeds of an indictable offence.  In coming to such conclusion, the court has to consider the defendant’s own perception and evaluation of the situation. 

Discussion

Reliability of Documents and Records

161. There is no challenge to the reliability of the documents produced by either side except for those matters as commented by Defence Counsel in relation to Schedule 1 (see Paragraphs 79 - 80 above).  I have already dealt with this issue in Paragraph 87 above.  I am sure the 1,444 entries in Schedule 1 are in the right order.  The schedule is an accurate and reliable summary of those entries as communicated between D1 and D3 between June and October 2012.  At that time, the two did not know that their communication records would be exposed so they talked freely, sometimes in a light-hearted manner but most of the time they were serious.  I am sure I can rely on those serious exchanges as what the two meant to convey to each other at that time.

Credibility and Reliability of PW1 - PW8 and D1

162. The burden of proof is on Prosecution. It is not for the defendant to rebut any guilt allegation.  However I think it is more convenient for me to point out at this stage that in light of all the evidence I have considered, I do not find the defendant an all truthful witness despite he has a clear record. Yet I will not say what he told ICAC and what he now says in court are all lies.  The credibility of his evidence would be discussed in due course.  

PW3 - Mark So

163. Defence Counsel does not challenge much of the evidence of PW1 - 8 except for Mark So’s saying that D1 once told him D2 wanted to avoid tax.  Mark So says that took place some time after he had spoken to D2 on investment in May 2012.  D1 denies he had ever told Mark So that.  D1 actually denies he knew D2 wanted to avoid tax.  He says even if he knew D2 wanted to avoid tax, there was no reason for him to inform Mark So of that.

164. D1 had sought Mark So’s assistance in advising D2 on what to invest. That is apparent in the evidence.  It is also clear in the evidence that D3 had expressed to D1 about D2’s tax concerns.  In Schedule 1 Entry 523, D3 says “Cannot let Malaysia Government knew that Tan is rich, tax very high”.  D3 also mentioned tax escape in relation to G7Asia International which was apparently associated with D2 (Schedule 1 Entry 1094).  I am sure D1 knew D2 wanted to evade tax from the Malaysia Government and he did tell Mark So that D2 wanted to avoid tax in order to enable Mark So to know his client well.  Tax avoidance could be achieved through legitimate schemes. D1 need not be shy about that with Mark So.  I do not see any reason for Mark So to fabricate evidence against D1.  I am sure D1 did tell Mark So that D2 wanted to avoid tax. 

PW8 - Mr Cheng, the Forensic Accountant

165. Defence Counsel does not challenge the expertise or the credibility of this Forensic Accountant working for ICAC.  However, he does criticise Mr Cheng for lacking banking experience.  He also says Mr Cheng was not in full grasp of all the information necessary to explain the nature of the funds and the purpose of the transactions.  Counsel submits that Mr Cheng has viewed the matter only from a forensic accountant’s point of view.  Under the said limitations, his views cannot be deemed to be those of an ordinary reasonable person.

166. Mr Cheng admits he has no banking experience at all.  He also agrees that he did not have the full information necessary for explaining the funds and the transactions.  He agrees that much need to be addressed by D2 and D3 but that is not available.

167. Mr Cheng has spent one to two months to analyse the transactions relating to the accounts of SDL and GBML.  Basically he finds that many in and out transactions look odd.  The account activities seem to be inconsistent with the recorded profile of the companies.  The accounts look like temporary repository of funds.  The information of many depositors was brief.

168. Mr Cheng certainly has spent much time and effort in preparing his report (Exhibit P398).  It is always the prosecution case that the defendants laundered money for the purpose of D2’s evading tax from the Malaysia Government.  Unfortunately Mr Cheng has not discussed the identified problems in that context.  There is only a brief comment in Paragraph 98 of his report referring to his earlier Paragraphs 49 - 51.  There Mr Cheng comments on the brevity of the information of some depositors.  He says their profiles do not appear to be consistent with being customers of business operations.

169. Mr Cheng does not specify what business operations he had in mind.  I am not sure whether he was talking about business operations in general or vis-à-vis D2’s alleged businesses in different places.  If it is the latter, then Mr Cheng is too general again.  Mr Cheng also does not address on the possibility of different requirements for remittance details in different jurisdictions.  Nothing is said of the commercial practices or customs in those places, for example, Singapore, Malaysia, and as can be seen most funds came from Indonesia.  D2 claimed to D1 that he has swiftlets business and we know a major place for such business is Indonesia. 

170. The brevity problem might worry Mr Cheng as a forensic accountant but it is certainly not a problem with the banks in those send-out places or with SCB receiving the money in Hong Kong. Otherwise, they would not accept the funds in and out.  It is true SCB later made enquiries with SDL and G7 Asia International but the enquiries were not related to the brevity issue.

171. I agree with Defence Counsel that Mr Cheng’s evidence must be viewed in light of the said limitations and one must bear in mind he has studied all the materials available to him for one to two months on an intensive basis as a forensic accountant.  Such expert’s views would not be all the same as those would be formed by an ordinary person looking merely at those grounds D1 had at the material time, whether that ordinary person was a bank manager or not.

Charge 1

172. Charge 1 alleges the three defendants conspired to transfer the money in the accounts of SDL and GBML for the purpose of money laundering.  The charge does not mention G7Asia International but the communication between D1 and D3 in Schedule 1 shows G7 Asia International was also involved and under the control of or at least associated with D2. 

173. The prosecution case is that D2 used SDL and GBML and also G7 Asia International as conduits of money.  Such money came from Indonesia, Singapore, Malaysia, Hong Kong and unknown places (due to insufficient information on the remittance records).  Most of the money was later remitted from Hong Kong, mainly from Account 1 of SDL (except for once) to Captivate Realty, Glocal Billion SB and QOQ Capital Holdings in Malaysia and also to Property Maintenance & Consultancy Limited in UK.  The four companies were all under D2’s control or at least associated with him.

174. Prosecutor at times describes the incoming funds as business income of D2 but at other times he would call the money proceeds of tax evasion.  In the end, Prosecutor does not seek to prove tax evasion as the underlying offence of the money. Rather he just relies on the having reasonable grounds to believe limb. That is, anyone looking objectively at the grounds D1 had at the material time would believe the money represented proceeds of an indictable offence.

Tax Evasion

175. In normal circumstances, when Prosecution just rely on the having reasonable grounds to believe limb they need not and would not prove the underlying offence relating to the money.  However, in the present case it is always an allegation that D2 was evading tax from the Malaysia Government and D1 knew about that (see Paragraphs 8 - 13 above).  The money was at times described as D2’s business income and at other times termed as proceeds of D2’s tax evasion.  When only the having reasonable grounds to believe limb is to be considered, the jury need not make any determination on the nature of the money but they must take into consideration of what the defendant knew or believed or thought of the money in order to decide whether anyone looking objectively at the grounds the defendant had would believe the money represented proceeds of crime.  According to Spigelman NPJ in Paragraph 45 of the Pang Hung Fai case FACC 8/2013, “grounds” are wider than “facts”. 

176. Though D1 denies that he knew or believed D2 was evading tax, there is indeed evidence that D1 did. 

177. In Schedule 1 Entry 523, in the context of talking about the change in SDL’s shareholders and directors, D3 told D1 that they could not let the Malaysia Government know D2 was rich and the tax was very high there.

178. In Schedule 1 Entry 550, D3 expressed her wish that the Hong Kong side (referring to SCB) would not reveal anything.  She also hoped the Malaysia side would not know D2 owned SDL as an offshore company.  That echoed her earlier tax concern for D2.

179. In Schedule 1 Entries 665 - 667, D3 said D2 was going to take over a legal casino in UK.  She asked D1 if D2 could open a bank account for the casino in Hong Kong. D1 counter-asked D3 whether an offshore account could be used to settle the funds from the UK casino. Although the two did not mention the word “tax” in their communication there, it is quite clear their discussion was again related to tax concern on such income that might come from the UK casino which D2 was going to take over.

180. In Schedule 1 Entries 1089 - 1096, D1 asked D3 if D2 wanted to waste money to do a saving plan under Mr Low (referring to Mr Low Aik-meng of G7 Asia International.  D3 replied that D2 would not.  There D1 was speaking to D3 about his concern of G7Asia International receiving funds from remittance agents.  D3 explained to D1 that it was because G7 (referring to G7 Asia Traders in Malaysia) had asked its client (a paint company called Rainbow Force SB) to pay in Hong Kong to escape tax.  D3 further said Rainbow Force sometimes used remittance agents and there was no choice.

181. I find as I am sure D1 did know or believe D2 was escaping tax from the Malaysia Government, making use of such offshore companies like SDL, GBML or G7Asia International. 

Remittance Agents

182. It is clear from his exchange with D3 that D1 was wary of the involvement of remittance agents and that would attract the bank’s attention (Schedule 1 Entries 529 - 531, 587 - 591, 620, 1080 - 1119). 

183. In Entry 1119 D1 said, “Why?  You remind Mr Tan that if he dun use remittance agent to send TT, then Mr Zhao should be safe”.  D1 obviously thought the remittance agents were engaged by D2 to conduit money for the purpose of tax evasion.  He did advise D3 to warn D2.

184. Apparently D1 wanted to retain D2 as a client he treasured much, contrary to his saying in court that he did not care if he could not keep D2’s accounts.

185. There was some irregularity as pointed out in Paragraph 12 of the Agreed Facts, ie. four Malaysia remittance agents or moneychangers had their names being used without their knowledge. But there is no evidence that D1 knew about that. 

Tip Off

186. Prosecution say D1 tipped off D3 on SCB’s suspicion of SDL and G7 Asia International, D1 denies.  However, his communication with D3 in Schedule 1 speaks for itself.  D1 indeed had told D3 more than he ought to.

Coaching

187. Prosecutor also criticises D1 for coaching D3.  If that means D1 is telling D3 what type of information she should prepare to supply to SCB, the answer is “yes”.  However, D1 did not ask D3 to make up the contents or teach her how to say it for reply.  The tenor of their communication shows the information and proof were originated by D3. D1 just accepted them on their face value.

False Information

188. We now know that some information given by D3 through D1 to SCB was not true, for example, the Authorised Distributor Letter (B2362) but there is no evidence that D1 was aware of any falsity.  D1 had sent the proof to FCIO.  Apparently the compliance people did not find any problem with the information either.  As such, D1 should not be singled out.  As the witnesses from SCB tell the court, they would not have independent ways to check on the information. In fact, D1 really believed D2 traded in gems.  He asked D3 to quote him the diamond price because he wanted to buy one (Schedule 1 Entries 631 - 644).  There is no evidence that D1 knew the information D3 gave him or what she told him was false.  There is no evidence that D1 asked D3 to tell SCB anything untrue except for that he told D3 not to tell SCB about the change in SDL’s company structure on 24 April 2012 in order to “make the thing as simple as possible” (see Schedule 1 Entries 518 - 519).

Oddities of transaction

189. Mr Cheng says there are certain oddities with respect to some of the transactions in and out of the accounts of SDL and GBML. For example, some amounts were in round number, even identical, occurring within the same day or close to others.  The information of the depositors was insufficient for good identification and the funds generally stayed for a short time in the accounts only.  Prosecution say D1 was the Relationship Manager of SDL and he actually looked after the accounts of GBML and G7 Asia International as well. He would have good knowledge of those odd transactions in the accounts. 

190. Prosecutor is right to say that D1 did not have to know all in order to be found guilty but the extent of his knowledge is an important ground to consider. To what extent did D1 know of the oddities of the transactions?

191. D1 had been a relationship manager for several years.  He said he had accumulated about a thousand clients and he was busy. That sounds reasonable.  There is no reason to doubt about that.  I accept D1 was a busy bank manager and it is unreasonable to expect a busy bank manager to pay attention to each in and out transaction in a particular account of a particular client unless he was asked to do so.

192. It is true that D3 at times asked D1 to check the balance of the accounts of SDL (Schedule 1 Entries 419 - 420, 472 – 473), GBML (Schedule 1 Entries 628 - 630, 650, 661 – 662) and G7 Asia International (Schedule 1 Entries 978 - 979).  On some occasions, D1 did provide the balance figure to D3 but that does not mean D1 must be aware of the details of each and every in and out transaction.

193. In Schedule 1 Entry 474, on 10 April 2012 D3 asked D1 to e-mail her “Full transaction of Sunny Drive account”.  On 11 April 2012, D1 sent D3 two screen captures (B2284 and 2284A).  In fact, we can see in the bundles that D1 had sent D3 other screen captures of some accounts involved (see B2288, 2290, 2294, 2296, 2299, 2302, 2307, 2367, 2416 - 2645).  We can see there were some figures and names on those screen captures but the details were limited on such computer records.  There is no evidence that D1 had dug into the paper records for further details. There is no reason to expect D1 knew more than what he saw on those screen captures on the computer unless he himself was personally involved in those transactions or informed of the details by D3 or others. But there is no such evidence.

194. In Schedule 1 Entry 590 on 2 May 2012, D3 asked D1 “I need a big help from you. Every transaction of money into Sunny Drive, I would like to know who is the remittance agent, date and amount, can you check?”.  D1 replied D3 in Entry 591, “I checked with my colleague now”.  However, in the prosecution case there is no evidence of D1’s reporting to D3 such transaction details.  D1 only raised the issue of remittance agents again to D3 on 12 September 2012 after Kevin Tsui had forwarded to him FCIO’s query of G7 Asia International.  In Schedule 1 Entry 1109, in the context of talking about G7 Asia International enquiry D1 said, “Otherwise how come I know one of the company is a remittance again?”  That suggests that D1 was not actually following on each and every ‘in’ transaction relating to the accounts of SDL as requested by D3, or GBML’s, or G7 Asia International’s. If he was, one would expect there was frequent reporting by him of those details to D3 or discussion of that sort. But we do not see that in their communication records. 

195. Unlike the inter-account transactions between SDL, GBML and G7Asia International, the ‘in’ transactions from overseas or local companies other than SDL, GBML or G7 Asia International did not require D1’s involvement. The money just came in to the accounts of D2’s companies. There is no evidence that D1 had good knowledge of those ‘in’ transactions noting their amounts, dates, frequencies and depositors’ details (or lack of details as PW8 Mr Cheng comments in his report).  Thus it is unfair to say D1 would be aware of the details of the many individual ‘in’ transactions which did not require his involvement at all.  It is also unfair to say that he should be alert to the brevity problem.  In any event, as said in Paragraph 183 above, D1 thought the remittance agents were engaged by D2 to conduit money.  D1 was told by D3 that G7 Asia in Malaysia asked Rainbow Force SB to pay in Hong Kong for tax evasion. He would naturally be led to think the remittance agents arrangement was by D2 to facilitate tax evasion.

196. As far as the ‘in’ transactions are concerned, Prosecution can only prove D1 knew those coming from D2’s other companies (Table 3 of Schedule 2) ie. those transactions between SDL, GBML and G7 Asia International. D1 in court says they were investment-related.

197. With one exception, the ‘out’ sums from SDL and GBML, mainly from Account 1 of SDL, all went to D2’s companies in Malaysia, Captivate Realty, Glocal Billion SB and QOQ Capital Holdings and also to Property Maintenance & Consultancy Limited in UK.  The exceptional one, Deal 6, went to D2’s personal account. Thus all the money going out of the accounts of SDL and GBML effectively went from those accounts to D2’s control.  D1 says he thought the transactions were all business or investment-related.  He knew or believed D2 had many businesses and investments in different places including Malaysia and UK.

198. Prosecution say D1 had knowledge or involvement in all those transactions in Schedule 2.  D1 has no argument with those in Table 1 and Table 3 but he says he was not involved in the US$700,000 (Deal 42) in Table 2 and he was probably not involved in the other five (Deals 45 to 49).

199. Whether D1 personally involved himself in the process of those six transactions in Table 2 of Schedule 2 or not is not clear from the records but the evidence shows that D1 was aware of those six transactions (B2279 and B2301). I would not say D1 lies about his knowledge or involvement of those six deals. He probably cannot remember some deals out of the many for so many clients over the years. 

The Premium Deposit

200. The transaction in Table 3 of Schedule 2 seemed to be related mainly to a premium deposit (Deal 209). Table 3 mentions the start date of the deposit as 28 September 2012. However, according to the records (B808 - 812 & Annex B2), that start date should be 3 October 2012.  The maturity date was 11 October 2012.

201. PW8, Mr Cheng, is sceptical of this capital arrangement saying it was a short-term deposit for less than two weeks and resulted in a loss of over $200,000.  He points out that £2 million in GBML’s account were converted back to Hong Kong dollars and sent to SDL’s account and then SDL remitted two sums each of £1 million to Property Maintenance & Consultancy Limited in UK on 11 October 2012.  Mr Cheng suspects that was a layer-adding exercise.

202. We now know there was an investment agreement between Property Maintenance & Consultancy Limited and SDL.  The £2 million were part of the agreed loan to be remitted to Property Maintenance & Consultancy Limited for property investment in the UK.  One might query why GBML would not remit the £2 million directly to the UK company as SDL and GBML both belonged to D2.

203. The answer is in Schedule 1 Entry 1361, where D1 explained to D3 who complained about the loss in the deposit: “Because booked a forward FX, so transfer HKD to Sunny and use 12.505 to make TT”.  D1 says in court that the arrangement was actually carried out on Mark So’s advice.  He thus made one more conversion (轉多咗一次).  He intended to gain for D2 but it turned out to be a loss.  D2 blamed him.  D1 feared D2 would complain to the bank so he shouldered the liability and finally negotiated with D3 to reach an agreement to compensate D2.  The agreed amount was $200,000 (Schedule 1 Entries 1286 to 1359).  On 22 October 2012, D2 and D3 did go to D1’s office for the money (Schedule 1 Entries 1431 - 1444).  All defendants were arrested on that day.  It is common ground that D2 had  $100,000 with him at that time.  D1 says that was the amount he gave D2 as part-payment for the compensation.  Prosecution have no dispute with that.

204. PW8, Mr Cheng, certainly fails to understand that deposits for short terms are not uncommon. Banks do offer deposits for merely a week or just days.  Large sums can attract quite an amount of interest and foreign exchange may lose or earn through fluctuation of exchange rates.  Mr Cheng also fails to appreciate the communication between D1 and D3 on the matter (Schedule 1 Entries 1056 - 1071, 1127 - 1216, 1286 - 1361).  The two defendants obviously talked about the premium deposit as an investment.  D3 blamed D1 for the loss and finally got D1 to compensate.

205. I accept D1’s words in this regard.  The one more conversion was on financial advice from Mark So.  The investment was intended to gain but finally turned out to be a loss.  D1 took up the blame and bore much of the loss fearing D2 would complain to the bank.  The whole thing was not a layer-adding exercise. It was a genuine but failed investment.

The Law

206. The two-stage test previously adopted in considering the having reasonable grounds to believe limb has now been abolished since the Court of Final Appeal’s decision in the case of Pang Hung Fai FACC 8/2013.  Now the jury only have to decide whether looking objectively at the grounds the defendant had at the material time anyone would believe the money transacted represented proceeds of an indictable offence.

207. Prosecution focus on such grounds as D1’s exposure and training on money laundering as a bank manager, his knowledge of the odd features of the activities of the accounts of SDL, GBML and G7 Asia International including the frequencies, amounts, dates of the transactions and the use of remittance agents in some of the transactions.  Prosecution also rely on the lack of detailed information regarding some of the remittance agents.  They also rely on the ‘slick talk’ between D1 and D3 in Schedule 1 and in other emails.  The details of such grounds and the extent of D1’s knowledge of those grounds have been discussed above. I will not repeat them here save to say, as a matter of summary, D1 only knew what he did and what he talked with D3 but he did not know all Prosecution allege he knew or should know. 

208. According to the law now, D1’s own perception and evaluation of the situation must also be considered even though what he thought, knew or believed might not be true.  Spigelman NPJ says in Paragraph 45 of the Pang Hung Fai case that “grounds” are wider than “facts”.

209. D1’s own perception of evaluation of the situation is not conclusive of his guilt or innocence but it is important to the jury’s consideration on whether one looking objectively at the grounds D1 had at the material time would believe the money represented proceeds of an indictable offence.

210. D1 says he did not know D2 at the outset.  Lydia Lee of a proper secretarial service company introduced this client to him to open bank accounts.  D2 passed the bank’s scrutinising checks.  His documents appeared to be proper and certified by a certified public accountant.  D2 also had a good reference letter from Citibank in Malaysia (B427) to say he was a premium client since 2010 and the operation of his accounts had so far been satisfactory.

211. D1 had D2’s name card, Exhibit D16, which listed a number of companies, the EBNI ones, Captivate Realty and MYCN.  These companies had all been mentioned in the business proof D3 sent to D1 to clarify SCB’s enquiry on SDL.  D1 knew or believed D2 had businesses in China and UK apart from Malaysia. D3 also mentioned to D1 that D2 had a business partner in Japan (Schedule 1 Entry 554).  It is also mentioned to D1 that D2 was to start business in Thailand (Schedule 1 Entries 1224 - 1262).  Hearing that, D1 remarked “He has many many many different businesses” (Schedule 1 Entry 1263).  That perhaps sums up D1’s perception of D2.  Of course, that was what D3 told him. But D3 was always able to come up with proof of D2’s businesses and investments.  D1 himself noticed that D2 often had $10 million to $20 million left in his accounts.  To him, D2 was a very rich and diversified businessman with many operations in different parts of the world. D2 invested here and there and in great sums. As such, he had to make transactions through the accounts of his companies.  As a Relationship Manager, D1 was more than willing and ready to serve such a client even though he knew D2 wanted to pay less tax in Malaysia.  D1 himself was of the view that tax avoidance could be achieved by legitimate ways, very often through offshore companies.

212. D1 was blinded by D2’s riches but that is not the same as turning a blind eye to anything illegal.  He thought D2 was doing his legal businesses and made legal investments. 

213. D1 was not aware of any falsity in D3’s claim. Neither the FCIO people of SCB could.  The Head of FCIO, Mr Terry Ng, says bank officers usually rely on the integrity of the client as there are no independent ways to verify the information coming from the client. 

214. Though a bank manager for some years, D1 would not be as astute as PW8, Mr Cheng, the forensic accountant.  He thought the money in the accounts of D2 and his companies were business or investment-related.  There was always quite a sum left there in the amount between $10 million to $20 million.  He did not suspect D2 of money laundering.  I believe him.

Verdict

215. The jury are not to look objectively at all the facts of the case but only those grounds D1 had at the material time to decide whether anyone would believe the money represented proceeds of crime.  D1’s own belief, perception or evaluation would not be conclusive of his guilt or innocence. It is just one of the grounds the jury have to consider. 

216. One can criticise D1 for being imprudent or even unscrupulous in helping a client when he knew or believed the crime was evading tax from his home country.  However, in the circumstances as D1 knew of them and one looks at those circumstances including D1’s own perception and evaluation of the situation, one would be more inclined to believe the money coming into the accounts of SDL and GBML or G7 Asia International was merely income of D2’s many businesses in different places rather than crime proceeds.  One would also be more inclined to believe that the transactions in question were, in the circumstances as D1 knew of them, business or investment‑related.  The use of conduits and remittance agents were probably necessary for D2’s tax evasion.

217. Evading tax is an indictable offence in Hong Kong and for the purpose of money laundering, dealing with proceeds of tax evasion is money laundering but the money has to be the proceeds of tax evasion or money representing such proceeds. It cannot be the business income itself because business income is capital rather than proceeds of tax evasion. 

218. Prosecutor makes it clear that he would not seek to argue that business income for tax evasion can be deemed to include any pecuniary advantage obtained in connection with the commission of an indictable offence under section 2(6)(a) of Cap 455, the Organised and Serious Crimes Ordinance.

219. As I find anyone looking objectively at the grounds D1 had at the material time would be more inclined to believe the money transacted in the accounts of SDL and GBML were D2’s business income.  I have to acquit D1 of Charge 1.

Charge 2

220. Charge 2 is concerned with the Checklist.  The relevant page is B435C.  On that page, D1 put a tick against the answer “Yes” to Question 1. Prosecution say D1 knew the change on SDL’s shareholders was imminent but he deliberately withheld this information from SCB in order to deceive and to mislead the bank.  Prosecution rely on Schedule 1 Entries 512 - 553 mainly to prove D1 was well aware of that change before 27 April 2012 when he filled the Checklist.

221. Did D1 know of the change? If so, when?  According to Lydia Lee, D3 asked her to process the change in April 2012. The two exchanged emails are between 20 and 24 April 2012. From the way D3 talked, it seemed she had asked Lydia Lee to do that even before 20 April (B59 - 64).

222. Lydia says she received a packet of documents relating to the application including B37 - 41, the $1,600 cheque issued by SDL on B42, and B45 - 49.  That packet was sent to her by D1 through courier service.  Lydia cannot say on which day she got it.  She banked in the cheque on 3 May 2012. 

223. We can see from Schedule 1 Entries 570 - 586 that D2 and D3 went to D1’s office on 30 April 2012.  On 2 May 2012, D3 reminded D1 to pass all documents in the envelope to Lydia.  D1 replied that he had already done so. 

224. 1 May 2012 was a Public Holiday.  D1 admits in court that he sent the packet before the holiday.  That packet was left with him by D2.  The time fits well into the timeline described by Lydia and I am sure D1 sent out that packet on the day he got it from D2, ie. 30 April 2012. That was already a few days after D1 had filled the Checklist on 27 April 2012.  Also there is no evidence that D1 read the documents before he sent them out.  We do not know whether the documents were already sealed by D2 in an envelope or not.

225. D1 says he was not aware of SDL’s change before his arrest in October 2012.

226. However, on 3 May 2012 at 1717 hours, Lydia sent him an e-mail asking him to pay the $300 in relation to the change (B2741).  Lydia titled her e-mail “Sunny Drive Limited”.  It reads:-

Dear Nathan,

Sorry to bother you. The above client would like to appoint a new director and shareholder. Could you please help to remit HK$300 from the client’s account to us. The client - Miss Grace will call you soon.”

Lydia specified her company’s account for D1 to make the payment.

227. A few hours later that day, D1 replied by e-mail to Lydia, “Okay, no problem, I will arrange it from the client”.  The title of D1’s e-mail was “Re: Sunny Drive Limited” (B2742).  The next day, ie. 4 May 2012, D1 did pay $300 into the account specified by Lydia.

228. D1 in court says he did not pay attention to the title of his own e-mail or the title of Lydia’s e-mail.  He says the title of his own e-mail just automatically appeared in reply to PW1’s incoming e-mail and even though he paid the $300 the next day, he did not know the payment was for which company as D2 had a number of companies with him.

229. The titles of D1’s own e-mail and Lydia’s e-mail do not exactly match so the title of D1’s e-mail could not be an autocopy of Lydia’s e-mail.  I am sure D1 typed in the title in his own e-mail. Furthermore, D1 would not be paying money for something he was not clear of. I am sure D1 lies here. When he answered Lydia and paid the money the next day, he was well aware that the money was paid for SDL’s change.  But when did D1 first know about that?

230. On 24 April 2012, D3 and D1 communicated on WhatsApp.  D3 told D1 in Schedule 1 Entry 512, “Sunny Drive share 75 per cent is belongs to a china man in 25 per cent is Mr Tan.”  D1 replied, “No”; “Sunny still 100 per cent owed by Mr Tan……” (Entries 513 - 514).  Then D3 said in Entries 515 - 517, “Huh we already tell HSBC Malaysia that Sunny Drive have two shareholder”; “Even the percentage already tell”; “We made loan agreement”.  D1 responded in Entries 518 - 519, “It is separate.  If Hong Kong side knew there are two shareholders and then why Hong Kong side asked q to u?  Thus keep saying there is only one shareholder (Mr Tan only)”; “Make the thing as simple as possible”. D3 in Entries 520 - 521 said, “We had said that how”; “We had ask Lydia to change the shareholder into two person right? Did I tell you before? How?”.  The record of Entry 522 is D1 saying “You did told me before.  Is it changed? Or you just plan to change it?”  Then D3 said in Entry 523, “In the process of changing cox, cannot let Malaysia Government know that Tan is rich, tax very high”; “Transfer of share I backdate to last year”; “Signatory is either one”.  And then D1 said in Entries 526 - 527 “Okay”; “It is not a matter, the main thing is the relationship between these three companies”.

231. D1 says in court that in Entry 522 he actually wanted to say “You did not told me before”.  The word “not” just failed to appear and he was not aware of that. 

232. Sometimes it does happen that a certain word like “not” would be missed from a certain utterance or sentence inadvertently. That is a common experience in everyday life. And that obviously did happen elsewhere in Schedule 1: in Entry 1318 where D1 certainly meant he did not steal Mr Tan’s money and in Entry 1357 where D1 surely wanted to say “I am not greedy”.  In both places, the word “not” was missing. The word “not” was missed again in Entry 1347, “I did deposit the cheque” but this time D1 was aware of that. He immediately made correction in the subsequent Entry 1348, “Did not deposit”.

233. However, reading the entries of 512 to 517 as a whole, I am sure the existing entry 522 was exactly what D1 said or wrote to D3. That was exactly what he meant to respond to D3’s question in the previous entry of 521.

234. I am sure D3 had told D1 earlier about the change.  D1 only asked D3 in Entry 522 in order to know whether the change which he had heard of was already executed or still in D3’s contemplation.  Then D3 told D1 clearly that it was in the process of changing.  It is absolutely clear that D1 had learnt of the change from D3 before 24 April 2012.  On 24 April 2012, he was told by D3 of more details, ie. the change would be backdated to last year, 75 per cent of shareholding would be transferred to a China man and the change was in the process.

235. I am sure when D1 filled the Checklist on 27 April 2012, he had in mind that SDL change which he knew well was in the process.  He was just told of that by D3 three days ago. That was not something to forget easily when he had to answer the Checkpoints Question 1 on B435C. I am sure D1 intentionally chose the answer “Yes” to express there was no change and that the existing information the bank had was up to date enough.

236. Counsel submits that the answer was factually correct as nothing had been changed by 27 April 2012 because the change was only executed on 8 May or 9 May 2012.  Counsel says bank officers from SCB confirmed in court that they would only act on proven facts.  Counsel also says D1 in that circumstance had no duty to report the change which was yet to be executed or finalised.  As such, the “Yes” answer on the document was neither erroneous, false or defective.

237. I disagree.  D1 knew the question on SDL’s structure was an important one, particularly in light of the SAR enquiry. Although the change was still in the process, D1 indeed had a duty to remark that on the Checklist for the bank’s information but he just put a simple tick there.  I am sure D1 intentionally chose to withhold the information from SCB in order to make the thing as simple as possible.  That is actually what he told D3 in Entry 519 of Schedule 1.  I am sure D1 on 27 April 2012 intentionally omitted the information from the Checklist with intent to deceive and to mislead SCB. 

238. While that “Yes” answer on the Checklist was not false or erroneous by itself, it was only half-true. As such, the answer was defective. 

Conspiracy or D1’s Lone Act

239. Charge 2 alleges a conspiracy between D1 and D3 on or about 27 April 2012 in that the two defendants conspired together for D1 to use the Checklist which contained that false, erroneous or defective statement with intent to deceive the bank. 

240. The conspiracy alleged by Charge 2 is not a general one, just saying the two conspired to withhold from the bank the change of SDL’s structure.  It was a narrow one alleging the two conspired for D1 to use the Checklist with intent to deceive and to mislead the bank.

241. There is no dispute that D1 filled the Checklist on 27 April 2012. However, there is no evidence that D3 knew D1 would have to fill that document, not to say how D1 would answer questions on that document.  D1 filled the checklist all by himself.  There is no evidence that he had collaborated with D3 as to how to do it. 

242. Prosecutor says D1 on 24 April 2012 told D3 not to let the Hong Kong side, ie. SCB, know of SDL’s change “to make the thing as simple as possible”.  D3 said in Schedule 1 that she had already HSBC in Malaysia.  She asked D1 how the Hong Kong side (referring to SCB) would not know that too.  No doubt, D3 worried the bank on both sides would communicate but D1 did not reply to D3’s worry there.  In Schedule 1 Entry 527, he just told D3 “It is not a matter, the main thing is the relationship between these three companies”.  The two defendants then talked about something else.

243. Prosecutor says the two defendants talked again the next day, ie. 25 April 2012.  In Schedule 1  Entries 534 - 535, D1 said he would help D2 and D3.  D3 then said she wished Malaysia and Hong Kong would not communicate much.  She was referring to the banks on both sides.

244. Prosecutor says D1 and D3 collaborated on the said conspiracy.  However, from the exchanges in Schedule 1, it is obvious that D1 was telling D3 that he would help D2 and D3 to clear the SAR enquiry while D3 was just saying wishfully that she hoped the banks on both sides would not communicate with each other.  D3 certainly did not want SCB in Hong Kong to know what HSBC in Malaysia had already known including SDL’s change in company structure.  However, the two defendants did not discuss what to do and how to do it.  D1 just told D3 to keep saying to SCB that there was one shareholder and to make the thing as simple as possible.  Although D3 asked D1 how SCB would not know when she had already informed HSBC in Malaysia, D1 did not give D3 any suggestion and the two did not discuss on what to do or how to do it. 

245. Prosecutor points out that D3 had never informed SCB on her own volition. But that is not the same as if she had collaborated with D1 on withholding the relevant information from SCB regarding SDL’s change by failing to disclose that information on the Checklist.  As said, D3 never knew there was a checklist to be filled and she never knew what was on the Checklist. 

246. Prosecutor also relies on the communication between the two defendants on 26 April 2012.  He points out that D3 in Schedule 1 Entry 550, said “I hope Hong Kong side will not reveal anything and also Sunny Drive is belongs to Mr Tan as Sunny Drive is an offshore company”.  D1 then said in Entries 551 - 552, “Okay, I will search it tomorrow for you”; “I will resolve it, no problem”.  D3 then expressed relief and thanked D1. Then the two talked about something else. 

247. I do not think the two defendants were conspiring there.  Again, D3 was just saying wishfully that she hoped SCB in Hong Kong would not reveal anything.  Obviously she worried that the Malaysian side, ie. HSBC and the Government, would know D2 owned the offshore company SDL.  That was actually the worry she expressed in different words in Schedule 1 Entry 523.  D1 responded to D3 that he would search it. Nobody asks D1 in court what that meant.  Probably D1 meant he would find out the situation for D3 tomorrow about what SCB knew. And D1 told D3 that he would solve it.  Again, it is not clear what he would solve but this might just be a consolation statement to ease D3’s worry.  In any event, it is clear the two did not discuss as to what to do and how to withhold any information from SCB. 

248. I am sure both defendants would not like SCB to know that there was a change or there would be a change in SDL’s company structure.  The two had a common wish but a common wish by itself would not make a conspiracy.  There must be agreement on a common way to achieve the wish or goal but there is no evidence that the two defendants had discussed or agreed as to what to do and how to achieve their common wish.  The two did not discuss for any execution of their common wish.  D1 later filled the Checklist on his own volition and all by himself on 27 April 2012. Therefore it cannot be said that D3 had conspired with D1 to withhold that information from SCB. 

249. If Charge 2 is a substantive charge, I would convict D1 of that. However, Charge 2 is a conspiracy one.  Prosecutor never asks for the charge to be amended to a substantive one or lays an alternative to it. 

250. Under section 51(2) of Cap 221, the Criminal Procedure Ordinance, the court has power on the right occasion to convict a defendant of another offence if the original allegations amount to or include expressly or by implication the first‑mentioned offence.  However, I do not think that section can apply in the present situation.  A conspiracy to commit a substantive crime cannot be deemed to amount to or include the substantive offence itself.  Conspiracies are always treated as being of a separate category from substantive offences. One is not an easy substitute for the other. Often, Prosecution elect to or being asked to elect prosecuting one or the other but not both because a defendant should not be made to face double jeopardy.  In the present case, Prosecution all along stick to the conspiracy allegation and I do not think they have made out such allegation in respect of Charge 2.  I do not think in the circumstances D1 should finally be convicted of the substantive offence when the allegation against him is conspiracy. 

251. I find the conspiracy allegations in Charge 2 are not proved against D1 beyond all reasonable doubts. He is acquitted of that charge.

Charge 3

252. Prosecution allege D1 accepted an advantage of HK$4,404 from D2 as an inducement to or reward for or otherwise on account of D1’s handling the accounts of D2 and D2’s companies.

253. Prosecution say D1 on 5 September 2012 accepted a $30,000 cheque (B400) from D2 but he was only entitled to be reimbursed to the extent of HK$25,596.  I call that $30,000 cheque ‘Cheque 6’.  The sum of HK$25,596 is an aggregate of the following:-

a) HK$6,250 for annual renewal registration for SDL in March 2012;

b) HK$300 for change in SDL’s shareholding and directorship in May 2012;

c) HK$10,296 for setting up GBML in March 2012; and

d) HK$8,750 for setting up Maxigold in August 2012.

Prosecution allege D1 accepted the surplus of HK$4,404 as an advantage which was accepted by D1 for his handling of the accounts of D2 and D2’s companies.

254. D1 admits accepting the cheque from D2 on 5 September 2012.  He also agrees that there was a surplus of $4,000 odd after deducting the major sums he had advanced payment on behalf of D2 as aforesaid.  However, D1 says in court that the surplus of $4,000 odd was only retained by him as further expenses for services that would be rendered to D2 upon his further request. He says D2 at times would ask for his help or would ask him to help his friends.  D1 also says in running errands for D2 in the past he had actually incurred some miscellaneous costs like travelling expenses which he had not asked D2 to pay him back.  He says though he helped to make transfers for D2 at times, the service was provided only in the discharge of his duties as a bank manager and not for any advantage. 

255. In the communications between D1 and D3, we do see that D3 often asked D1 to help in D2’s business.  Apart from those that have been mentioned of SDL, GBML, G7 Asia International and Maxigold Limited, we can also see in Schedule 1 Entry 554 where D3 said D2’s partner in Japan would open an offshore company and open an account with D1. So it is not a fiction that D2 had at times asked D1 for help and surely he would do so again in the future. 

256. When D1 was questioned by ICAC, he told the investigators that he would only claim from D2 what he had spent (實報實銷).  He also told the investigator that it was clear between him and D2 that there was no advantage to be gained.  He told the officers that the $30,000 cheque was more or less what he had spent for D2 on previous occasions, three to four times.

257. Prosecutor criticises D1 for being inconsistent with his explanation tendered in court and given to ICAC.

258. On the face, D1’s versions about the cheque amount are inconsistent. But looking at the matter in depth, the gap between what he said to ICAC and in court is actually not as wide as it seems. 

259. One can see that D1 appeared tense and nervous in the two interviews in ICAC even though he was accompanied by a lawyer during the first one.  D1 seemed to be not sure of a lot of details.  He refused to answer a number of questions and would only give brief answers to some others. At that time, the four clear sums of money which he had paid on behalf of D2 were not laid out before him.  It appears that D1’s answer to ICAC officers that the cheque amount of $30,000 represented more or less what he had paid for D2 was only provided out of convenience at that time.  His emphasis was actually that he had not taken any advantage from D2.

260. I accept D1’s evidence in court that he had incurred miscellaneous expenses for D2 on previous occasions and he was not that calculating with D2 down to dollars and cents.  Indeed the two seemed to like to settle between themselves in round sums rather than to dollars and cents.

261. At first, SDL issued on 4 April 2012 a $10,500 cheque, B398, and a $6,500 cheque (B399) to D1.  I call that $10,500 cheque ‘Cheque 2’ and this $6,500 cheque ‘Cheque 3’.  Although D1 told D3 in Schedule 1 Entry 485 that he would process the three cheques (the other one was certainly the $100 cheque to Low Aik-meng – ‘Cheque 1’), D1 says in court that he actually had not received those three cheques.  It seems that D1 really had not got the cheques or he had got them but misplaced them. Now we know ICAC officers found on 22 October 2012 Cheques 1 - 3 among other things in an area around D1’s desk in the office he shared with others.  That is probably why SDL would issue to D3 two more cheques in the same or very similar amounts. That is the $11,000 cheque (B395 - Cheque 4) and another $6,500 cheque (B396 - Cheque 5).  Both of these were dated 16 April 2012.  But these two cheques seemed to be not reaching D1 too as they were found by Mark So in a recycle envelope on 11 May 2012.  Mark So handed these two cheques to ICAC on the day he found them. 

262. I am quite sure that Cheque 4 and Cheque 5 were sent to replace Cheque 2 and Cheque 3.  The amounts of $10,500 and $11,000 were close to each other and also close to the $10,296 D1 had spent on GBML for D2.  The $6,500 ones were close to the amount of $6,250 D1 had spent for D2 on the renewed registration of SDL. 

263. Prosecutor says any surplus of the cheque must be given to D1 as an advantage and D1 so accepted it only in relation to his handling of the accounts of D2 and his companies. That is only a hypothesis.  One can also hypothesise that it is only for D1 doing extra service for D2 by helping him to set up companies and running errands other than handling the accounts.  It may also be the case as D1 says, that D2 paid him a round sum with any surplus to be used only as expenses in future services that D1 might render to D2. 

264. Would D2 give D1 advantage?  From the evidence it seems D2 was not a generous or grateful man.  When his premium deposit lost money, he insisted through D3 that D1 should pay him back the greater part of the loss to the extent of $200,000.

265. Prosecutor says that D1 used the $30,000 cheque as partial payment of the $200,000 compensation.  That suggests D1 had treated the whole sum of $30,000 as his own money.  Prosecutor says D1 therefore had appropriated the surplus of $4,000 odd as an advantage.  He relies on D1’s exchanges with D3 in Schedule 1 Entries 1343 - 1357. 

266. One must not lose sight that it was already 16 October 2012, more than a month after D1 had got the cheque and at that time D1 was engaged in a course of difficult negotiation with D3 as to how much he had to pay D2 for the loss in the premium deposit (Schedule 1 Entries 1286 - 1359).  I find that D1 in that sense was just using the cheque to get down the amount he had to pay D2. There is no admission from D1 that he accepted advantage from D2.  In his exchanges with D3, there was no hint or discussion of soliciting or accepting of advantage or anything of that sort.  I accept D1’s explanation that he received the $30,000 cheque to get back what he had spent previously for D2 with any surplus to be used as future costs for providing service to D2 again.  I am sure on 16 October 2012, D1 was only using the cheque to rough down the compensation amount he had to pay D2. He was not accepting the $4,000 odd as an advantage for handling the accounts of D2 and his companies.

267. It is also to be noted that in Schedule 1, D1 said in Entries 1320 - 1321, “I did not gain anything from the transactions”; “I just wanna do something good to Mr Tan, but made mistakes only”.  Of course, D1 was talking about the premium deposit transactions in particular but I am sure that was his general mindset when providing service to D2 because he wanted to please D2.

268. As said, I accept D1’s explanation to Charge 3 that he did not retain any surplus from the cheque as an advantage but only as payment for any future expenses that might be incurred should D2 ask for his service again. And in talking with D3 about the compensation amount to be reached, he was just using the cheque to rough down the actual compensation he had to pay.  He was not accepting the cheque surplus as an advantage. Therefore I find Charge 3 not proved beyond all reasonable doubts.