HKSAR v. SHEN ZHUOTAO

CACC 320/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 320 OF 2014

(ON APPEAL FROM HCCC NO. 246/2014)

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REASONS FOR JUDGMENT
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Hon Lunn VP (giving the Reasons for Judgment of the Court) :

1. The appellant appealed, with the leave of Macrae JA granted on 29 October 2015, against the sentence of 6 years’ imprisonment imposed on him by Bokhary J on 11 September 2014 on his plea of guilty to a charge of dealing with property, between 18 June 2010 and 21 June 2012, namely $567,336,660.17, knowing or having reasonable grounds to believe that those monies represented the proceeds of an indictable offence, contrary to section 25(1) and (3) of the Organized and Serious Crimes Ordinance, Cap 455. That sum of money was the total of the monies deposited into a bank account of Fortune Millennium Limited (“FML”), whose registered address was at premises in the Bank of America Tower, Central. Having pleaded guilty to the charge on 30 May 2014 at Eastern Magistrate’s Court the appellant had been committed to the Court of First Instance for sentence. We allowed the appeal, quashed the sentence imposed on the appellant and in its place imposed a sentence of 5 years’ imprisonment. We said that we would give our reasons for doing so in due course. That, we do now.

The facts

2. In pleading guilty to the charge, the appellant accepted the factual basis of the commission of the offence set out in the ‘Summary of Facts’.  The appellant, who was aged 20 in 2010, is a Mainland resident who visited Hong Kong regularly on a two-way permit during the period the subject of the charge and resided in premises in Sham Shui Po when in Hong Kong.

3. On 12 June 2010 the appellant became the sole director and shareholder of FML.  He became the sole signatory of the FML’s bank account, which was opened with the Bank of China (Hong Kong) Limited of 18 June 2010. 

4. In the tax return of FML for the year ending 31 March 2011, it was stated that the company had “no business activity for this year”, declaring no income and no profit.  In the following year’s tax return, no trade or business was reported by FML.

5. The activities of FML’s bank account bore a number of features which corresponded to patterns of money laundering:

a) the total turnover was more than $567 million over 2 years;

b) nearly all transactions were made via e-banking and ATM transfers;

c) there were around 6 to 8 transactions per day and about 135 transactions per month;

d) the amount involved in each transaction was around $180,000;

e) many withdrawals were made immediately after deposits of the same amount, on the same day;

f) multiple deposits of small amounts were followed by a large withdrawal on the same day of the total amount of those small deposits; and

g) most of the transactions were in round numbers.

6. On 20 June 2013, the appellant had been observed by police officers to be working in Hing Lung, a money exchange shop in Tai Po Road, Sham Shui Po, although he was not a licensed money service operator.  A fund flow analysis of FML’s bank account showed that about 23% of the funds deposited into its bank account were from accounts connected with Hing Lung, one of its owners and another similarly named money exchange business, owned by one of the owners of Hing Lung.

7. Having been arrested and cautioned by the police officers on 3 October 2013, the appellant claimed that he used FML to trade mobile telephones.  He said that he had come to Hong Kong to visit relatives and would stay with his wife in Sham Shui Po.  Earlier, on 10 April 2013, police officers had found the offices at FML at Bank of America Tower to be about 70 feet in size and essentially empty.

Mitigation

8. In mitigation advanced on behalf of the appellant, Mr Boyton asked the court to note that the appellant had a clear criminal record.  It was submitted that he was not the person in charge of FML, although it was conceded that he did knowingly assist in the operation of its bank account, for which he was paid $2,000 per month.  It was contended that the movement of monies in FML’s bank account was consistent with the operation of a money exchange business.  It was submitted that there had been e-banking transactions from the Mainland to the account on many occasions on which the appellant was in Hong Kong.  Mr Boyton accepted that, as a result, there was an international dimension to the deposits of some of the monies.  Mr Boyton contended that the “underlying offence” was the operation of an unlicensed money exchange business.  That offence was less serious than bookmaking, theft or major fraud.

9. Mr Boyton referred the judge at some length to the judgments of the Court in HKSAR v Boma [1], HKSAR v Lam Mei Ling [2] and the reasons given for sentence in HKSAR v Yip Chi Keung.[3]

Reasons for Sentence

10. In sentencing the appellant, having said that she took “into account everything said on your behalf ”, the judge rejected the submission made on behalf of the appellant as to his role and the benefits he gained.  Having referred to the reasons for sentence given by Deputy Judge Anthea Pang, as Pang J was then, in HKSAR v Yip Chi Keung, and, having noted that the judge, “seemed to have accepted what was said by the defence about the role which the defendant…have played and what he gained from his offence…and felt they will to rely on certain things which (the defendant) said to the police under caution following his arrest”, the judge said:[4]

“ As to the role which you played and what you gained from your offence, you are unable to rely on anything you said out of court.

I do not feel able simply to accept what has been asserted by your counsel on your instructions.  I have to look at the whole picture as it emerges, doing so in a way which is fair and balanced.”

11. Then, the judge said:[5]

“ Whatever the predicate offence was, the amount involved shows that it must have been very serious and substantial.

The money laundering in which you engaged was prolonged, and you were very actively engaged in it.”

12. Having stipulated a starting point for sentence, and having afforded the applicant a discount of one-third from the starting point taken for sentence for his plea of guilty, the judge imposed sentence of 6 years’ imprisonment. 

Grounds of appeal against sentence

13. Mr Grounds, on behalf of the appellant, advanced two grounds of appeal against sentence, namely:

(1) the starting point of 9 years’ imprisonment adopted by the judge was manifestly excessive and/or wrong in principle, in particular that she failed to have proper regard to the relevant considerations as set out in HKSAR v. Boma; and

(2) the judge erred in sentencing the appellant on the basis that the predicate offence, “must have been very serious and substantial”, without an evidential basis for so concluding.

14. In his written submissions, Mr Grounds referred to a number of judgments of this Court and to some reasons given by judges of the Court of First Instance in sentencing for the same offence.[6]  He submitted that the starting point should not have been greater than 7½ years.  Complaint was made that the judge did not “compendiously examine the factors listed out in Boma ”. 

15. Further, it was submitted that where the predicate offence was unknown, the judge should not have concluded that the offence was “very serious and substantial.” [7]

Respondent’s submissions

16. Ms Parwani acknowledged that the starting point of 9 years’ imprisonment stipulated by the judge was “on the high side”, although she contended that it was not manifestly excessive.  She invited the court to note that that there is no tariff sentence for money laundering offences, but that deterrence is the paramount sentencing consideration.  She submitted that, although the judge did not refer specifically to the judgment of this Court in Boma in sentencing, given that she had been referred to the factors relevant to sentencing adumbrated in that judgment, the judge was to be taken to have had them in mind in imposing sentence.  She suggested that the amount of impugned monies dealt with in the bank account of FML, the period over which the conduct occurred and the appellant’s status as a visitor to Hong Kong were factors relevant to a consideration of the appropriate sentence.  Nevertheless, she submitted that little assistance can be derived by detailed consideration of different cases.

17. On the other hand, she suggested that the judgments of this Court in the Secretary for Justice v. Lau Man Ying [8] and the Secretary for Justice v. Herzberg [9], established as appropriate a broad range of sentence of 6 to 9 years for offences the commission of which involved dealing in hundreds of million dollars which the defendant knew or had reasonable grounds to believe were the proceeds of the indictable offence.

18. Finally, Ms Parwani submitted that the judge’s statement that whatever the predicate offence might have been, “the amount shows that it must have been serious and substantial” was justified, as the only reasonable inference to be drawn from the facts admitted by the appellant. 

A consideration of the submissions

19. In the judgment of this Court in HKSAR v Boma, Stock VP said that the first factor to which the court should have regard in sentencing for this offence was the maximum penalty for the offence, namely 14 years’ imprisonment; the second matter was that deterrence was paramount, and then there was, “the question of the amount of money laundered” which was a “significant feature”, albeit that it was not the “be-all and end-all of a case”.[10]  In identifying other factors which the court should consider, Stock VP said:[11]

“ (1) The nature of the predicate offence, if known, and the penalty available for the predicate offence:

… So, for example, where the predicate offence is trafficking in dangerous drugs, the offender should expect a sentence significantly greater than where the predicate offence is gambling.

(2) This brings us to the question of the state of knowledge of the offender. This divides itself in two – knowledge of the nature of the predicate offence, where the predicate offence is known to the court; and knowledge of the fact that the funds are the proceeds of an indictable offence:

(a) Where the predicate offence is known to the court, the question of knowledge of the offender as to the nature of the predicate offence is relevant in that the person who knows the nature of the predicate offence is more culpable than the person who does not :

(3) An international dimension will always be a significant aggravating feature; and by international dimension we include money laundered from, or for those operating in, the Mainland.

(4) The sophistication of the offence is always relevant. This will include the degree of planning and whether deceit is practised to achieve the objective.

(5) Where the offence is committed by or on behalf of an organized criminal syndicate, that is an aggravating fact.

(6) It is relevant to take into account whether there is one transaction or many and the length of time over which the offence was committed.

(7) As in the case of Herzberg, it will be an aggravating feature where the offender continues to launder funds after he has discovered as a fact that the funds are the proceeds of an offence or after he has discovered the nature of an offence which is serious.

(8) The sentencing court should have regard to the role of the offender and the acts performed by him. In this regard, the director of a laundering operation or scheme should attract a greater sentence than a person engaged by him although sentences should be sufficient to deter those who might be prevailed upon by directing minds. In the case of a person down the chain, the court will wish to have regard to whether a benefit has been received and if so the nature and size of the benefit. But within the category of persons down the chain there will gradations of culpability. So for example the drug addict or petty crook who is paid a small sum to open an account and hand over its operation to another with no more participation and no more knowledge than that it is going to be used for some sort of crime is much less culpable than an offender of a different sort not “used” in that way.”

20. Regrettably, although in his submissions Mr Boyton had taken the judge through those factors seriatim, in giving her reasons for sentence the judge did not condescend to identify which, if any, other factors applied to the appellant, other than determining that the predicate offence was “serious and substantial” and the commission of the offence was “prolonged”.  It is apparent from her exchange with counsel that, although she did not say so, in imposing sentence the judge was satisfied that there was an international dimension to the commission of the offence.  Clearly, that was so.  Again, although the judge found that the appellant played an “active role” in the commission of the offence, she did not stipulate what she found that be.

21. In part, in addressing the role of the appellant the judge was handicapped by the paucity of detail in the Summary of Facts.  Although there was no dispute that the appellant was the sole director, shareholder and signatory of the bank account of FML, which received over $567 million in deposits, there was no evidence, as Ms Pawani conceded in her oral argument, as to the total amount of withdrawals from the bank account, the ratio of e-banking transfers to ATM transfers and the correlation between those transfers and the appellant’s presence in Hong Kong.  There was no evidence of the mechanics by which those transfers could be effected.  That was relevant, given the mitigation advanced on behalf the appellant that he was present in Hong Kong when e-banking transfers were made from the Mainland to Hong Kong and the suggestion that dealings in the bank account could have been controlled by others, particularly since he was an employee of a money exchange business which, together with persons connected with their business, made 23% of the deposits into the bank account.

22. The judge made no reference to the “sophistication of the offence and the degree of planning”, or to the issue of whether a “criminal syndicate was involved”, factors identified in Boma.  In respect of the last of those factors, Mr Boyton had submitted that was not an applicable factor in this case.

23. With respect to the judge, she fell into error in determining of the predicate offence that, because of the amount of money with which the appellant dealt, it must have been, “very serious and substantial.”  The amount of money involved, per se, did not establish that factor.  On the other hand, as noted earlier the judge was entitled to regard it as a “significant feature”.  Having rejected the mitigation advanced on behalf of the appellant that the culpability of the appellant was merely that the bank account of FML was operated as a money exchange business, which operated without a licence and without making declarations to the authorities of those remittances, there was no evidential basis on which the judge could determine properly the nature of the predicate offence(s).

24. Of course, if established to be known to a defendant, the nature of the predicate offence was highly relevant to the determination of the appropriate sentence.  As noted earlier, in Boma Stock VP said, in addressing the different levels of sentence it would be appropriate to impose having regard to the nature of the predicate offence, for example, “..where the predicate offence is trafficking in dangerous drugs, the offender should expect a sentence significantly greater than where the predicate offence is gambling.” [12]

25. The judgment of this Court in HKSAR v Lam Mei Ling, delivered by Pang J, as Pang JA was then, to which Mr Boyton drew the attention of the judge affords an illustration of the range of sentence appropriate for the different circumstances that may obtain in the commission of this offence.  There, this Court dismissed an application for leave to appeal against a sentence of 10 years’ imprisonment imposed on the appellant after trial, in circumstances in which he had dealt with deposits of over $6.8 billion into multiple bank accounts from which there were equivalent withdrawals over a period of 3 years and 7 months.  All the transactions occurred within Hong Kong.

26. By contrast, in the reasons for sentence articulated by Deputy High Court Judge Anthea Pang in HKSAR v Yip Chi Keung [13], to which Mr Boyton referred the judge, the judge sentenced the defendant, a 51-year-old man with no previous convictions in Hong Kong, on his plea of guilty, to a single count of dealing with the proceeds of an indictable offence, to 5 years’ imprisonment.  The defendant, a Mainlander, was not only the sole shareholder and director of a company but also the sole signatory of its bank account.  The company had been incorporated in Hong Kong on 7 September 2010 and the bank account opened on 14 September 2010.  In the period, between 15 November 2010 and 23 May 2011, the bank account received 842 deposits, by means of remittance or bank transfer, from at least 162 different bank accounts in 9 countries or regions in foreign currencies to a total of $883,284,156.  Withdrawals in foreign currencies to a total of $859,592,413 were made in 867 transactions.  In that period the appellant entered and exited Hong Kong 18 times.

27. The judge noted that in his out-of-court statements the defendant had claimed that he had established the company and opened a bank account at the request of a friend on the Mainland to handle remittances.  He did as instructed.  He claimed that the total benefit that he had received was $70,000.

28. In sentencing the defendant, the judge said that she found aggravating features in the commission of the offence, namely that:

(i) the total of money involved was over $880 million and that the offence occurred over a period of more than six months;

(ii) there was an international element in the commission of the offence, involving cross-border crime;

(iii) the defendant, who was not a resident of Hong Kong, had come to this jurisdiction to commit the crime; and

(iv) having opened the bank accounts, it was the defendant who operated the account and effected the transfers.

29. The judge stipulated a starting point for sentence of 7½ years’ imprisonment.  Having afforded him a discount of one-third for his plea of guilty, she imposed a sentence of 5 years’ imprisonment.

Conclusion

30. For the reasons set out above, we were satisfied that the sentence imposed on the appellant was manifestly excessive.  Approaching the task of sentencing the appellant afresh we were satisfied that the appropriate starting point to be taken sentence was 7½ years’ imprisonment. Affording the appellant a one-third discount for his plea of guilty, the sentence to be imposed on the appellant is 5 years’ imprisonment.  Accordingly, we allowed the appeal, quashed the sentence imposed by the judge and in its place imposed a sentence of 5 years’ imprisonment.

[1] HKSAR v Boma [2012] 2 HKLRD 33.

[2] HKSAR v Lam Mei Ling (CACC 103/2013; unreported, 11 October 2013).

[3] HKSAR v Yip Chi Keung (HCCC 250/2012; unreported, 10 June 2013).

[4] Appeal Bundle, page 16 A-C.

[5] Appeal Bundle, page 16 E-F.

[6] HKSAR v. Kam Susanto (CACC 542/2003; unreported, 13 May 2005); Secretary for Justice v. Lau Man Ying [2012] 4 HKLRD 435; Secretary for Justice v. Herzberg [2010] 1 HKLRD 502; HKSAR v. Yip Chi Keung (HCCC 250/2012; unreported, 10 June 2013); HKSAR v. Yu Tak Kin (CACC 446/2010; unreported, 7 August 2013); HKSAR v. Wong Lan Chun and anor (HCCC 14/2014; unreported, 14 November 2014); HKSAR v. Lam Mei Ling (CACC 103/2013; unreported, 23 October 2013); HKSAR v. Luo Juncheng (HCCC 159/2012; unreported, 23 January 2013); HKSAR v. Yeung Ka Sing, Carson (CACC 101/2014; unreported, 13 and 15 May 2015).

[7] HKSAR v. Lau Man Ying [2012] 4 HKLRD 435.

[8] Secretary for Justice v. Lau Man Ying [2012] 4 HKLRD 435.

[9] Secretary for Justice v. Herzberg [2010] 1 HKLRD 502.

[10] HKSAR v Boma; page 42, paragraphs 35-8.

[11] HKSAR v Boma; pages 40-44, paragraph 40.

[12]  HKSAR v Boma; page 42, paragraph 40(1).

[13]  HKSAR v Yip Chi Keung - which judgment was delivered in Chinese, an English translation of which was provided to the Court.