HKSAR v. TABAGUA VALERIAN also known as TABAGUA VALERYAN

DCCC 130/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 130 OF 2014

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Reasons for Sentence

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1. The defendant has been charged with one count of attempting to deal with property known or believed to represent proceeds of an indictable offence, contrary to section 25(1) and (3) of the Organised and Serious Crimes Ordinance, Cap 455 and section 159G of the Crimes Ordinance, Cap 200. The defendant was convicted after trial.

2. This is a case where the predicate offence is known.  There was a telephone deception that led to police involvement and the bank refusing to deal with the money as ultimately requested by the defendant. The defendant was convicted on the basis that he had reasonable grounds to believe the proceeds he attempted to deal with were proceeds of an indictable offence.  There was no evidence that he knew he was dealing with such proceeds.  That is relevant to sentencing unless it is very obvious that he turned a blind eye to the fact, but that is not the case here.

3. I will not repeat the prosecution’s evidence.  I gave full reasons in my verdict and set out both the prosecution and defence case in it.  I explained my findings as to why I found the defendant guilty after trial.

4. To recap succinctly, PW2 worked for Satfa BV in Holland as a financial controller.  He was duped over the phone.  He thought he was doing a transfer of euros to a Hong Kong bank account on behalf of his group’s CEO when in fact he was deceived by a fraudster.  He sent €350,000 to a Hong Kong bank account as directed, an HSBC account of M N Technology Limited.  This fraud and transfer took place on the morning of 8 August 2013. 

5. M N Technology is a Hong-Kong-registered limited company owned solely by the defendant at the material time.  He was also the sole signatory of the HSBC bank account that received the €350,000.  This account had been dormant for 16 months prior to this deposit.  Nothing resembling a trade or business was obvious upon examination of the statements of this account. 

6. The defendant arrived in Hong Kong for the first time in 16 months to transfer the money out of this account.  He arrived on 14 August, one week after the deposit.  The telegraphic transfer was to a beneficiary in Estonia.  The beneficiary was an Octans Industries Limited.  He was arrested at the bank.  There was no admission made. 

7. At trial, the defendant did not give evidence. At trial, for the first time, the defence tried to put forward an explanation to the court to explain the defendant’s attempt to transfer the money out of his company account. 

8. I found that the explanation put forward by DW1, by the defence witness, Mr Palienko, was in the main, where relevant to this charge, hearsay.  Whether he was trying to show the defendant was a victim or acting upon an honest belief the money was legitimate or clean, what he had to say on it or the defendant’s knowledge was hearsay.

9. After applying the test set out in the authority of HKSAR v Pang Hung Fai [2013] HKC 366, I found the prosecution proved beyond reasonable doubt that the defendant had reasonable grounds to believe the proceeds were proceeds of an indictable offence and attempted to deal with it. 

10. I have heard full mitigation today.  The defendant has a clear record in Hong Kong and in Russia as confirmed by a document from the Ministry of Internal Affairs.  I have heard full mitigation put forward on the defendant’s behalf.  The defendant is a Russian national, 52 years old, married with three young daughters who are all still at school.  The defendant’s wife has been in court throughout this trial and obviously supportive.

11. I have received a letter from the defendant’s wife, asking for leniency.  There are letters from the children’s schools, explaining that there has clearly been an effect on the defendant’s daughters as a result of the defendant’s absence. 

12. Miss Lai has set out the defendant’s personal background and business background to date.  It seems, according to Miss Lai, the defendant is a successful businessman as well as a loving and caring father and husband.

13. I have seen many documents that relate to patents and client or business associates’ testimony. 

14. I have also been referred to several authorities that do set out what is relevant to sentencing in cases of this nature, but they all reiterate that there are no guidelines for money-laundering offences. I quote the Court of Appeal saying:

“Given the highly variable circumstances in which the offence might be committed, it was difficult and undesirable to offer guidelines.”

I refer to HKSAR v Boma CACC 335 of 2010.

15. Another authority referred to me was HKSAR v Hsu Yu Yi CACC 159 of 2009 which goes through many previous cases, their facts and sentences imposed.  It is clear upon reading that authority and its references to past sentences it is hard or impossible to set out guidelines or even see a pattern to sentencing offences of this nature. 

16. The maximum sentence for this offence is 14 years’ imprisonment.  The courts have always viewed this offence seriously. The courts have said time and time again that without the assistance of money launderers, it would be difficult for criminals to hide their ill-gotten gains.  Money launderers assist criminals to launder their ill-gotten gains, indirectly encouraging them in their criminal activity.  Money‑laundering offences also have an effect on Hong Kong’s reputation as an international financial centre, affecting its integrity.  The courts do take a robust approach, and there will be and should be a deterrent element in sentencing of these offences.

17. What is relevant to sentencing in this case is the amount of money involved.  It is not insignificant.  It is €350,000, HK$3.7 million.  What is also relevant is that ultimately no loss was suffered by Satfa BV or SpeedCast Limited.  They have had the money returned to them.  It is also relevant that this is a single offence.  There is an international element in these facts. The victim was duped in Holland to send money, ill-gotten gains, to Hong Kong.  On the face of it, this is not a particularly sophisticated scheme, but it did involve some planning to target PW2.

18. Having regard to all the facts, the relevant sentencing factors I have just set out, the defendant’s background and mitigation put forward today, I find a term of imprisonment appropriate and impose a sentence of 3 years and 6 months.  I will give the defendant credit for his clear record and reduce that sentence by 4 months.  Accordingly, the defendant is sentenced to 3 years and 2 months.