HKSAR v. HE QINGQIU AND ANOTHER

DCCC 473/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 473 OF 2013

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REASONS FOR SENTENCE

1.  D1 is charged with 2 "Money Laundering" offences (Charges 1 and 3) and D2 is charged with 3 (Charges 2, 4 and 5). D1 pleaded guilty to Charge 1; and D2, Charges 2 and 5. The prosecution applied to leave Charges 3 and 4 in the court file; not to be proceeded against D1 and D2 respectively without the leave of court. I granted the application.

2. The respective sums involved in Charges 1, 2 and 5 are roughly US$1.54 million, US$1.54 million and US$50,000.

Summary of Facts

The Underlying Theft Offence

3. In February 2012, a Russian company named Game Insight purchased a shelf company in Hong Kong through a company secretarial agent in Moscow.  The purpose was to open a bank account in Hong Kong for receiving profits of mobile phone software applications from Google.

4. By the end of April 2012, an HSBC bank account held in the name of the shelf company ("Account A") was set up.  Internet banking services were also available to Account A.  The Chief Operating Officer of Game Insight received the Internet Banking Access Set (which included the security device).

5. On 26 June 2012, Google paid a sum of US$10,440,019 into Account A.  Then unbeknownst to and without the authorization of Game Insight, almost the entire sum was transferred out of Account A to 4 different bank accounts through internet banking.  They include bank accounts of Topgroup Sales Limited ("Topgroup") and Pacific Trading Solutions HK Limited ("Pacific Trading").

Charge 1

6. Topgroup was incorporated on 27 April 2012.  D1 was the sole shareholder cum director.  Topgroup held an account (No.127-843365-838) with HSBC ("Topgroup's Account"), which was opened on 28 May 2012.  D1 was the sole signatory of that account.

7. Between 4 and 11 July 2012, Topgroup's Account received a total sum of US$1,545,585.11 from Account A.  A total sum of US$1,539,510 was transferred to a bank account in Singapore shortly after the funds were received from Account A.

Charge 2

8. Pacific Trading was incorporated on 13 January 2012.  D2 was the sole shareholder cum director.  Pacific Trading held an account (No.570-1-100410-7) with Standard Chartered Bank ("Pacific Trading's Account"), which was opened on 31 January 2012.  D2 was the sole signatory of that account.

9. Between 3 and 16 July 2012, Pacific Trading's Account received a total sum of US$1,545,249.50 from Account A.  A total sum of US$1,545,210 was transferred to a bank account in Cyprus shortly after the funds were received from Account A.

Charge 5

10. Further investigation revealed that D2 had opened an account (No.819-464496-838) with HSBC held in the name of Steelway Alliance Limited ("Steelway's Account").  He was the sole shareholder cum director of Steelway and the sole signatory of that account.

11. On 26 June 2012, a sum of US$50,000 was remitted into Steelway's Account from the United Kingdom.  Steelway's Account has been frozen by the Police and its balance remains at US$50,000.

Arrest and Admissions

12. D1 and D2 were arrested at the Lo Wu Control Point on 29 November 2012 when they entered Hong Kong.

13. In his video recorded interviews, D1 admitted, inter alia, that he comes from Guangzhou.  He incorporated Topgroup and opened Topgroup's Account for a person named Alex.  He received US$150 as a reward for doing so.  D2 is D1's former colleague.  D1 introduced Alex to D2, but seldom had contact with Alex.  Alex contacted D1 through D2 in relation to this job.  When opening Topgroup's Account, D1 instructed the bank to send the bank card and security device to a secretarial company in Wanchai. At that time, D1 was accompanied by a Mr. Lam of that secretarial company.  D1 had no knowledge of the transactions in Topgroup's Account, except 2 withdrawals on 5 and 11 July 2012 respectively.  He knew about those 2 withdrawals because he received SMS notifications.  D2 told D1 that the forming of companies and opening of bank accounts in Hong Kong were for clients in Russia or Eastern Europe since it was difficult for them to do so.  Before D1 accepted the job, he felt suspicious, but D2 told him that the risk was low since the company chop and bank card would not be given to the client until the ownership of the company has been changed to the client.  D1 suspected that someone might use the company for improper purposes including commercial fraud.

14. In his video recorded interviews, D2 admitted, inter alia, that he opened Pacific Trading's Account at the request of Alex because Alex needed the bank account for his trading business.  D2 received US$150 as a reward for doing so.  Alex promised D2 that no transactions would be made through the account until its ownership has been transferred to his client.  D1 is D2's former colleague, and D1 introduced D2 to Alex.  Both D1 and D2 opened bank accounts for Alex and sold them to Alex's clients.  Pursuant to Alex's request, D2 formed 3 companies and opened 3 bank accounts.  A Mr. Lam accompanied D2 to open the bank accounts.  The security devices and correspondence from the bank were all sent to Mr. Lam's office.  D2 referred D1 and another male to open bank accounts for Alex.  He received US$300 for each referral.  He also delivered the reward to D1.

Mitigation

15. D1 is now 31, single and has a clear record.  He resides with his father in Guangzhou.  His antecedent statement reveals that he graduated from university majoring in International Trade.  Prior to his arrest, he held a purchasing job in Guangzhou.

16. Ms. CHOW submitted that as disclosed in paragraphs 5 and 6 of the Summary of Facts, the Russian company discovered on 30 June 2012 that it could not access Account A through internet banking and was told to meet up with the senior management of HSBC in Hong Kong.  The company representative, however, only came to Hong Kong in early August 2012.  The funds in Topgroup's Account were not transferred out until 5 July 2012 (several days after HSBC had notice of the problems with Account A).

17. Ms. CHOW stressed that D1's reward was only US$150.  After D1 was notified by HSBC, he questioned D2 what it was all about.  D1 had threatened to close the bank account.  D1 came to Hong Kong on 29 November 2012 at the request of HSBC.  Mitigation letters were placed before me; their contents are duly noted.

18. D2 is now 29, married and has a clear record.  He resides with his wife in Guangzhou.  His antecedent statement shows that he is a university graduate majoring in English and Japanese Languages.  Prior to his arrest, he worked in the trading field in Guangzhou.

19. Mr. LAM adopted what Ms. CHOW had said in mitigation for D1 insofar as applicable to D2.  He submitted that D2 decided to plead guilty to the charges knowing full well of the consequences.   Mr. LAM stressed that D2 is a well educated person and is able to communicate with counsel in English.  D2 got himself into big trouble for only a small reward; he deserves some sympathy.  Mitigation letters were placed before me; their contents are duly noted.

Sentence

20. The Court of Appeal in SJ v WAN Kwok Keung [2012] 1 HKLRD 201 held:

"Money laundering" is a serious offence for not only does it encourage criminal activities indirectly, but also attempt to legitimize the proceeds of crime. In order to crack down on serious crimes, to prevent offenders from getting financial gains, it is necessary to deter the commission of the "money laundering" offences.

Generally, the sentence for "money laundering" offences should mainly reflect the amount of "black money" laundered and not the benefit obtained by the defendant or others. The reason being that it is very difficult to prove the benefit concerned, and in most "money laundering" cases, there may not be evidence to show from what indictable offence the "black money" are in fact derived. Of course, if there is information to prove that the "black money" is originated from serious crimes, including drug

trafficking, kidnap and blackmail, illegal human trafficking, other organized crimes, etc. or the defendant's benefit is huge, then the sentence should be adjusted upward.[1]

21. I have reminded myself of the sentencing principles laid down in HKSAR v HSU Yu Yi [2010] 5 HKLRD 545 and HKSAR v Boma Amaso [2012] 2 HKLRD 33.  As held by the Court of Appeal in both HSU Yu Yi and WAN Kwok Keung, when the "black money" involved is over HK$10 million, the starting point can be above 5 years' imprisonment.

22. For the purpose of sentencing, I accept that the evidence only shows that D1 and D2 were involved in forming the companies and opening bank accounts.  D1 and D2 each received US$150 as a reward, and D2 received an additional US$600 of referral fees.

Charges 1 and 2

23. In determining the proper starting point, I have borne in mind the amount of money involved, the duration of the offence, the defendant's role in relation to the movements of funds as well as his personal circumstances.  What I cannot overlook is in each charge, a total of US$1.54 million (roughly HK$12 million) went through the relevant bank account.

24. Based on the low level of their participation as well as their clear record, I adopt a starting point of 4 years' imprisonment each for Charges 1 and 2.  A one-third discount is given for the guilty plea, reducing the sentence to 32 months each.  Apart from this, I see no other mitigating factors which warrant any further discount.  Hence, I sentence D1 and D2 each to 32 months' imprisonment for Charges 1 and 2 respectively.

Charge 5

25. Charge 5 involves only US$50,000 (roughly HK$390,000).  Based on similar reasons, I adopt a starting point of 18 months' imprisonment.  A one-third discount is given for the guilty plea, reducing the sentence to 12 months.

26. D2 is clearly more involved than D1.  D2 established 3 companies and opened 3 bank accounts for Alex; he also referred D1 and another person to Alex in return for more monetary reward.  Having considered the totality principle, I order 4 months in Charge 5 to run consecutive to Charge 2.  In other words, the total prison term for Charges 2 and 5 is 36 months.