HKSAR v. LAM HING WAN

CACC 387/2016

[2018] HKCA 686

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO 387 OF 2016

(ON APPEAL FROM DCCC NO 378 OF 2014)

_______________

_______________

_______________

J U D G M E N T

_______________

Hon Zervos JA (giving the Judgment of the Court):

1.  The appellant stood trial in the District Court before Deputy District Judge Bina Chainrai (the judge) on three charges of dealing with property knowing or having reasonable grounds to believe represent the proceeds of an indictable offence, contrary to section 25(1) and (3) of the Organized and Serious Crimes Ordinance, Cap 455 (Charges 1 to 3). At the conclusion of the trial on 15 November 2016, the judge acquitted the appellant of Charge 1 and convicted him of Charges 2 and 3. On 1 December 2016, the judge sentenced the appellant to a total term of 5 years and 11 months’ imprisonment.

2.  This offence is commonly referred to as “money laundering” but it is much broader than the description suggests for it is “dealing in the proceeds of crime”.  We will use both descriptions for the offence in the judgment.

3.  The appellant initially applied for leave to appeal against both conviction and sentence but he subsequently abandoned his application against conviction on 1 February 2018.  At the hearing of the application for leave to appeal against sentence on 20 July 2018, McWalters JA considered the three grounds of appeal against sentence that were advanced by the appellant.  He found the first two grounds were not reasonably arguable but granted leave on the third ground which is couched in general terms that in all the circumstances of the case the total sentence of 5 years and 11 months’ imprisonment was manifestly excessive.  See HKSAR v Lam Hing Wan [2018] HKCA 456.

The case background

4.  The appellant was one of three defendants who stood trial, variously charged with offences of dealing in the proceeds of crime. He was the 1^st defendant who faced three charges of dealing in the proceeds of crime (Charges 1 to 3), whereas the 2^nd and 3^rd defendants each faced one charge of dealing in the proceeds of crime (Charges 4 and 5 respectively).  It was alleged by the prosecution that the appellant operated an illegal gambling establishment in premises in Tsuen Wan and the proceeds therefrom of around $20 million cash were deposited into two bank accounts during the period from 1 October 2009 to 17 January 2013 (the day when the police raided the premises).  It was alleged against the 2^nd and 3^rd defendants that they worked at the illegal gambling establishment and made certain cash deposits into the bank accounts on behalf of the appellant.

The case against the appellant

5.  The case against the appellant stemmed from a police operation on 17 January 2013 into an unlicensed gambling establishment at a cockloft in Tsuen Wan operated by the appellant.  The police arrested a total of 20 people, including the appellant and the other two defendants, in the establishment.  The police observed that most of the people present were playing mahjong.  In the premises, there were 6 electronic mahjong tables and 12 sets of mahjong tiles, together with gambling chips, $2550 cash and 10 business logbooks.  There was also an extensive system of CCTV cameras, one at the entrance and ten inside the premises, which were connected to three screens inside the premises.  When police arrested the appellant, they found in his possession a set of keys which opened the main door of the premises.

6.  Charge 1 alleged that the appellant, on 17 January 2013, at the premises, dealt in the proceeds of crime, namely cash of HK$27,000 and RMB14,300, 6 wristwatches and 25 pieces of jewellery.  The property related to items seized by the police during the operation. 

7.  Charges 2 and 3 of which the appellant was convicted related to the funds subsequently discovered to have been transacted in his two HSBC bank accounts.  Charge 2 alleged that appellant had dealt in the proceeds of crime in the sum of $15,453,626.26 between 1 October 2009 and 17 January 2013 through the HSBC bank account numbered 075-3-099969 in his name.  Charge 3 alleged that the appellant had dealt in the proceeds of crime in the sum of $4,773,353.60 between 3 September 2011 and 17 January 2013 through a HSBC bank account numbered 632-094777-888, also in his name. 

The case for the appellant

8.  The appellant gave evidence in his own defence but did not call any witnesses.  He denied that the funds in Charges 2 and 3 were the proceeds from an illegal gambling operation at the premises.  He claimed that the funds were earnings he derived as a subcontractor in the construction industry, winnings he received in gambling, and the repayment of loans from friends.  He admitted that he rented the premises since 2011, for about one year and three months prior to the raid on 17 January 2013.  He said he paid a rental of $12,000 a month.  He said he set up the premises so that his friends could play mahjong.  He admitted that a commission was paid to him from the players.  He also admitted that he had not filed any tax returns or paid tax between February 2006 and January 2013.  He said the items of property in Charge 1 were personal items of his and his wife that he had taken from home and kept at the premises in Tsuen Wan.  He claimed that his wife had a serious gambling habit and he took the items to the premises so that she would not sell them.  He denied that the items of property were security offered by players for the advance of funds in order to gamble at his establishment.

The judge’s reasons for verdict

9.  The judge found that the appellant was in possession of these items, as specified under Charge 1, but she was unable to draw the inference that they were used as security to borrow money in order to gamble at the establishment as alleged by the prosecution.  She acquitted the appellant of this charge.

10.  The judge found that the appellant had operated the gambling establishment during the material times and that the funds transacted in the two bank accounts represented the profits of his illegal gambling establishment and therefore were the proceeds of crime.  She convicted the appellant of Charges 2 and 3. 

The appellant’s mitigation

11.  In mitigation, it was noted that the appellant had been charged with operating a gambling establishment, contrary to section 5 of the Gambling Ordinance, Cap 148, in relation to the present offence. It had been dealt with in the Magistrate’s Court where the appellant had pleaded guilty to the offence for which he was fined $15,000 and sentenced to 3 months’ imprisonment, suspended for a period of 36 months.  Defence counsel acknowledged that the sentence was very lenient, which he said may have been due to the court not having the relevant banking information about the sums of money generated during the alleged period of operation of the gambling establishment. 

12.  This is a matter of some concern because the case against the appellant in relation to operating an illegal gambling establishment was much more serious than the one prosecuted.  It appears that in the Magistrate’s Court all that was alleged against him was that on 17 January 2013 he operated a gambling establishment consisting of 6 mahjong tables.  This was a far cry from the illegal gambling operation alleged against him in relation to the offences of dealing in the proceeds of crime in the present case. 

13.  Defence counsel went on to urge the judge not to consider the entire sum that went through the two bank accounts as being the proceeds of the appellant’s illegal gambling operation but offered no reason why she should, other than there was no evidence that his only income was derived from his illegal gambling operation.  However, defence counsel acknowledged that the appellant had admitted to operating the gambling establishment for a period of about 15 months.

14.  It was noted that the appellant was in his 60s and not of good health, suffering from a heart condition and diabetes, and that his wife had committed suicide as a result of the case.  However, it was revealed that the appellant’s relationship with his wife was strained and that she suffered with bouts of depression.  The appellant’s criminal record was briefly referred to by defence counsel, who acknowledged that a term of imprisonment was bound to be imposed for the present offences for which he had been found guilty. 

15.  A background report had been obtained in relation to the appellant which was not favourable and depicted him in a bad light, noting his lack of cooperation during inquiries for the report, and lack of remorse for his past criminal misconduct.  The appellant had a criminal record dating back to 1974, which included variously offences of robbery, possessing a dangerous drug and operating a gambling establishment.

The sentencing of the appellant

16.  In sentencing the appellant, the judge, having briefly set out the facts of the case, noted his criminal record with his most recent conviction being his operation of the gambling establishment in Tsuen Wan.  She noted that he did not have a previous conviction for dealing in the proceeds of crime, although he had a previous conviction in 1986 for operating a gambling establishment and also one in 2006 for assisting in operating a gambling establishment

17.  The judge went on to refer to his personal circumstances, particularly his medical condition for which he was receiving treatment, and his family situation.  She referred to the background report and medical reports as well as letters in mitigation.

18.  The judge directed herself to the relevant sentencing authorities and set out the sentencing principles that she considered relevant to the present case.  She found that the appellant had shown no remorse and that the only appropriate sentence was an immediate custodial sentence.  She described the facts and circumstances of the offences.  She noted that over a period of 3 years and 4 months the appellant had dealt in over $20 million through the two bank accounts which she had found were the proceeds of his illegal gambling establishment that he had admitted he operated in the Magistrate’s Court on 18 October 2013.  She said that the bank records showed there were “large, frequent and numerous deposits and withdrawals involving cash and transfers in these two bank accounts over the charge period.”  She pointed out that the appellant was the sole signatory to the two bank accounts and that he had not filed any tax returns and was not registered as the proprietor or partner of any business.  However, she accepted that “there was no international dimension or any sophistication and there is no evidence that the offences were committed by D1 on behalf of any organised criminal syndicate.”

19.  The judge went on to address defence counsel’s submission that the gambling operation was “not a big one” and that not all the funds in the bank accounts were the proceeds of illegal gambling.  She explained that there was no way to calculate the proportion of the total funds which represented the proceeds derived from the illegal gambling operation and none had been suggested by defence counsel.  Without any further explanation, she took 30% as a reasonable discount for this factor and accordingly sentenced the appellant on Charge 2 in relation to a sum of slightly under $11 million and on Charge 3 of slightly over $3 million.  She added that she considered as an aggravating factor the fact that the funds laundered by the appellant were the proceeds of his own criminal activity.

20.  It is unclear why the judge discounted the actual amount of funds flowing through the appellant’s two bank accounts by 30% from a total of around $20 million to around $14 million.  Defence counsel in mitigation asked the judge not to rely on the accumulated amounts of the two bank accounts as totally representing proceeds of crime.  He submitted that even though the appellant’s evidence had not been accepted by her, there was no evidence to suggest that the two bank accounts only dealt with the appellant’s profits from his illegal gambling establishment.  Having rejected the appellant’s evidence as to other sources of income, the judge in her reasons for verdict found that on the evidence the appellant had operated an illegal gambling establishment during the relevant periods of the charges and took commissions from other people’s winnings. She went on to say:

“D1 himself admitted that commission was paid and he kept this. It must be an irresistible inference that in operating the gambling establishment, he made profits and in the process some of the monies that were being moved or distributed or dealt with by D1 through his 2 HSBC bank accounts were the profits and therefore the proceeds of an indictable offence. I find that D1 dealt with the monies deposited into his 2 bank accounts are set out in Counts 2 and 3, he knew that the property in whole or in part, directly or indirectly, represented the proceeds from an indictable offence - operation of a gambling establishment.”[1]

21.  It seems the judge may have sought to qualify that not all the monies that were “moved or distributed or dealt with” by the appellant in the two bank accounts were profits from his illegal gambling establishment, by her reference to “some of the monies”.  However, she did not make that qualification when referring to the monies deposited into the two bank accounts.  This is also apparent in the judge’s reasons for sentence where she said:

“I found on the facts before me and on the evidence that there was compelling evidence to show that the property that D1 dealt with through his 2 HSBC bank accounts were the proceeds from his operation of the unlicensed gambling establishment in which he was the operator.”[2]

22.  It seems to us that the judge may have harboured some doubt that all the funds in the two bank accounts represented the proceeds of the appellant’s illegal gambling operation and therefore discounted the amount of funds laundered through the two bank accounts.  But she did not explain the basis of her doubt and why she has discounted the amount of funds laundered by 30%.  We have to agree with the respondent that the appellant was very fortunate to have received such a generous consideration as to the amount of funds that were laundered.  It is of particular relevance that the judge found on the evidence, that the appellant operated an illegal gambling establishment during the charge periods, spanning 3 years and 4 months, from which he derived profits that he deposited into the two bank accounts.  It was not in dispute that the 2^nd and 3^rd defendants made various deposits into the bank accounts on behalf of the appellant.  Having rejected the appellant’s evidence as to other sources of income, there was no other evidence to point to any other source of income, particularly as it had been admitted that he had filed no tax returns during the relevant period. 

23.  The judge adopted a starting point on Charge 2 of 5 years’ imprisonment and on Charge 3 of 3 years’ imprisonment.

24.  The judge noted that there was a delay in bringing on the case, which was no one’s fault because of the legal challenge to the offence of dealing in the proceeds of an indictable offence.  She therefore discounted each of the starting points by one month to 4 years and 11 months’ imprisonment on charge 2 and 2 years and 11 months’ imprisonment on Count 3.  She noted that there were no other mitigating factors to warrant any further discount to the sentences.  She took into account the totality principle and ordered that one year of the sentence on Charge 3 run consecutively to the sentence on Charge 2, thereby resulting in a total sentence of 5 years and 11 months’ imprisonment.

The sentencing of the 2^nd and 3^rd defendants

25.  The 2^nd and 3^rd defendants were convicted on their own plea to the charge that they faced.  It was alleged against the 2^nd defendant that he made cash payments of $1.03 million into the appellant’s bank account between 22 May 2010 and 23 August 2011.  It was alleged against the 3^rd defendant that she made cash payments of $630,000, into the appellant’s bank account between 16 November 2009 and 18 August 2011. 

26.  In sentencing the 2^nd defendant, the judge adopted a starting point of 15 months’ imprisonment, which she reduced by one third for his guilty plea and by a further one month because of the delay in bringing the case to court to 9 months’ imprisonment.  She then suspended this term for a period of 2 years because of exceptional circumstances, particularly the age of the defendant who was then 82 years old. 

27.  In sentencing the 3^rd defendant, the judge adopted a starting point of 12 months’ imprisonment, which she reduced by one third for her guilty plea and a further one month because of the delay in bringing the case to court to 7 months’ imprisonment.  She then suspended this term for a period of 2 years because of exceptional circumstances.  The sentence of the 3^rd defendant was the subject of an application for review in Secretary for Justice v Siu Yun Yee [2017] 3 HKLRD 678, where this Court allowed the application, quashed the sentence and imposed in its place a sentence of 8 months’ imprisonment.

The appeal against sentence

28.  The appellant’s challenge to the sentence mainly rests on (1) the judge’s findings that the total amount of funds involved in the two offences was about $14 million and the fact that there was no international dimension or any sophistication or any organised criminal syndicate involved in the case; and (2) the proposition that the predicate offence of gambling is low in the order of serious crime, which should have been reflected in the starting points adopted by the judge. 

29.  In the premises, Mr Wong Man Kit, SC, with Mr Jon Wong, for the appellant, submits that the total sentence of 5 years and 11 months’ imprisonment for Charges 2 and 3 was manifestly excessive.  He argues that appellate authority reveals a pattern of sentencing for offences of dealing in the proceeds of crime, which suggest a sentence not exceeding 4 years’ imprisonment when the predicate offence is no more serious than illegal gambling and when the proceeds do not exceed $14 million.

30.  Ms Vinci Lam, with Mr William Siu, for the respondent, disagrees that the total sentence imposed was manifestly excessive. She relies on the case of Secretary for Justice v Wan Kwok Keung [2012] 1 HKLRD 201, where this Court gleaned from the outline of sentences passed in money laundering cases mentioned in HKSAR v Hsu Yu Yi [2010] 5 HKLRD 545 a range of starting points that suggested a starting point of over 5 years for amounts of money involved of above $10 million.  However, as has been repeatedly noted by this Court, there are no sentencing guidelines for the offence of money laundering.  This point was made in Hsu Yu Yi itself, where Cheung JA, giving the judgment of the court, offered the following guidance when sentencing for the offence of money laundering:

“9. There are no sentencing guidelines for the offence of dealing with the proceeds from an indictable offence because the facts vary from case to case. However the following factors are to be taken into account when determining sentence:

(a) It is the amount of money involved that is a major consideration and not the amount of benefit received by a defendant in the transaction.

(b) The culpability of the offence lies in the assistance, support and encouragement offered to the commission of an indictable offence. So a defendant’s level of participation and the number of occasions on which he is involved in the “money-laundering” activities are relevant factors to be considered.

(c) The offence of dealing with the proceeds from an indictable offence does not necessarily have any direct correlation with the indictable offence in question. However if the relevant indictable offence can be identified, the court may take into account the sentence imposed on the indictable offence per se when determining the sentence of the dealing offence.

(d) If the case has an international element involving activities carried out across different regions, the court may impose a more severe sentence. This is to protect Hong Kong’s reputation as an international finance and banking hub from being tarnished.

(e) The length of time the offence lasted.”

31.  In HKSAR v Boma [2012] 2 HKLRD 33, Stock JA (as he then was) explained that it was not realistically possible or desirable to lay down guidelines in relation to the offence of money laundering because of the variety of circumstances in which such offences are committed and the widely different roles played by those convicted of these offences.  He went on to set out factors for consideration when sentencing an offender for money laundering, such as, the nature and penalty of the predicate offence, which provides a measure of the illicit nature and source of the funds, and the state of knowledge or belief of the offender as to the nature and source of the funds; the presence of an international dimension, which would be an aggravating factor; the level of sophistication of the offence, including the degree of planning and deceit involving; the involvement of an organised criminal significant, which would be an aggravating factor (see also section 27 of OSCO that provides for an enhanced sentence if the offence is shown to be an organised crime); the number of transactions and the duration over which they occurred; the offender continues to launder funds after discovering the serious nature of the predicate offence, which would be an aggravating factor; the role of the offender and the acts performed by him.

32.  Mr Wong relies on the judge’s finding that there was no international dimension, or level of sophistication, or organised criminal syndicate involved in the case, to suggest that the appellant’s culpability was not deserving of the sentence that he received.  He submits that this was a case of laundering the funds of relatively low order crime, namely illegal gambling, involving an amount as found by the judge of around $14 million.

33.  Ms Lam in response submits that the following significant features in the case warranted the sentence imposed on the appellant:

(a)   The appellant was the owner of the illegal gambling establishment that spawned the money laundering offences.  He was both the perpetrator of the predicate offence and of the money laundering offences.  Hence, the appellant had full knowledge that the cash deposits into his two bank accounts were the proceeds of crime.

(b)   The amount of money that was laundered was substantial, namely $20.22 million as charged and $14.16 million as reduced by the judge. 

(c)    The offences spanned a protracted period of 3 years and 4 months. 

(d)    Banking deposit machines were used to make multiple cash deposits and withdrawals in relatively small amounts in order to avoid being identified or arousing suspicion. 

(e)   The appellant deployed the 2^nd and 3^rd defendants to make cash deposits in sums of $100,000 or more. 

(f)    A substantial proportion of the monies were withdrawn in cash, preventing any tracing of the flow of funds.

34.  Whilst the judge may not have found a level of sophistication in the appellant’s money laundering activities, there was nevertheless a degree of planning and deceit employed by him as evidenced by the nature and amount of funds involved, the manner and frequency by which the funds were transacted, and the length of time that he was able to launder the funds.  However, bearing in mind that the origins of the funds were illegal gambling, in our judgment the resultant sentence imposed by the judge was manifestly excessive.  While there were two separate charges dealing with two different banks, the illicit funds, as found by the judge to be a little over $14 million, all flowed from the appellant’s illegal gambling operation over a period of 3 years and 4 months.  Taking these matters into account, we are of the view that 5 years’ imprisonment was the appropriate starting point when taking a global view of the criminality involved.

35.  The judge discounted by one month the final starting points on each charge for the delay in bringing the case on for trial because of a legal challenge to the offence provision in other proceedings. We refer to the guidelines provided on discounting of a sentence for delay in HKSAR v Chiu Chi Wing, CACC 243/2012, 18 October 2013, unreported, paragraphs 36 to 38.

36.  On the issue of delay, we note that the offences took place over a three-year period and ceased when the appellant was arrested at his illegal gambling establishment on 17 January 2013.  As this was a money laundering case, it would have involved an extensive investigation and preparation for trial, given that the banking records of the two accounts over a three-year period had to be collated and analysed.  The appellant pleaded guilty to operating an illegal gambling establishment in the Magistrate’s Court on 18 October 2013 but chose to fully contest the money laundering charges against him.  The case was transferred to the District Court in May 2014 and the trial eventually commenced in October 2016.  There is an issue as to whether a reduction to the sentence for delay was warranted.  However, in the related case of Siu Yun Yee, the discount of one month for delay was not disturbed and we will therefore also discount the sentence by one month.  This will result in a sentence of 4 years and 11 months’ imprisonment.

Conclusion

37.  It follows from what we have said that we allow the appeal.  We set aside the judge’s sentences, and in substitution we sentence the appellant as follows.  On Charge 1, we adopt a starting point of 5 years’ imprisonment which we reduce by one month for the delay to 4 years and 11 months’ imprisonment.  On Charge 2, we adopt a starting point of 2 years and 10 months’ imprisonment which we reduce by one month for the delay to 2 years and 9 months’ imprisonment.  We order that the sentence on Charge 2 be served concurrently with the sentence on Charge 1.  The overall sentence on the appellant is therefore reduced from 5 years and 11 months’ imprisonment to 4 years and 11 months’ imprisonment.