HKSAR v. LEONG WAI KEONG

CACC 476/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. CACC 476 OF 2007

(ON APPEAL FROM DCCC NO. 664 OF 2007)

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REASONS FOR JUDGMENT

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Hon Yeung JA:

Introduction

1.  On 20 November 2008, we dismissed the application for leave to appeal against sentence.  We indicated that we would hand down our reasons in due course and this we now do.

Background Facts

2.  Between September 2001 and January 2002, the applicant (Leong Wai Keong), having set up three BVI companies (Soros Development Co. Ltd, HS Capital Ltd and Gordon Capital Asia Ltd), opened three bank accounts in the names of those BVI companies with the Hong Kong Bank.

3.  There were then large deposits of over $11 million, $14 million and $4.6 million respectively into the three accounts, and when the accounts were closed in December 2002, the monies were completely withdrawn, leaving balances of a few cents to about $235.  Each of the transactions in those accounts invariably exceeded $100,000.

4.  After his arrest, the applicant told the police the following story :

“Having lost $50,000 in or about May 2001 in Macau, the applicant borrowed from loan sharks and incurred a debt of $60,000.  He then reached an agreement with a Mr Lee whereby Mr Lee would settle the $60,000 debt for him in return for his promise to open bank accounts for Mr Lee’s use.  Mr Lee then paid the loan sharks $60,000 and further paid the applicant $10,000 for his expenditure.

When returning to Hong Kong, Mr Lee’s cohort escorted the applicant to a secretarial services company to set up the three BVI companies, and then to open the three bank accounts.

Documents, relating to the companies and the accounts, were kept by Mr Lee’s cohort, who also paid the necessary expenses.

In mid 2002, the applicant went to South Korea to open another company bank account with the assistance of Mr Lee’s cohort. He was paid $10,000 as expenses for the trip.

In July 2003, the applicant was again asked by Mr Lee’s cohort to go to Taiwan to open three bank accounts with on-line banking facilities.  All initial deposits came from Mr Lee’s cohort and all bank documents were given to him.  Mr Lee’s cohort also settled the expenses and gave the applicant a further sum of $5,000.

The applicant suspected the accounts were connected with illegal businesses and that Mr Lee and his cohorts might be “terrorists”.  He said he dared not refuse Mr Lee’s requests for fear of trouble to his family members.”

5.  The aforesaid incidents led to an indictment consisting of three counts of “money laundering” and two counts of “conspiracy to launder money” against the applicant.

6.  On 17 December 2007, the applicant pleaded guilty to all five charges before Judge Mackintosh in the District Court.

The Judge’s Approach to Sentence

7.  The judge adopted starting points of 5 years for the three charges of “money laundering” and 3 years for the two charges of “conspiracy to launder money”.  The judge reduced the starting points by one-third on account of the guilty pleas to 40 months and 2 years respectively.

8.  The judge took the view that the total starting point should have been six years and after the one-third discount for the guilty pleas, the total sentence should be four years’ imprisonment.  The judge reduced the sentence by one month to 3 years and 11 months because of the delay.

9.  To reach the total sentence of 3 years and 11 months, the judge ordered the 40-month sentence on each of the three charges of “money laundering” to run concurrently, and the 2-year sentence on each of the two charges of “conspiracy to launder money” also to run concurrently.  The judge ordered 7 months of the 2-year sentence to run consecutively to the 40-month sentence.

Grounds of Appeal

10.  Represented by Mr Keith Fung, the applicant sought leave to appeal.

11.  Mr Fung submitted that the starting points adopted by the judge were too high and that the judge should have imposed a concurrent sentence on all charges when the applicant pleaded guilty.  Mr Fung further argued that the judge had not given sufficient regard to the issue of delay, and thus the total sentence was manifestly excessive.

Discussion

12.  Money laundering is a very serious offence as demonstrated by the maximum penalty of 14 years’ imprisonment and a fine of $5 million.

13.  As we have observed in HKSAR v. Javid Kamran,CACC400/2004 :

“Money laundering is a very serious offence as it is an attempt to legitimize proceeds from criminal activities.  Serious criminal offences are very often motivated by financial gains and those who assist criminals in laundering money indirectly encourage them in their criminal activities …

Successful deterrents against money laundering could be effective measures against crimes.”

14.  Within a period of just less than two years, the applicant laundered almost $30 million.  Although the underlying offences could not be ascertained, they must be serious illegal activities when such a large sum of money was involved.

15.  The judge was right to emphasise the international element involved as what the applicant did seriously undermined Hong Kong’s status as a financial and banking centre.  I wish to echo what Mayo VP said in HKSAR v. Mak Shing,CACC322/2001 at paragraph 27 of the judgment :

“… there was an international element to the offences and … Hong Kong has to take a very serious view of such matters as its international reputation is not to be sullied.”

16.  In addition to the large sum involved and the international element, the judge also relied on the following factors :

“(a)  that this was a sophisticated, well-organised and substantial money-laundering scheme;

(b)  (the applicant’s) participation was essential, extensive and continuing.  It covered a period of about a year so far as Charges 1 to 4 are concerned.  Charge 5 was committed in mid-2003, seven months after the closure of the Hong Kong accounts, so (he) continued to be involved with the scheme;

(c)  (the applicant) derived substantial personal benefit, at least, on (his) account, the cancellation of the $60,000 debt, the payment of two sums of $10,000 and one of $5,000;

(d)  the mon(ies) laundered were very large sums;

(e)  on the other hand, there is no evidence that (the applicant) were handling the money (himself); or (was) involved directly in the crimes from which it was derived; or that (he) actually knew the amounts of money which were passing through the accounts (he) had established.”

17.  The judge referred to sentences in other “money laundering” cases, including HKSAR v. Jain Nikhil,CACC405/2006 (5 years for laundering $6.6 million with some overseas elements and the use of a false passport), HKSAR v. Xu Xia Li [2004] 4 HKC 16 (3 years for a case involving $11 million - described as an “individual decision”), HKSAR v. Chen Zhen Chu [2007] 5 HKC 505 (7½ years for laundering $73 million drug money), HKSAR v. Abayomi Bamidele Fayomi, CACC197/2005 (3½ years for laundering $1.2 million) and HKSAR v. Chow Ying Ki, CACC378/2004 (4 years for laundering $3 million).

18.  As the Court of Appeal ruled in Chen Zhen Chu (supra), apart from the amount involved, other relevant factors for sentence in “money laundering” offences include “the nature of the offence that generated the laundered money, the extent to which the offence assisted the crime or hindered its detection, the degree of sophistication of the offence and perhaps the defendant’s participation, including the length of time the offence lasted and the benefit he derived from the offence”.

19.  This was clearly a large-scale and sophisticated operation involving the use of three BVI companies.  The applicant actively participated in setting up the companies and opening the bank accounts.  Whilst the applicant denied knowledge of the underlying offence and claimed that his benefits were only $85,000, the true extent of his knowledge, his involvement and the benefits he derived from the offences could only be known to himself.

20.  What the applicant did greatly assisted the underlying offence and hindered its detection.  The applicant, as he had admitted, knew at the outset that the accounts would probably be used for illegal business and he even suspected that “terrorists” were involved.  Yet the applicant, with such knowledge, was prepared to go to the extent of opening accounts both in South Korea and Taiwan.

21.  In my view, this is a very bad case of the type.

22.  The starting points of 5 years for the 1^st to 3^rd charges and 3 years for the 4^th and 5^th charges are certainly not manifestly excessive.  The judge was entitled to order part of the sentences to run consecutively.

23.  The applicant was located and interviewed in November 2004.  He was further interviewed in February 2005, and then arrested and charged in June 2007.  Mr Fung complained about the delay of about 2½ years between November 2004 and June 2007.

24.  The applicant used three BVI companies to open the bank accounts, which would no doubt have created considerable difficulties for the law enforcement agency to lift their corporate veils and to expose the applicant’s identity.  The opening of accounts in South Korea and Taiwan required international co-operation to bring the applicant to justice.  The delay of 2½ years is understandable.

25.  I was not persuaded that the reduction of one month was insufficient to reflect the delay in the present case.

Conclusion

26.  The total starting point of 6 years, not a particularly lenient sentence, is not wrong in principle.  The final sentence of 3 years and 11 months is certainly not manifestly excessive.  I would dismiss the application for leave to appeal against conviction.

Hon McMahon J:

27.  I agree with the judgment of Yeung JA and wish to add this :

28.  The circumstances to be taken into account in cases of money laundering will often vary widely and, given that the setting of sentencing guidelines is, at least at present, thought undesirable (see Javid Kamran (supra) and Chen Zhen Chu (supra)), the sentence appropriate to each offence must be determined with reference to the particular facts of the case.

29.  The amount of money involved in a laundering operation is one cogent factor to take into account and indeed may be, in the circumstances of a particular case, the primary factor, though plainly a mathematical progression in sentence based on the sums involved is inappropriate.

30.  Other factors will often be of considerable importance.  In Javid Kamran, this court said :

“Other factors include the nature of the offence that generated the laundered money, the extent to which the offence assisted the crime or hindered its detection, the degree of sophistication of the offence and perhaps the defendant’s participation, including the length of time the offence lasted and the benefit he derived from the offence.”

31.  It should be borne in mind that the nature of the underlying offence will usually only be relevant as an aggravating factor, and in the event that it can be shown the defendant was aware that the funds came from very serious crimes : see HKSAR v. Xu Xia Li (unreported), CACC395/2003 and HKSAR v. Chow Ying Ki (unreported), CACC378/2004.

32.  An additional consideration which may arise is whether or not the laundered funds represent the actual proceeds of crime in the sense that they are the profits of the offence or whether they can be taken to represent the turnover of the criminal enterprise, in which case an element of “double counting” may have to be allowed for : see Chen Zhen Chu (supra) at paragraph 47; HKSAR v. Oei Hengky Wiryo, CACC109/2005 and HKSAR v. Kam Susanto, CACC542/2003.

33.  Another factor which will often play a role in the sentencing process is the offence having, and the degree to which it had, an international dimension.  If there is a significant international dimension, that will be an aggravating factor : see Chen Zhen Chu, at paragraphs 53 and 61.

34.  To return to the present case, Mr Fung was able to point to a number of other cases involving larger sums which attracted lower sentences.  Mr Tam for the respondent, on the other hand was, able to point to various cases involving smaller sums than the present case where proportionally heavier sentences were imposed.  Such comparisons are of limited assistance, and on the present state of the authorities all that can really be said is that what is required of a sentencing court is an appreciation of the relevant sentencing factors in the case before it and the application of a level of sentence appropriate to those factors.  Here those factors included, apart from the sums involved, the applicant going to considerable lengths in opening up bank accounts not just in Hong Kong for the purposes of the money laundering operation, but in South Korea and Taiwan also.  He was prepared to do this and play a continuing role in the operation of this sophisticated and international operation even though he believed, or at least suspected, the funds involved may have had a terrorist connection.  He made a personal and significant profit from his involvement in the scheme.  He participated in the setting up of the British Virgin Island companies which were involved in the laundering of the monies.

35.  On that basis the sentence imposed could not be said to be manifestly excessive regardless of the fact that in other cases, in different circumstances, the laundering of greater sums of money attracted proportionally lesser sentences.