HKSAR v. SORIAN GHEORGHE IOAN AND OTHERS

DCCC 592/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 592 OF 2014

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Reasons for Sentence

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1. The charge sheet contains a total of 11 charges, and all four defendants were charged with one count of conspiracy to steal (1st charge). The defendants were charged separately and in pairs with offences of possession of equipment for making false instruments or possessing false instruments. Each defendant was also charged with one count of money laundering.

2. Upon plea bargaining, D1 now pleaded guilty to Charge 1 and Charge 8; D2 to Charges 1 and 9; D3 to Charges 1 and 10; D4 to Charges 1 and 11.  They were convicted accordingly.  The remaining charges are all left on court file.

Brief Facts

3. D1 to D4 are Romanians.  On 23 October 2013, D1 and D2 arrived in Hong Kong from Amsterdam and London respectively.  On 28 October 2013, both D3 and D4 arrived in Hong Kong from Doha.  They were allowed to enter Hong Kong as visitors.

4. On 28 October 2013, staff of Wing Lung Bank discovered that somebody used plastic cards encoded with stolen credit card account data.  They made numerous attempts to withdraw cash from the automatic teller machines (ATMs).  The bank discovered that four plastic cards were retained in the ATMs.  The case was reported to the police.

5. From the CCTV, the police found D1 and D2 were responsible for the withdrawals.  It was alleged that between 23 October 2013 and 29 October 2013, D1 to D4 conspired together to use plastic cards encoded with stolen credit card account data in order to steal cash from the ATMs.

6. At 9:20 pm on 29 October 2013, the police arrested D1 and D2 shortly after they left the ATM centre in Central. The police then escorted the defendants to their hotel room in Island Pacific Hotel, and a room search was conducted.  From D1’s luggage, cash in the sum of HK$70,500 was found.  From D2’s luggage, the police found the following items:

(1) cash in the sum of HK$56,500;

(2) 21 white cards wrapped by a piece of paper;

(3) 3 plastic cards placed inside a white paper box; and

(4) 20 plastic cards placed inside a brown carton box.

7. On the other hand, 53 plastic cards and a magnetic card encoder were found inside D2’s rucksack.

8. At about 11:45 pm on 29 October 2013, D3 and D4 were seen making withdrawals from the ATMs in Sheung Wan area.  They then returned to their hotel rooms in Ibis Hotel.  The police arrested D3 and D4 at about 1:52 am on the following day.  The police found the following items in D3’s hotel room:

(1) 205 plastic cards contained in a white plastic bag;

(2) 13 plastic cards contained in a wallet;

(3) cash of HK$400,000 contained in a white plastic bag;

(4) cash of HK$20,000 on a fixed stool;

(5) cash of HK$1,170 in a shoulder bag;

(6) one notebook computer which was turned on and displaying some stolen credit card account data; and

(7) one component designed to compose a magnetic card encoder.

9. On the other hand, the police also found two large sums of cash from D4’s luggage, namely HK$103,000 in a white plastic bag, and HK$400,000 in a paper bag.  In summary, the police found the following items from D1 to D4:

(1) a total of 333 plastic cards (6 from D1, 109 from D2, and 218 from D3);

(2) cash in the total sum of HK$1,052,020 ($71,350 from D1; $56,500 from D2; $421,170 from D3; and $503,000 from D4);

(3) one magnetic card encoder (from D2);

(4) one notebook computer and one component designed to compose a magnetic card encoder (from D3).

10. All the plastic cards abovementioned have the appearance of gift cards, white cards or hotel key cards.  The cards are of the same size as credit cards, with magnetic strips on the back.  Out of the 333 cards so seized, 312 cards were all encoded with stolen card account data, and there were PIN numbers written on the back of 150 cards.

11. A compatible utility programme for magnetic card encoder and a total of 1,486 sets of stolen credit card account data were found in D3’s notebook computer.  Upon comparison, 235 sets of them were found to match with the data encoded in those plastic cards seized from D1 to D3.  Out of the six cards from D1, one matched with one set of data found in D3’s computer.  Out of 109 cards from D2, there were eight; and out of 218 cards from D3, there were 226.

12. Investigation revealed that all the credit card account data found in the seized plastic cards and D3’s computer were relating to overseas financial institutions, including those in Norway, Finland, Denmark, Sweden, Poland, Austria, France, United Kingdom, Spain, Greece, Russia, India and Australia.

13. The magnetic card encoder seized from D2’s rucksack could read data from magnetic cards into a computer and, through compatible utility programme, write data onto the cards with magnetic strips. The component seized was part of the component designed to compose the magnetic card encoder.

14. The head of Risk Services of Visa International stated that in order to manufacture false credit cards which could make fraudulent cash withdrawals at ATMs, the perpetrators have to obtain credit card account data illegally and then store those card data in a computer which was equipped with a compatibility programme.  The culprit would then use a magnetic card encoder to connect to the computer in order to write the data onto the magnetic strip of the card.  With a valid PIN number, the culprit could then make cash withdrawals with the cards.

15. It was confirmed that the seized plastic cards, computer, magnetic card encoder and the component are essential equipment for making false cards for cash withdrawals at ATMs.

16. A total of 316 sets of encoded data found in the plastic cards were sent to all major banks in Hong Kong for transaction matching purpose.  In response, Citibank said between 24 October and 29 October 2013 there were 140 successful transactions totalling HK$480,000 from nine different branches.  Wing Lung Bank confirmed there were four unsuccessful transactions totalling HK$10,500 from two different branches over the period from 17 October to 29 October 2013.

17. It was said D1 had made 15 successful withdrawals totalling HK$55,000; D2 made two successful withdrawals totalling HK$3,000; D3 made 55 successful withdrawals totalling HK$196,500; and D4, 29 totalling HK$92,500.  From the CCTV, the police could not identify the one who made the withdrawals on 39 occasions totalling HK$133,000.  The total sum of cash so withdrawn amounted to HK$480,000.

18. Between 27 October and 29 October 2013, D1 instructed a remittance agent to remit three sums of money totalling HK$29,800 to the UK and Romania.  D1’s attempt to remit the last sum of HK$15,000 was stopped by the police.

19. D2 instructed the same agent to remit three sums totalling US$7,820.59 to Ukraine and Romania.

Mitigation

D1

20. D1 is now aged 33, and had a clear record in Hong Kong.  He was born in Romania and holds a Romanian passport.  It was said he lived in Italy since year 2000.  He is married and has a 7-year-old daughter.  They are living in Italy.  D1 works as a warehouse manager earning €1,100 per month.  Defence counsel said D1 was very remorseful.  He is the breadwinner of the family.  D1 was told to come to Hong Kong to do a single job for few days.  D1 promised that he would not commit a crime again and would like to apologise to everyone in Hong Kong.

21. Some of the stolen proceeds were recovered.  In fact, it was submitted the banks or financial institutions could be compensated.  When asked, defence counsel submitted that D1 would get 10% commission based on the amount of successful withdrawals.  D1 could not divulge who paid for the trip to and the expenses in Hong Kong.  It was submitted that D1 possessed only six cards and was only responsible for 15 successful withdrawals totalling HK$55,000.  It was further submitted that the whole scam was relatively simple and D1 was just a foot soldier in the operation.

D2

22. D2 is aged 46 and he is divorced.  He received education at university level.  He has three sons.  D2 worked in a large construction company for some 20 years until 2012, when the company collapsed. D2 was not able to find a job in Romania.  It was submitted that no individual was harmed in this incident as the victims were banks.  It was said that D2 was least involved in this operation.

23. As regards the money laundering charge, it was submitted that the subject matter in fact was the stolen proceeds, not the common form of money laundering activity.  D2 accepted his foolishness in committing the present offence.  D2 pleaded guilty to two charges and has been in custody for over a year.  D2 wrote a mitigation letter in English.  It said:  “I want to apologise for the crime that I committed here in Hong Kong in October 2013.”  He accepts full responsibility for the offence and has faith in the Hong Kong justice system.  He had a clear record in Hong Kong.

D3 and D4

24. Both D3 and D4 are aged 28 and were born in Romania.  D3 planned to get married this year.  D4 is single.  They were construction workers.  It was submitted that D3 and D4 arrived in Hong Kong on 28 October and they were arrested on the following day.  In that regard, it was submitted their involvement as part of the conspiracy only lasted for about 24 hours.

25. The offence of money laundering shares the same criminality as the conspiracy charge, as the cash was those ill‑gotten gains. The money laundering activity was not sophisticated.  It was submitted that the facts of the present case are similar to those false credit card cases.  As some of the stolen proceeds were recovered, the loss suffered by the banks can be reduced.  It was submitted that both D3 and D4 had a clear record in Hong Kong and have been in custody for a long time.  Although there was no fault on the part of the prosecution, it was submitted that there was a certain degree of delay in prosecution.  Leniency in sentence was asked for.

Sentence

26. There is no doubt that the present case involves a large‑scale operation and a big syndicate.  From copies of the defendants’ passports, it is apparent that D1 had a high frequency of travelling in year 2013, and even so for D4, who even travelled to Taiwan for a few times.  The movement record of all four defendants shows that for the period from July 2013 to November 2013, this was the first time for D1 to D3 to come to Hong Kong, but this was the sixth time that D4 arrived in Hong Kong through the airport. When asked, D4’s lawyer submitted that D4 was just on stopover in Hong Kong, and therefore the stay was relatively short.

27. D1 and D2 arrived in Hong Kong on 23 October, while D3 and D4 arrived on 28 October.  They stayed in different hotels.  Although D3 and D4 were arrested on the following day, I do not accept that their role to play in this conspiracy lasted for just one day. I have no doubt that the conspiracy was formulated and orchestrated long before the arrival of these four defendants.  They came to Hong Kong to execute the fraud.

28. D3’s computer contained a total of 1,486 sets of stolen credit card account data.  235 plastic cards have the data that matched with the data contained in the computer.  Out of the 333 plastic cards, 312 plastic cards were already encoded with stolen credit card data, and there were 150 plastic cards with PIN written on the back.

29. D3 and D4 possessed most of the stolen proceeds, that is, D3 had 421,000-odd, and D4, $503,000.  D3 had the component and the computer installed with the compatibility programme.  D3 also had 218 cards with him.

30. To some extent, this fraudulent operation is similar to those of using false credit cards.  But in the present case, by accessing through ATMs, the culprits could avoid personal contact with salespersons or a third party, hence reducing the chance of human detection, and through machines - that is, ATMs - it provides an easier way for the culprits to withdraw money as frequently as they want to.  ATMs in Hong Kong are open for business 24/7.  There are so many ATMs installed in Hong Kong that the culprits could conveniently access to.  It is clear that such a scam could cause much damage to the automated banking system in Hong Kong.

31. There is no dispute that there is an international element in this operation.  The defendants came to Hong Kong to make full use of the advanced automated banking system.  D3 and D4 started to perpetrate the crime on the following day upon their arrival.

32. Upon plea bargaining, each defendant pleaded guilty to two charges in pair, the 1st count of conspiracy to steal and one count of money laundering.  Although D1 to D3 did not plead guilty to those offences relating to false instruments, this court has to consider the factual background of the conspiracy charge when considering the appropriate sentence.

33. All four defendants were charged with one count of conspiracy to steal on the basis of joint enterprise.  That means each and every defendant has to shoulder the responsibility of the crime committed by the other culprits, because he was acting in concert with others.

34. Amongst the four defendants, there is no clear evidence as to who was the mastermind.  Of course, the real mastermind can be someone else in an overseas country.  It can be the case that D4 could be the one having a more important role in this scam because:

(1) he had most of the stolen proceeds in hand;

(2) he did not have any plastic cards in his possession;

(3) this was his sixth visit or transit to Hong Kong during the period from February 2013 to 28 October 2013.

35. That said, this court will sentence all four defendants based on the Summary of Facts admitted by the defendants.

36. Although strictly speaking the present case is not related to the uttering of false credit cards per se, the use of stolen credit card account data allows the sentencer to consider the case of R v Chan Sui To and another [1996] 2 HKCLR 128, where sentencing guidelines and considerations were enunciated.  I have also considered various similar cases in District Court.  In HKSAR v Kavangh Darren and another, DCCC 572/2008, where two British used cards with stolen credit card data withdrew $447,000‑odd, and 238 gift cards were recovered, the court chose a starting point of 4 years.  In HKSAR v Ionut Leonard Oancea and 2 Others DCCC 782/2011, the defendants are Romanians and they came to Hong Kong from Spain. They used gift cards with stolen credit card data to withdraw cash from ATMs. They elicited 628 successful withdrawals totalling $1.56 million‑odd, and 472 failed attempts would have netted $1.1 million‑odd.  The District judge in that case used a starting point of 5 years.  In HKSAR v Milos Cosmin and 2 Others DCCC 224/2014, all three defendants are Romanian passport holders.  They came to Hong Kong to commit similar offences like the present one.  They used gift cards encoded with stolen credit card data and eventually withdrew a total sum of $548,100 from ATMs.  The defendants pleaded guilty to the charges and were sentenced to 4 years’ imprisonment.

37. I have to say this case was a well organised and well-executed scam.  They made full use of Hong Kong, which is renowned for the advanced state banking system, with the aim of swindling banks or financial institutions in Hong Kong out of large sums of money.  A strong message is to be sent to those potential culprits who intend to come to Hong Kong to perpetrate similar crimes.  A deterrent sentence is called for.

38. In the present case, the prosecution said there were a total of 140 successful withdrawals, netting a total sum of $480,000 (paragraph 23 of the Summary of Facts).  I have serious doubt about the figure of successful withdrawals, as the police were able to seize a total sum of $1,052,020 from all defendants.  This sum of money was on top of those five successful remittances totalling HK$14,800 ($29,800 minus $15,000) and US$7,820‑odd.

39. The most significant mitigating factor for all defendants is their guilty plea.  I have to say that this is a wise move, as their plea would make them entitled to have one‑third discount in sentence, even though their pleas were the outcome of plea bargaining.  In fact, I consider that the case against the defendants is very strong, and their convictions will be the natural outcome of a trial.

40. Taking all factors into account and the fact that the defendants were acting in concert, I would adopt a starting point of 5 years for Charge 1, and with their plea, I reduce the sentence to 40 months.  As regards their respective money laundering offences - that is, Charge 8 for D1; Charge 9 for D2; Charge 10 for D3; and Charge 11 for D4 - I have to say that the money so recovered can be taken as the stolen proceeds. In fact, I consider it proper if the prosecution charge all four defendants with one charge of money laundering covering all the money so seized, as this should be the stance of the prosecution when they lay a general conspiracy charge against all four defendants.

41. I have considered the case of HKSAR v Boma Amaso, CACC 235/2010.  In the present case, all four defendants had the actual knowledge of the predicate offence as they were the actual perpetrators. I consider that the monies involved are only one of the considerations for sentencing purpose.

42. I will not differentiate the culpability of each defendant based on the difference in the amount of money stated in the respective four charges - that is, $101,150 for D1; $56,500 for D2; $421,170 for D3; and $503,000 for D4 - as they were acting in joint enterprise.

43. That said, I have to sentence each defendant based on the charge that they pleaded guilty to.  Taking all factors into account, I make the following sentence in respect of the money laundering charges:

(1) for D1, I take a starting point of 24 months, and with his plea, I reduce the sentence to 16 months;

(2) for D2, the starting point is 18 months, and with his plea, I reduce the sentence to 12 months;

(3) for D3 and D4, the starting point is 36 months, and with their plea I reduce their sentence to 24 months.

44. I have to consider the totality principle.  As I have mentioned in the paragraph above, I consider that the monies so recovered are stolen proceeds and they were the outcome of the ill‑gotten gains from the conspiracy charge.

45. Accordingly, I will order that the sentence for the money laundering charge for each and every defendant is to be served concurrently with the first sentence.  In gist, I sentence each and every defendant to an imprisonment term of 40 months.