HKSAR v. YUEN ZIRU

DCCC 785/2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 785 OF 2015

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REASONS FOR SENTENCE

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INTRODUCTION

1.  On 2 November 2015, the defendant pleaded guilty to one charge of conspiracy to deal with property known or believed to represent proceeds of an indictable offence, contrary to section 25(1) and (3) of the Organized and Serious Crimes Ordinance, Cap 455 (“the Ordinance”) and sections 159A and 159C of the Crimes Ordinance, Cap 200 (Charge 1).  Upon the defendant’s conviction of Charge 1, the prosecution applied to have Charge 2 left on court file, the charge being one of resisting a police officer in the execution of his duty, contrary to section 63 of the Police Force Ordinance, Cap 232.  The defence had no objection to that application; the court, accordingly, granted it.

FACTS OF THE CASE

2.  On the morning of 20 July 2015, the defendant and another person Huang entered Hong Kong within minutes of each other via Shenzhen Bay Immigration Control Point.  They took rooms, upon arrival in Hong Kong, and stayed at the Ocean Wifi Hotel, Mong Kok.

3.  At about 11:20 am on 22 July 2015, Mr Chan, aged 70, received at his residence in Tsuen Wan a telephone call from a male person pretending to be Mr Chan’s son.  Screaming for help, the man said he had been kidnapped. Another male person took over the conversation, claimed to be the kidnapper, and demanded for a ransom in the sum of $100,000.  After negotiation, this second male agreed to take $25,000 for the release of Mr Chan’s son.  He told Mr Chan that his surname was “Chan” and asked him to contact him when he had the money to pay.

4.  Mr Chan ascertained quickly that his son was not in any sort of danger at all; a report was then made to the police.  The police arranged for Mr Chan to take part in a controlled delivery of the ransom, using a stack of paper (instead of banknotes) in a brown envelope.  As arranged, Mr Chan arrived at the vicinity of Exit C of the Tsuen Wan MTR Station at about 12:30 pm.  The defendant and Huang were seen looking around nearby (they had earlier at about 12:19 pm left the Ocean Wifi Hotel together).  Huang was seen following and talking with the defendant, while the defendant kept talking on the phone.  At around 12:50 pm, Mr Chan was directed to go to an open area.  The defendant approached him there and said words to the effect: “Mr Chan asked me to come.”  Mr Chan handed over the brown envelope stuffed with paper, which the defendant put inside his own bag.  The police took action to effect arrest on the defendant, in the course of which he put up a struggle.

MITIGATION

5.  In his plea in mitigation, the defendant submitted, via his solicitor Ms Susan Liang, that he was the only son in the family, his father having passed away, his mother working as a part-time janitor, and his elder sister living away from home. The defendant said he had been to Hong Kong as a visitor once before and submitted that he was not the mastermind in the commission of the offence.  He had not been told how much he would get as his reward for collecting the money from the victim.

6.  The defendant relied on the case of HKSAR v Cen Huakuo[1], a case in which the victim was asked to pay $50,000 in circumstances similar to the defendant’s, and in that case, the Court of Appeal said:-

“25. Taking into account all the circumstances of the case and the requirement that a sentence should have deterrent effect in order to prevent mainlanders from taking part in such an abhorrent and despicable offence like “phone deception” in whatever manner, we are of the view that the appropriate starting point is 3 years’ imprisonment, and the sentence should be enhanced by one-third pursuant to the Organized and Serious Crimes Ordinance.”[2]

7.  The defendant argued that the starting point in his case should be no more than three years as the amount involved in his offending was $25,000 and that Mr Chan had suffered no loss.  He further submitted that the enhancement of sentence should not be more than one-third of his sentence after mitigation[3].

INFORMATION FURNISHED PURSUANT TO SECTION 27(2) OF THE ORDINANCE

8.  The defendant confirmed, before arraignment, receipt of the prosecution’s notice of intention to furnish information to the court pursuant to section 27(2) of the Ordinance and indicated that the prosecution’s application for enhancement of sentence under section 27(11) of the Ordinance was unopposed.

9.  The prosecution tendered to court DCIP Lam Cheuk Ho’s witness statement dated 19 October 2015 in support of their application for enhancement of sentence.  The defendant did not seek to dispute the information supplied in DCIP Lam’s statement.

10.  In essence, DCIP Lam’s evidence showed the following:-

(i) Between 2010 and 2014, the number of reported cases of telephone deception varied between about 2,000 to 2,300 a year, and in cases where the culprits succeeded in their criminal ploys, the victims had suffered a yearly loss ranging between around $23m and $45.7m.

(ii) There had been a noticeable increase recently in the number of such reported cases: in the first three quarters up to 19 October 2015 alone, there were in excess of 2,600 such cases; and the accumulated loss in this 9-month period stood at a staggering $287.6m.

(iii) In the 3^rd quarter of 2015 alone, there were a total of 1,249 victims of telephone deception cases, almost all of whom were Hong Kong residents, most of them students, housewives or retirees.

(iv) Before 2011, there had been minimal reported cases in which an offender was involved or supposed to be involved in the physical collection of the victims’ monies (“drop-off” cases).

(v) Between 2011 and 2014, the average daily number of reported drop-off cases ranged between 2.85 and 3.37 cases a day; and the figure for the first three quarters up to 19 October 2015 alone had risen to 3.73 cases a day.

(vi) The losses occasioned by drop-off cases between 2008 and 2014 rose from some $3m to about $13m yearly; and the losses in first three quarters in 2015 alone totalled $11.3m.

(vii) There had been a steady increase in the number of “detected” drop-off cases being prosecuted as money laundering from 15 in 2011 to 52 in 2014; however, the first three quarters in 2015 alone had seen a rapid, significant rise in that figure to 74.

(viii) With the exception of six cases, the 183 detected drop-off cases from 2012 up to and including September 2015 had all been prosecuted with offences of money laundering or of conspiracy to commit money laundering.

CONSIDERATION OF ENHANCEMENT OF SENTENCE

11.  There was no dispute that the offence in Charge 1, of which the defendant stands convicted, was a specified offence.  The offence of “dealing with property known or believed to represent proceeds of an indictment offence” is included in Schedule 1 to the Ordinance[4]; and a specified offence includes a conspiracy to commit a Schedule 1 offence[5].

12.  Section 27(2) of the Ordinance provides:-

“(2) The prosecution may furnish information to the court regarding any or all of the following–

(a) the nature and extent of any harm caused, directly or indirectly, to any person by the act in respect of which the person has been so convicted;

…

(c) the prevalence of that specified offence;

(d) the nature and extent of any harm, whether direct or indirect, caused to the community by recent occurrences of that specified offence;

…”

13.  Section 27(11) provides:-

“(11) Subject to subsections (12) and (13), where a court is satisfied beyond reasonable doubt–

…

(b) as to any information furnished under subsection (2) … ,

or where any such matter is agreed by the person convicted, the court shall have regard to such matter when it passes a sentence on the person for the relevant specified offence and may, if it thinks fit, pass a sentence on the person for that offence that is more severe than the sentence it would, in the absence of such matter, have passed.”

14.  In the present case, the prosecution relied on DCIP Lam’s evidence for the purpose of establishing the matters referred to in section 27(2)(c) and (d), namely prevalence of the specified offence and the nature and extent of the harm, direct and indirect, caused to the community by recent occurrences of that specified offence.  Those were the two grounds on which an enhancement of sentence was sought.

(1) Relevance of the predicate offence, namely telephone deception

(A) Section 27(2)(d)

(i) Section 27(2)(d) and the harm referred to in section 27(2)(a)

15.  There are no logical reasons why the harm alluded to in section 27(2)(a) must be ignored when the court is called upon to assess the nature and extent of the harm, direct and indirect, caused to the community by the recent occurrences of the specified offence under section 27(2)(d).  Any contrary interpretation can be dismissed at once as being so plainly absurd that the legislature could never have intended it.

16.  It is therefore essential to ascertain in the first place the scope of section 27(2)(a).

(ii) The expression “act in respect of which” in section 27(2)(a)

17.  When considering the direct and indirect harm caused to “any person” under section 27(2)(a), the court is to have regard to “the act in respect of which the person has been so convicted.”  Three obvious observations can be made of this. 

18.  First, the focus is on the “act” – and not the specified offence – in respect of which the person has been convicted.  Secondly, the offender’s guilty mind or his state of knowledge is prima facie irrelevant in the court’s consideration of the harm caused.  Thirdly, section 27(2)(a) being a provision on assessment of the harm caused, “the act in respect of which the person has been so convicted” can and should, in appropriate cases, include a consideration of relevant aggravating factors so that the nature and extent of the direct and “indirect” harm caused can be accurately and adequately reflected. 

19.  The offence of money laundering and its relationship with the underlying or predicate offence to which it relates provide a good example  in support of these observations. 

20.  An offender can be found guilty of money laundering when it is established that he has had reasonable grounds to believe (and therefore, did so believe) that the property he dealt with represented proceeds of an indictable offence.  Proof of the offender’s knowledge of the illegal provenance of the proceeds is but an alternative way by which the offence can be prosecuted.  

21.  The person who suffers as a result of the predicate offence – committed often by an offender other than the money launderer himself – is the victim, the likes of whom the offence of money laundering is, to a large measure, designed to protect.  The Court of Appeal in HKSAR v Boma[6] said:-

‘ … It is to be remembered that “the criminality in laundering arises from the encouragement and nourishment it gives to crime in general. Without it many crimes would be rendered much less fruitful and perhaps more difficult to perpetrate”: R v Basra [2002] 2 CR App R (S) 469, 472.’

If the predicate offence that causes the harm to the victim is to be ignored in the court’s examination of “the act in respect of which the person has been so convicted” under section 27(2)(a), the legislative intent in providing for enhancement of sentence on consideration of the harm to “any person” in money laundering cases would be substantially, if not wholly, frustrated.

22.  Seriousness of the predicate offence, if and when known, is an important consideration in sentencing[7] and can amount to significant aggravation.  There are no plausible reasons whatsoever why the predicate offence (and with it, the harm suffered by the victim of that offence) must be ignored when the court considers “the act in respect of which the person has been so convicted” under section 27(2)(a).

(iii) The “harm” referred to in section 27(2)(d)

23.  Turning now to section 27(2)(d), according to DCIP Lam, whose evidence was unchallenged, drop-off cases involve an act of money laundering: an offender is tasked to collect the money.  The offence of money laundering is therefore an integral part of the criminal design in those cases; in this circumstance, whether or not they can be prosecuted as fraud, conspiracy to defraud, obtaining property by deception, or any other offending is neither here nor there.  Further, it is clear from DCIP Lam’s evidence that there has been an established practice or prosecutorial preference since 2012, a practice that is continuing, to approach and prosecute drop-off cases on the basis of money laundering.

24.  In addition, the wording of section 27(2)(d) itself points strongly in favour of including the predicate offence in the court’s consideration of the direct and indirect harm caused to the community.  Rather than simply “the harm caused to the community by the specified offence”, section 27(2)(d) requires an examination and assessment of the harm caused to the community by reference to the “recent occurrences” of the specified offence.  In drop-off cases, the physical collection of the victim’s money is an integral and essential part of the criminal act which generates the crime proceeds in the first place.  The phrase “the harm, whether direct or indirect, caused by the recent occurrences of the specified offence” as it appears in section 27(2)(d) must therefore encompass the harm suffered by the victim as a direct result of the commission of the predicate offence to which the specified offence, namely, money laundering, relates. 

25.  Finally, from the point of view of a money launderer facing an application for enhancement of his sentence, his interest will be better served if in its assessment of the harm caused to the community under section 27(2)(d), the court is restricted specifically to the type of predicate offence – telephone deception in drop-off situations in the instant case – from which the crime proceeds originate, rather than to the harm occasioned by all money laundering offences, regardless of the various types of predicate offences to which a given money laundering charge may relate.

(iv) Information on telephone deception in drop-off cases

26.  In light of the foregoing discussion, the court can and should, in drop-off cases, take into account information supplied by the prosecution concerning the underlying, predicate offence when determining and assessing under section 27(2)(d) the nature and extent of the harm, direct and indirect, “caused to the community by recent occurrences of that specified offence.”

(B) Section 27(2)(c)

Prevalence of the specified offence

27.  As discussed above, collecting the money from the victim is an inherent and essential part of the criminal design in drop-off cases, without which or failing which the criminal plot would be incomplete and futile.  In addition, there is in recent years an established, ongoing prosecutorial bias to deal with drop-off cases on the basis of money laundering.   In these circumstances, there can be no objection for the court to take into account information concerning telephone deception committed in the drop-off mode, reported and detected, in its consideration under section 27(2)(c) of the issue of prevalence of money laundering offences arising from those drop-off cases.

28.  According to DCIP Lam, there have been more than three reported drop-off cases a day in recent times, and there is currently an upward swing in their occurrences.

(2) Ruling on the application for enhancement of sentence

29.  The court attaches full weight to the undisputed evidence of DCIP Lam – in particular, to paragraph 10(iii) to (viii) above – and finds beyond all reasonable doubt, first, the specified offence in Charge 1 is prevalent within the meaning of section 27(2)(c) and secondly, under section 27(2)(d), the nature and extent of the direct and indirect harm caused to the community by recent occurrences of the specified offence in Charge 1 are such that an enhancement of sentence pursuant to section 27(11) is called for. 

30.  The prosecution’s application for enhancement of sentence is granted on both grounds.

REASONS FOR SENTENCE

31.  In money laundering cases, deterrence as a sentencing consideration is paramount.[8]  Other important considerations include the maximum penalty; the amount involved; the nature and extent of the defendant’s participation; the nature and seriousness of the predicate offence (if known); the defendant’s state of knowledge of the predicate offence; the degree of sophistication of the offence; international element, if any; and the duration of the offence.[9]  That said, the Court of Appeal in the case of HKSAR v Boma[10] said:-

“39. We were at one stage of our deliberations minded to provide a suggested starting point for a specified relatively low sum involved in an offence, leaving the courts to use that as a base for other sentences but we at once could conjure a myriad of factual variations which might render even that single starting point unwise with the further risk that it might encourage a rigid mathematical approach and progression without proper regard to other individual relevant factors.”

32.  The maximum sentence for the offence of money laundering is one of 14 years’ imprisonment[11]; a conspiracy to commit money laundering carries the same statutory maximum[12].  

33.  HKSAR v Wu Jianbing[13] was a drop-off case committed by a mainland resident on four victims in Hong Kong.   In that case, two victims suffered losses in the total sum of $50,000, while the other two were asked to pay a total of $260,000 but suffered no loss.  The defendant was prosecuted with two charges of money laundering and two charges of conspiracy to commit money laundering; to those four charges he pleaded guilty.

34.  In allowing the defendant’s appeal against sentence in that case, the Court of Appeal adopted a starting point of three years’ imprisonment for each of the charges, reduced it to 24 months’ imprisonment for the defendant’s guilty pleas, enhanced the sentence by one-third, ie., eight months, pursuant to the Ordinance, and sentenced him to 32 months’ imprisonment.  In addition, the Court ordered that six months of the defendant’s sentence in respect of the fourth charge be served consecutively with the sentence for the third charge, with the remainder to be served concurrently; the final sentence was therefore 38 months’ imprisonment.

35.  HKSAR v Cen Huakuo[14], the authority cited and relied on by the defence in the instant case, was yet another drop-off case committed by an 18-year-old offender from the mainland.  In that case, an elderly lady of 78 was asked over the phone to make payment of $250,000 for the safe return of her son; the amount was in the end agreed at $50,000.  The police later arrested the defendant at a pre-arranged meeting at a park, and the victim suffered no loss.  The defendant pleaded not guilty to one charge of conspiracy to commit money laundering and was convicted after trial. 

36.  The Court of Appeal observed, in the defendant’s appeal against sentence, that there was insufficient evidence to show that the defendant knew the victim had been told that her son would be harmed, and that she had suffered a greater degree of fear and stress than those experienced by victims in street deception cases. The Court adopted a starting point of three years’ imprisonment and had the sentence enhanced pursuant to the Ordinance (likewise) by one-third, ie., one year; in consequence, the defendant was sentenced to four years’ imprisonment.

37.  In the instant case, the amount involved – with which the prosecutor Mr Simon Kwong PP has fairly agreed – was $25,000.  There was no evidence to suggest that the defendant was involved in the telephone deception on Mr Chan who suffered no loss and no evidence capable of supporting a finding of marked sophistication in the planning or execution of the criminal plot, in which the defendant played only the role of the collector of the money.  As Ms Liang submitted, the defendant did not appear to be the mastermind. 

38.  There was an international aspect to the offence in that the defendant came to Hong Kong as a visitor from the mainland to commit a serious crime.

39.  The appropriate starting point in all the circumstances is one of 32 months’ imprisonment.

40.  The defendant, a resident on the mainland, is 24 years old and has had a clear record in Hong Kong prior to his current conviction.  He has received education up to Form Six level.  He used to work as a light bulb installation worker but was unemployed at the time of the offence.

41.  Apart from his previous good character and guilty plea, little in the defendant’s background constitutes valid or viable mitigation.  The defendant is entitled to the usual one-third discount for his guilty plea and previous clear record; his sentence is accordingly reduced to 21 months’ imprisonment.

42.  Having regard to the cases of HKSAR v Wu Jianbing[15]and HKSAR v Cen Huakuo[16], there are no compelling reasons why the court should not impose a one-third enhancement of the defendant’s sentence pursuant to section 27(11) of the Ordinance; the 21-month sentence is therefore enhanced by seven months.  If the current trend in terms of prevalence of offence (averaging more than three reported cases a day) and of the degree of harm caused to the community is to continue unabated, it may well be that an enhancement in excess of one-third should be seriously considered.

CONCLUSION

43.  For the offence in Charge 1, of which the defendant stands convicted, he is sentenced to 28 months’ imprisonment.