HKSAR v. LIU JIACHENG

DCCC 742/2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 742 OF 2015

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REASONS FOR SENTENCE

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INTRODUCTION

1. On 8 January 2016, the defendant pleaded guilty to one charge of dealing 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”) (Charge 1)  and 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 Ordinance and sections 159A and 159C of the Crimes Ordinance, Cap 200 (Charge 2). 

FACTS

2. On 8 June 2015, the defendant came to Hong Kong from Shenzhen.  On 11 June 2015, Madam Fan, a lady of 60 years of age, received at home a phone call from a male person claiming that her son had been kidnapped.  Pretending to be the hostage, another male person shouted over the phone for help.  Madam Fan was led to believe that her son, who happened to be outside Hong Kong, had been held captive.  The first male demanded for a ransom of $300,000; Madam Fan was unable to meet that demand; after negotiation, the male agreed to take $50,000 for the release of her son.  Switching to speak with her on her mobile phone, the man told Madam Fan to keep quiet while withdrawing the money from the bank.  She withdrew $50,000 from the bank accordingly and put the money inside a white envelope.  At the man’s directions, she went to Lek Yuen Material and Child Health Centre, placed the money next to a lamp post, and left.  The defendant arrived on the instructions (according to what he told the police subsequent to his arrest) of a person unknown and picked up the white envelope from which he took $350 to cover his taxi fares and another $300 as his reward; he had the remainder in the sum of $49,350 remitted to an account held at the Agricultural Bank on the mainland.  When Madam Fan discovered that her son had never been held hostage, she made a report to the police.  The defendant left Hong Kong the following day, ie., 12 June 2015.  (Charge 1)

3. The defendant next arrived in Hong Kong on 22 June 2015 on the strength of a visitors’ permit which allowed him to stay for seven days.  On 25 June 2015, an unknown male person made a call to Madam Chan (who was aged 56) at her residence.  He pretended to be her son and asked her to save him saying that he was bleeding, having been beaten.  Another man took over the conversation alleging that Madam Chan’s son owed them $230,000; the man threatened to kill him.  She could only afford to pay $80,000 to $100,000 at most, she pleaded.  The man then asked for $100,000 and told her to speak with him on her mobile phone.  On the mobile phone, he instructed her to get the money from the bank immediately.  Madam Chan alerted her husband surreptitiously who made enquiries and confirmed that his son was unharmed.  A report was made to the police.  Madam Chan co-operated with the police in their investigation; she went to Tuen Mun Hospital carrying a dummy money bag and, according to the man’s instructions, had it placed on the boot of a car at the car park of the hospital, and walked away.  The defendant who had been seen talking on his mobile phone approached the car, took the money bag, and left the scene. Police officers nearby revealed themselves, declared their police identity, and chased after him.  The defendant threw the money bag away and attempted to flee but was intercepted.  He was arrested and said under caution: “I answered the call and am responsible for picking up the money only.”  In a subsequent cautioned interview, he initially admitted the offence, saying he understood he would be rewarded by an unknown male for collecting the money, although he did not know how much; but he retracted his admission at a later stage of the interview, claiming that he did not know it was money that he had been asked to collect. (Charge 2)

MITIGATION

4. The defendant, a mainland resident, is 21 years old and has been educated to lower secondary level.  Single and unemployed, he lives with his parents.  In his plea in mitigation, Mr Ivan Cheung appearing for the defendant submits that the defendant has co-operated fully with the police by revealing his involvement in Charge 1; but for his voluntary disclosure, there would not have been sufficient evidence to prosecute him with the offence in that charge.  Mr Cheung emphasizes that the defendant knew nothing of the deception practised on the victims and his role was confined to the collection of the monies only.  It is submitted that the two victims were not particularly aged, 60 and 56 as they were at the time of the offences, and that only one of them had suffered financial loss in the sum of $50,000.  Relying on the case of HKSAR v Chen Jianchao[1], in particular, on the sentence in respect of the second charge in that case which involved $17,700, Mr Cheung asks for a global starting point of not more than three years’ imprisonment and indicates to the court that the defendant has no objection to the enhancement of the sentence under section 27(11) of the Ordinance, nor does he contest DCIP Lam Cheuk Ho’s statement dated 2 December 2015 upon which the prosecution rely in support of the application for enhancement of sentence[2].

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

5. The defendant confirms, before arraignment, receipt of the prosecution’s notice of intention to furnish information to the court pursuant to section 27(2) of the Ordinance.

6. In essence, DCIP Lam’s evidence shows the following:-

(i) Between 2010 and 2014, the number of reported cases of telephone deception varied between about 2,000 and 2,300 a year, but the figure in the first 11 months of 2015 has risen to 2,756.

(ii) Between 2010 and 2014, in cases where the culprits succeeded in their criminal designs, the victims have suffered a yearly loss ranging between $23m and $45.7m; again the first 11 months of 2015 have seen that figure shoot up to $294.5m.

(iii) In the third quarter of 2015 alone, there have been 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 have 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 averaged number of reported drop-off cases ranged between 2.85 and 3.37 cases every day; and the figure for the first 11 months of 2015 has been 3.33 cases a day.

(vi) The losses occasioned by drop-off cases between 2008 and 2014 have risen from some $3m to about $13m yearly; and the losses in first 11 months of 2015 stand at $11.97m.

(vii) There has been a steady increase in the number of “detected” drop-off cases from 21 in 2011 to 54 in 2014; however, the first 11 months of 2015 have seen a rapid, significant rise in that figure to 76.

(viii) With the exception of several cases, the 188 detected drop-off cases from 2012 up to and including November 2015 have been prosecuted with offences of money laundering or of conspiracy to commit money laundering.

CONSIDERATION OF ENHANCEMENT OF SENTENCE

7. There can be no dispute that the offences in Charges 1 and 2 of which the defendant stands convicted are specified offences.  The offence of “dealing with property known or believed to represent proceeds of an indictment offence” is included in Schedule 1 to the Ordinance[3]; and a specified offence includes a conspiracy to commit a Schedule 1 offence[4].

8. 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;

…”

9. 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.”

10. In the present case, the prosecution rely 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 offences and the nature and extent of the harm, direct and indirect, caused to the community by recent occurrences of those specified offences.  These are the two grounds on which an enhancement of sentence is 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)

11. The personal harm alluded to in section 27(2)(a) cannot be ignored when the court is called upon to assess the nature and extent of the harm, direct and indirect, caused to the community under section 27(2)(d).  Any contrary interpretation can be dismissed immediately as being so plainly absurd that the legislature could never have intended it.

12. 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)

13. 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.”  Some obvious observations can be made of this.  The focus is on the criminal conduct, and not the offender’s guilty mind or his state of knowledge.  The expression “the act in respect of which the person has been so convicted” certainly imports a wider scope that “the act of which the person has been so convicted.”  It is therefore the view of this court that the harm occasioned directly or indirectly by an accepted aggravating feature inherent in the specified offence must be taken into considered. 

14. In the case of money laundering or a conspiracy to commit money laundering, the nature and seriousness of the predicate offence, if and when known, are important considerations in sentencing[5] and can amount to significant aggravation.  There are no plausible reasons, therefore, why the predicate offence or the underlying criminal conduct (ie., telephone deception in this case) must be ignored when the court considers “the act in respect of which the person has been so convicted” under section 27(2)(a).  If the predicate offence or the underlying criminal conduct 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 frustrated.

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

15. In respect of section 27(2)(d), according to DCIP Lam, whose evidence is unchallenged, drop-off cases would necessarily involve an act of money laundering: an offender is tasked to collect the money.  In this circumstance, that the cases could have been prosecuted as fraud, conspiracy to defraud, obtaining property by deception, conspiracy to launder proceeds of crime, or any other offending is neither here nor there.  Judging from DCIP Lam’s evidence, it is clear that there has been an established practice or prosecutorial preference since 2012 to prosecute drop-off cases on the basis of money laundering.

16. 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 “recent occurrences” of the specified offence.  In drop-off cases, the physical collection of the victim’s money is but an integral and essential part of the criminal enterprise.  Money laundering committed in the drop-off mode must involve an antecedent telephone deception on the victim.  The phrase “the recent occurrences of the specified offence” as it appears in section 27(2)(d) must therefore encompass the underlying telephone deception to which the money laundering relates. 

17. Finally, a money launderer’s interest will be better served  or protected 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 underlying conduct (telephone deception with a drop-off arrangement 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 on drop-off cases

18. 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 assessing the nature and extent of the harm, direct and indirect, “caused to the community by recent occurrences of that specified offence” under section 27(2)(d).

(B) Section 27(2)(c)

Prevalence of the specified offence

19. As discussed above, collecting the money from the victim is an integral part of the criminal design in drop-off cases, without or failing which the criminal plot would be futile.  Further, 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 (and conspiracies to launder proceeds of crime) committed in that manner.

20. According to DCIP Lam, there have been more than three reported drop-off cases a day in recent times.

(2) Ruling on the application for enhancement of sentence

21. The court attaches full weight to the undisputed evidence of DCIP Lam and finds beyond all reasonable doubt, first, the specified offences in Charges 1 and 2 are prevalent within the meaning of section 27(2)(c) and secondly, under section 27(2)(d), the nature and extent of the harm, direct and indirect, caused to the community by recent occurrences of the specified offences in the two charges are such that an enhancement of sentence pursuant to section 27(11) is called for.  The prosecution’s application for enhancement of sentence is allowed on both grounds.

REASONS FOR SENTENCE

22. The paramount sentencing consideration in money laundering cases is deterrence.[6] Other factors that should be taken into account 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.[7]  That said, the Court of Appeal in the case of HKSAR v Boma[8] 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.”

23. The maximum sentence for the offence of money laundering is one of 14 years’ imprisonment[9]; a conspiracy to commit money laundering carries the same statutory maximum[10].

24. HKSAR v Wu Jianbing[11] 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 had suffered no loss.  The defendant was prosecuted with two charges of money laundering and two charges of conspiracy to commit money laundering, to which charges he pleaded guilty.

25. 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.

26. In HKSAR v Cen Huakuo[12], a case in which the victim was asked to pay $50,000 in circumstances similar to the defendant’s, the Court of Appeal said:-

“18. The applicant did not take part in the deception, he told Madam Chan that her son was being detained, but that only shows his sketchy understanding about the relevant indictable offence and does not mean that he knew the details. When considering the applicant’s knowledge about the relevant indictable offence, the trial judge should not have interpreted the facts in the most unfavorable way against the applicant. …

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.”[13]

27. In the instant case, the amounts involved in the two charges are $50,000 and $100,000, of which only $50,000 was lost.  There is no evidence to suggest that the defendant was involved in the telephone deception on the two victims and no evidence capable of supporting a finding of marked sophistication in the planning or execution of the criminal plot in which the defendant has played the role of the collector of the money only.  The defendant does not appear to be the mastermind.  There is however an international aspect to the offences in that the defendant has come to Hong Kong as a visitor from the mainland to commit a serious crime.

28. The two victims in this case are not as aged as the victims in other cases.  This factor pales into insignificance, however, in view of the fact that the fraudsters in this case have exploited the victims’ motherly instincts to protect their offspring, an instinct that is common to all mothers regardless of their age. 

29. There is no evidence suggesting that the defendant knew the nature of the predicate offences in the two charges.  While positive proof of the knowledge of the predicate offence is an aggravating feature recognized in various Court of Appeal cases, the absence of such proof does not, in the court’s view, constitute valid mitigation, particularly when the predicate offences are as serious as telephone deception.

30. The preponderance of the Court of Appeal authorities examined above shows that the appropriate starting point is one of three years’ imprisonment for each of the two charges.  There is no reason whatsoever not to adopt this starting point in all the circumstances of this case.

31. Little in the defendant’s background constitutes valid mitigation.  He is nevertheless entitled to the usual one-third discount for his guilty pleas and previous good character.  In consequence, the sentence for each charge is reduced to two years’ imprisonment.  The defendant has co-operated with the police to the extent of providing them with the only incriminating evidence against himself. Post-arrest co-operation with the authorities , as Mr Cheung submits, should be encouraged.  A further reduction of three months’ imprisonment is in order, bringing the sentences for the two charges to 21 months’ imprisonment each.  Having regard to the totality principle, it is ordered that the two sentences in respect of Charges 1 and 2 be served concurrently.

32. There is no justification not to impose a one-third enhancement of the defendant’s sentence pursuant to section 27(11) of the Ordinance(see HKSAR v Wu Jianbing[14]and HKSAR v Cen Huakuo[15]); the 21-month sentence is enhanced, accordingly, by seven months.   

33. In the case of HKSAR v Hung Yung Chun and anor[16], the Court of Appeal observed: “Therefore, we are of the view that the appropriate starting point for this case should be 4 years’ imprisonment.  On enhancement, we consider that an enhancement of 1/3 will do for now.  However, should this type of cases become even more prevalent, the court may increase the rate of enhancement.”  (emphasis supplied)

34. In the present case, it is the view of this court that if the degree of prevalence of offence (averaging more than three reported cases every day of the year) and of harm caused to the community either increases or continues unabated, it may well be that an enhancement in excess of one-third should, when a suitable case arises, be seriously considered.

CONCLUSION

35. For the two offences in Charges 1 and 2 of which he stands convicted, the defendant is sentenced to two years and four months’ imprisonment.