Background
On 29 June 2011, Carson Yeung Ka-shing (“Yeung”), the owner of English Premier League football club Birmingham City, was arrested and charged with money-laundering. The money involved under the 5 counts amounted to HK$721 million in total. The following article seeks to give a preliminary view on the offence of money-laundering as applied in Yeung’s case.

The Law on Money-laundering

Section 25(1) of the OSCO
Yeung was charged under sections 25(1) and (3) of the Organized and Serious Crimes Ordinance (Cap. 455) (“OSCO”). Section 25(1) provides that “a person commits an offence if, knowing or having reasonable grounds to believe that any property in whole or in part directly or indirectly represents any person’s proceeds of an indictable offence, he deals with that property.”

Actus Reus
The only guilty act (actus reus) element required under section 25(1) of the OSCO is “dealing”. Under section 2(1) of the OSCO, “dealing” includes various acts such as receiving or acquiring the property, concealing or disguising the property, as well as disposing of or converting the property. It is not necessary to prove the commission of the original indictable offence which gives rise to the proceeds.[1] Even if the underlying indictable offence is not specified, the charge is not a nullity.[2] Neither is the Prosecution required the property is, in fact, the proceeds of an indictable offence.[3]

Mens Rea
As regards the mental element (mens rea), the offence requires proof of knowledge or having reasonable grounds to believe. If (i) objectively “reasonable grounds” existed for the “belief” that the property the Defendant handled represented the proceeds of an indictable offence, and (ii) subjectively he was aware of the existence of those reasonable grounds, the Defendant would be convicted of the offence under section 25(1) of OSCO.[4]

Yeung’s Case

The Prosecution Case
The Prosecution first based their charges against Yeung on the significant discrepancy, between the credit balance of more than HK$721 million in 5 bank accounts in the name of Yeung and his father (the “Bank Accounts”), and the actual amount of money reported as taxable income of about HK$1.7 million.

According to the Prosecution, from 2001, deposits were made by various parties to the Bank Accounts; many for no apparent reason. About 400 deposits, totalling about HK$98 million, were made in cash; about HK$40 million originated from 21 cash deposits, where each exceeded HK$1 million. The deposits of HK$721 million in the Bank Accounts were virtually identical to the total withdrawn by the end of 2007. Multiple transactions were made on the same day in which the sums deposited and withdrawn were identical. The expert witness found that a series of cash cheques were issued by the Sociedade de Jogos de Macau (“SJM”), which might be related to gambling activities but there were no documents supporting such hypothesis; in fact Yeung was not in Macau gambling when he asked the SJM to deposit cash cheques into his bank accounts.

The Defence Case
The Defence case primarily sought to establish the source of funds in the Bank Accounts, and to account for the discrepancy between the HK$721 million and the apparently meagre incomes of Yeung and his father.

First the Defence expert witness said Yeung was running a profitable hairdresser’s salon at The Peninsula Hotel and earned HK$4 million to HK$10 million between 1989 and 1991. In 1999, Yeung set up a research company and began to actively trade stocks in large amounts and with margins; Yeung said the daily average for deals was around HK$2 million. This was especially so after he allegedly made a HK$15 million profit in real property investments. In 2008, Yeung allegedly acquired 29.9 per cent of Birmingham City FC’s shares by borrowing HK$140 million from Kingston Finance and raising funds from the market.

As regards the cheques from staff members of Macau casino junket operators such as Neptune Club, Yeung said that the money came from his investment capital in those firms. He claimed that all the depositors had Hong Kong addresses, identity card numbers and bank records. Another 11 deposits were allegedly Yeung’s returns on his investment in a 2005 Hong Kong film.

Preliminary Views on the Case
Yeung did not deny that there were HK$721 million in the Bank Accounts; nor did he deny that the credit balance was derived from various cash and cheque deposits. The bank records would have shown withdrawals as well. In our view the Prosecution would be able to prove the actus reus element of “dealing” by either the receipt limb or the disposal limb.

The issue is now on whether the mens rea could be inferred from the evidence. It would be difficult to prove knowledge, as there was no direct evidence pinpointing that Yeung did know that the source of the deposits was crime proceeds. The Prosecution may want to rely on the “reasonable grounds to believe” route to prove mens rea. Indeed the large amount of monies as well as frequent unusual deposits and withdrawals (especially from casinos) may cast doubts on the source of those funds transacted through the Bank Accounts. Yeung’s credibility was undermined because of his “confusing” testimony as found by the Court, as well. As such the Court may not believe on the “cleanliness” of sources of deposits alleged by the Defence.

Nevertheless, the burden remains on the Prosecution to prove its case beyond reasonable doubt. On one hand, Yeung subjectively knew of the frequent deposits and withdrawals in the Bank Accounts. On the other hand, it is doubtful whether the Court could infer from the above acts of Yeung that objectively reasonable grounds existed for the belief that the deposits represented the proceeds of an indictable offence.

The case is still ongoing and we would update our readers on its latest development in due course.

[1]     HKSAR v Li Ching [1997] 4 HKC 108 [2]     Lam Hei Kit v HKSAR (unrep., FAMC No. 27 of 2004) [3]     HKSAR v Wong Ping Shui Adam [2001] 1 HKLRD 346; Oei Hengky Wiryo v HKSAR (No. 2) [2007] 1 HKLRD 568 [4]     HKSAR v Shing Siu Ming [1999] 2 HKC 818

IMPORTANT:
The law and procedure on this subject are very specialized and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.

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