Introduction

In the case of HKSAR v Mondesir Johnny [2021] HKCA 1168, the Court of Appeal (the “Court”) considered an appeal case from the District Court that concerns the criminal offence of money laundering. This case illustrates the important factors that the Court would consider in assessing the merits of the defences raised to explain the receipt of funds from a phishing email scam case.

Background

Facts

The Defendant is a Canadian national born in Haiti. He lives out of Hong Kong but keeps a bank account here. On 28 July 2016, as a result of a phishing email scam, Agriteam Canada Consulting Limited (“Agriteam”) mistakenly deposited CAD$827,265.23 (the “Money”) into the Defendant’s bank account with The Hong Kong and Shanghai Banking Corporation (the “HSBC account”), which was opened by the Defendant more than 3 years prior to the current event and was not active ever since.

The Money was dissipated by the Defendant within a few days in the following manner:

1.        Transfer to the Defendant’s bank account with the Industrial and Commercial Bank of China (Asia) Limited. Part of the money was then transferred to the overseas account of the Defendant’s sister and late mother;

2.        Transfer to the account of Marquisa Limited, whereby the sole signatory and shareholder was the Defendant’s wife; and

3.        Cash withdrawals on 7 separate occasions by the Defendant at counter or through ATM machine when the Defendant was staying in Hong Kong.

The Defendant was charged with 2 charges of dealing with property known or believed to represent proceeds of an indictable offence (commonly known as “money laundering”), both contrary to sections 25(1) and (3) of the Organized and Serious Crimes Ordinance (Cap 455 of the Laws of Hong Kong).

The Defence case

It is in the defence case that he sold a piece of land which he inherited from his late mother located at Croix-des-Bouquets, Haiti (the “Land”) to a man who the Defendant thought to be the President and CEO of Agriteam. The Land was claimed to be sold at US$925,000 (equivalent to CAD$1.2 million) and would be paid by 2 instalments: (i) an initial payment (30% of the purchase price) to be paid into the Defendant’s account in Haiti; and (ii) the balance (70% of the purchase price) to be paid into his HSBC account.

The Defendant claimed that part of the Money was transferred to his wife and his sister since they were both entitled to the Defendant’s mother’s estate. For the money that was transferred to the Defendant’s mother’s succession bank account, it was for the purpose of paying expenses for the management of the estate.

The District Court’s decision

The judge found that the Defendant was not credible as he failed to produce any original documents relating to the alleged transfer of the Land and the Money was inconsistent with the purchase price for the transfer of the Land claimed by the Defendant. In particular, the Money was quickly dissipated by the Defendant and he left Hong Kong on the same day upon the completion of the transfers and withdrawals of the Money in several batches. The District Court found the Defendant guilty of both charges. He was sentenced to an imprisonment of 4.5 years.

The appeal

The Defendant appealed against the conviction on the grounds that:

1.        the judge failed to take into consideration his emphasis on his awareness of the Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”) policy in Canada which prevented any proceeds of indictable offence from leaving Canadian banks;

2.        the judge erred in rejecting the documents adduced by the Defendant in the absence of forensic expert evidence;

3.        the judge misinterpreted and misread information on official court documents when making findings; and

4.        the judge was unfair in drawing the inference against the Defendant.

The Court refused a further adjournment of the leave hearing, rejecting the Defendant’s request to adduce fresh evidence, i.e. the authentic copy of the Deed of Sale. Since the lack of authentic supporting documents was only one factor in assessing the credibility of the Defendant, it is unlikely for any such documents to qualify for fresh evidence to be adduced on appeal.

Ground 1: the Defendant’s awareness of reporting requirement

The Defendant argued that the judge failed to consider his awareness of banks’ reporting requirement in Canada. Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, Canadian banks should report to the FINTRAC of any international transfer of money of and above CAD$10,000.

The Court rejected this ground since it found no evidence regarding the Defendant’s awareness of the FINTRAC policy. In any case, his awareness offers little help to the issue at trial, which is whether the Defendant knew or had reasonable grounds to believe that the monies were proceeds of an indictable offence.

Grounds 2-4: the inference drawn from evidence

By exhibiting various photocopies of documents, the Defendant sought to establish his genuine belief that the Money represented the purchase payment of the Land. He contended that the trial court wrongly rejected the evidence produced. The Court disagreed. The Defendant failed to convince the judge that a land transfer occurred between himself and Agriteam because he could not produce original documents. His ability to instruct solicitors and counsel as well as his purported inheritance from his mother indicated that he had the means and resources to retrieve documents, if any. As such, his claim that the relevant original documents are irretrievable because they are located in Haiti or Vietnam is a futile attempt to escape liability.

Therefore, it is only reasonable to draw inference from the undisputed facts. The Defendant received a large sum of money in his HSBC account from Agriteam, to whom he had no previous dealing. He did not reside in Hong Kong and had no local family ties or business. His HSBC account had been inactive since its opening in April 2013, and yet he dissipated the bulk of money in a circuitous manner through cash withdrawals and bank transfers during his special day trip to Hong Kong. Even if the Defendant used his true identity, maintained a large balance in his account, and continued entering Hong Kong after dissipating the money, these facts offered no help in his defence.

Conclusion

The Court dismissed the Defendant’s application for leave to appeal against his conviction. Phishing email scams are commonly associated with banking activities across jurisdictions. Solid evidence is required in a defence against money laundering; a mere claim that certain evidence is irretrievable because it is located overseas is insufficient. A person’s awareness of anti-money laundering policies is unlikely to be relevant to show that the person did not have reasonable grounds to believe that the person was dealing with crime proceeds.