State v Tomande [2019] PGNC 228; N8030 (20 September 2019)

N8030

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

CR (FC) 63 OF 2019

THE STATE

V

RUTH TOMANDE

Waigani: Berrigan, J
2019: 17, 18, 19, 21, June; 5 July, 20 September

CRIMINAL LAW – Decision on plea – Part VIA of the Criminal Code - Money laundering – S. 508B of the Criminal Code – “Criminal property” – Underlying offence charged on indictment not made out as a matter of law – Plea to money laundering accepted.

Cases Cited:
Papua New Guinea Cases

Alexander Age v The State [1979] PNGLR 589
Brian Kindi Lawi v The State [1987] PNGLR 183
The State v Francis Laumadava [1994] PNGLR 291
Yalibakut v The State (2006) SC 890
The State v Ruth Tomande (2019) N7798
The State v Edward Bae (2019) N8029

Overseas Cases

R v Roebuck (1856) 25 LJMC 101
R v Marston (1918) 13 Cr App R 203
R v Lurie (1951) 35 Cr App R 113
R v Ball (1951) 35 Cr App R 24
R v Smith & Ors (1951) 34 Cr App R 168
R v Stones (1968) 52 Cr App R 36
R v Beck [1980] Qd R 123
R v Lenehan [2009] QCA 187

References Cited

Sections 383A, 404, 508A, 508B, 508C, 508D, 508E, 508F and 508G of the Criminal Code (Ch. 262) (the Criminal Code)

Counsel

Ms H. Roalakona with Ms T. Kametan, for the State
Mr E. Sasingian, for the Accused

DECISION ON PLEAS OF GUILTY

20 September, 2019

1. BERRIGAN J: Following my ruling on a preliminary objection, the State presented an indictment containing 14 counts of obtaining monies by false pretence, one count of money laundering and one count of misappropriation contrary to ss.404(1)(a), 508B(1) and 383A(1)(2) of the Criminal Code (Ch. 262) (the Criminal Code) respectively: The State v Ruth Tomande (2019) N7798.
   
2. A trial proceeded. During examination of the State’s second witness the accused indicated that she wished to plead guilty to all charges. She was arraigned and pleaded guilty to the following charges.
   
3. Count 1 of the indictment alleged that between 30 April 2017 and 1 June 2017, the accused “by falsely pretending to the Bank of South Pacific that the loan application in the name of Joseph Kupamu was genuine and obtained from the said Bank of South Pacific monies in the sum of... K20,850.23” with intent to defraud. Counts 2 to 14 were in similar terms but referred to the loan application being made in the name of a different individual in each case. The amount of monies averred in each case varied between K15,781.71 and K30,624.18. The offences were alleged to have taken place on various dates between 30 April 2017 and 1 January 2018. In total the amount of the monies allegedly obtained by false pretence was K372,131.74.
   
4. Count 15 of the indictment alleged that between 30 April 2017 and 1 January 2018 the accused “dealt with monies in the sum of... K368,141.64 that is criminal property by concealing and disguising the property and had knowledge or reasonably ought to know that the property is criminal property”, contrary to s. 508B(1) of the Criminal Code, also referred to as money laundering.
   
5. Count 16 alleged that during the same period the accused dishonestly applied to her own use and the use of the others monies in the sum of K368,141.64, the property of BSP, contrary to s. 383A(1)(2) of the Criminal Code, also referred to as misappropriation.
   

Facts on Arraignment

6. At the relevant time the accused was employed as a Home Loan Officer with Bank South Pacific (BSP) Boroko Banking Centre. Between 30 April 2017 and 1 January 2018 the accused extracted from the bank’s records, fourteen (14) loan applications previously submitted by existing bank customers but which had been declined. Each application had a unique customer identification (CIF) number and was supported by documentation including the original applicant’s payslips, confirmation of employment and photo identification.
   
7. The accused used the declined applications, and supporting documentation, of those initial customers, together with inflated salary figures, to apply for loans in the names of 14 different bank customers through the bank’s automated loan system, the “Lend Fast System”.
   
8. The remainder of the alleged facts is quoted verbatim for reasons that will become clear.
   

“6. Because of the inflated salary figures entered by the accused, the loans were approved on the system and the accused uploaded the loan contract to the Lend Fast System for Lending Support to fund the loans.

7. Once the loans were funded into the customer’s account, the accused compiled office entry debits and credits to authorise tellers to process transactions of the financed loans into numerous accounts belonging to the accused relatives and other bank customers. She did this to conceal the monies. The monies were also credited back to the loan accounts to fund loan repayment to avoid arrears and alert of her fraudulent conduct.

7a. The bank was alerted of this criminal conduct when a customer after having his loan application declined received an SMS alert through his mobile phone that his loan was approved. As a result of that alert he enquired at the bank and his account had been funded and then giving rise to the investigation into the conduct of the accused person.

8. The State alleges that by extracting the customer’s declined loan applications and using their customer identification file numbers to manipulate the lend fast system through data entry to approve and generate the different loans in the name of customers, the accused had obtained monies by false pretence and with the intent to defraud thereby contravened section 404(1) of the Criminal Code Act.

9.Further, the State alleges that by concealing and transferring the loan monies in the total sum of K368,141.64 through various bank accounts, being criminal property and knowing that the loan money is criminal property the accused had laundered money and thereby contravened section 508B(1) of the Criminal Code (Money Laundering and Terrorist Financing (Amendment Act).

10.The State alleges that when the monies were transferred into the accounts belonging to the accused relatives, the accused accessed the monies and dishonestly applied to her own use and the use of others monies in the total sum of K368,141.64, the property of Bank South Pacific Limited thereby contravening section 383A(1) and (2) of the Criminal Code Act.”

9. In summary, it was alleged that the accused obtained the monies by false pretence at the time the loans were approved on the bank’s system, that she then laundered those monies through various bank accounts, and that she also misappropriated monies in the same amount laundered.
   
10. I accepted the accused’s provisional plea of guilty to each of the 16 counts contained on the indictment subject to reading the depositions. It is well established in this jurisdiction that it is the duty of the judge on a guilty plea to examine the depositions to check that there is evidence of the elements of the offence: Yalibakut v The State (2006) SC 890.
    
11. Having read the depositions I expressed the tentative view that the depositions were not consistent with the offences under s. 404(1)(a) of the Criminal Code being complete at the time the loans were approved or even when the loan monies were transferred to the accounts of the 14 loan recipients nominated by the accused; that this then raised an issue as to whether it had been established that the property was at that point “criminal property”, necessary to form the basis of the money laundering charge under Count 15 on the indictment. Furthermore, I also expressed the view that there was a potential issue with respect to s. 16 of the Criminal Code, which provides that a person shall not be punished twice for the same act or omission.
    
12. This is only the third time an accused has been prosecuted for money laundering in this jurisdiction. The charge was brought pursuant to s. 508B(1), which was inserted into the Criminal Code by the Criminal Code (Money Laundering and Terrorist Financing) Amendment Act, 2015.
    
13. In the circumstances the parties were given an opportunity to make submissions on the law and the State was asked to provide a schedule setting out in detail the transactions underpinning each of the alleged offences with page references in the depositions to facilitate the process. The provision of such schedules on arraignment would greatly facilitate the conduct of all matters like this one, involving multiple offences, numerous financial transactions and large amounts of money, regardless of whether or not the matter is intended to proceed by way of trial or guilty plea.
    

Obtaining by false pretence, contrary to s. 404(1)(a) of the Criminal Code

14. It was the State’s case on the alleged facts that the accused obtained monies by false pretence when the loans were approved. Section 404(1)(a) of the Criminal Code provides, for our purposes, that a person who by false pretence “obtains from any other person any chattel, money or valuable security” is guilty of a crime.
    
15. In addressing the queries raised by the Court the State focused its attention on the elements of false pretence and intent to defraud.
    
16. To be clear, the elements and facts admitted, supported by the depositions, establish that the loan applications were submitted on a false pretence in each case, and with intent to defraud. The indictment alleged that the false pretence was that the loan application in the name of the original (declined) applicant was genuine. That original loan application was in itself genuine. It was its use in support of an application in the name of another customer that was the false pretence. Nevertheless, the offence was sufficiently pleaded and there was no uncertainty given the matters alleged in the brief facts.
    
17. The question I initially raised concerned the remaining element of the offence, i.e. at what point did the accused “obtain” the monies, or in other words, when were the offences of obtaining by false pretence complete?
    
18. Section 404(1)(b) of the Criminal Code provides that a person who, for our purposes, by any wilful false pretence “induces any other person to deliver to any person any chattel, money or valuable security” is guilty of a crime.
    
19. The State could have proceeded against the accused with respect to 404(1)(b) of the Criminal Code. Those offences would have been complete at the time the loan monies were credited or “delivered”, on the inducement of the false applications, to the accounts of the persons in whose names the loan applications were made. However, that is not what the State alleged. It alleged that the accused obtained monies by false pretence pursuant to s. 404(1)(a) of the Criminal Code.
    
20. Obtaining by false pretence is an old and somewhat technical offence. The State must establish that the accused “obtained” the monies, meaning “getting the property in, or the right to dispose of the thing obtained, i.e. ownership and not merely possession of the property”: R v Lurie (1951) 35 Cr App R 113; R v Ball (1951) 35 Cr App R 24; R v Smith & Ors (1951) 34 Cr App R 168 and R v Stones (1968) 52 Cr App R 36. It is not necessary that an accused person should have physical possession of the property. There is some English authority that it is sufficient if the property is under his or her control: see R v Marston (1918) 13 Cr App R 203 at 204 although the details of that case are unavailable given its age.
    
21. The history and application of the equivalent offence contained in the Queensland Criminal Code, on which our provision is modelled, is considered in detail in R v Beck [1980] Qd R 123. In that case the Court also held that:
    

“... a man cannot be guilty unless he gets the property in or the right to dispose of the thing obtained and that therefore a prisoner cannot be guilty under that section and also of stealing the same thing.”.

22. In R v Lenehan [2009] QCA 187 the Queensland Court of Appeal upheld an appeal against conviction in which the appellant was the sole director, and sole shareholder of a company which obtained cattle and other goods under a contract negotiated by the appellant. The goods were delivered to the company’s yards and received by the appellant. Nevertheless, the Court of Appeal rejected the prosecution submission that the company and the appellant were effectively one and the same, and that the appellant “physically” took possession of the cattle, finding that it was the company rather than the appellant personally who obtained possession and title, stating that:
    

“None of the examples of “obtain” (“get, gain, receive or acquire”) suggest that it includes the delivery of property to someone other than the fraudster. The definition undoubtedly ensures an extensive reach for the concept of “obtaining” in s 408C(1)(b), but it does not touch the requirement, unequivocally flowing from the language of the section, that the person who obtains the property must be the person who is dishonest. In that respect paragraph (b) may be contrasted with paragraphs (c) and (d), which comprehend cases in which an individual who is dishonest is (in terms of (c)) not the recipient of property and (in terms of (d)) does not personally gain from his or her dishonesty.”

23. In making this finding the Court considered the provisions of the repealed s. 427 of the Code (considered in R v Beck (supra) and in identical terms to our s. 404) and said there was no basis for adopting a non-literal construction of the provision, particularly in circumstances in which other paragraphs of the section specifically covered such a situation. For the same reason this is the situation here when regard is had to s. 404(1)(b) of the Criminal Code.
    
24. The State submitted that the accused obtained the monies when they were approved on the bank’s system, and/or at the time the funds were credited into the accounts of the customer in whose name the loan applications were made by the accused.
    
25. The facts on the plea establish, and the depositions show in more detail, that once a loan was approved the bank’s Lending Support Team created a loan account in the name of the approved customer. It is clear that the accused did not obtain the funds in those loan accounts. Not even the approved customers had access to those accounts. They were simply ledger accounts. The State ultimately agreed.
    
26. The funds were then credited by the Lending Support Team to the approved loan customer’s account in each case. It is also my view that the accused did not “obtain” the monies at that time either.
    
27. It was not alleged on the facts for the purposes of arraignment that the accused had control over the personal accounts of the loan recipients. It is clear that she did not. They are not in her name. It has not been alleged that they are dummy accounts or that the accused is a signatory to the accounts. Some of them appear to belong to her relatives and others had been dormant for some considerable time before the loan monies were deposited. The accused may have chosen the accounts for those reasons but contrary to the State’s submission, that is not sufficient to establish that she had access to, control over, or the right to deal with, the monies in those accounts. This is further demonstrated by the fact that she needed to conduct manual withdrawals or transfers from the accounts, which had to be approved by the tellers, i.e. the “office entry” transfers referred to at paragraph 7 of the brief facts (set out at [8] above) required the accused to fill out debit and/or credit slips which were then physically taken by her to the tellers for action.
    
28. In this regard the statement of Melanie Goasa, Team Leader Telling, states that she authorised the transactions because she trusted the accused and so didn’t conduct the usual checks but has since realised that they were “all third party transactions and I was not supposed to sign them”. The statements from the 9 tellers who processed the transactions confirm the same.
    
29. Moreover, the false pretence must be the operative cause of the obtaining: R v Roebuck (1856) 25 LJMC 101. In this case the accused, whilst not “obtaining” the monies, was able to deal with them at the time she conducted the transfers. Those transactions, however, were not approved on the basis of a false pretence that any loan applications were genuine when they were not but, where it was considered by the tellers at all, that the accused was conducting transactions on behalf of her customers.
    
30. In the circumstances, I cannot accept the accused’s pleas of guilty to obtaining by false pretence set out in Counts 1 to 14 in the indictment as a matter of law.
    

Money laundering, contrary to s. 508B of the Criminal Code

31. Where a money laundering charge is contained on the same indictment as the underlying offence, then it will usually be clear from what criminal conduct the State alleges the property is derived, and if that underlying offence is established then “criminal property” will also be established to the requisite standard as part of the proceedings: see Bae (2019), 20 September 2019 at [17].
    
32. For the reasons stated above, the underlying offences charged on the indictment have not been made out as a matter of law.
    
33. The question that then arises is whether I can accept the accused’s guilty plea on Count 15 to money laundering despite the fact that I cannot accept her pleas to Counts 1 to 14.
    
34. Money laundering is a serious offence attracting a maximum penalty of 25 years of imprisonment. It was introduced into the Criminal Code in 2015 as part of a suite of legislation to strengthen the country’s anti-money laundering and counter terrorism financing regime: see the discussion in The State v Edward Bae (supra) at [30] to [33].
    
35. Section 508B(1) of the Criminal Code provides that a person who “deals with property that is criminal property and who knows or ought reasonably to know that the property is criminal property is guilty of an offence”.
    
36. “Deals with property” is defined in broad terms and includes one or more of: a) conceals; b) disguises; c) converts; d) transfers; e) removes from Papua New Guinea; f) brings into Papua New Guinea; g) receives; h) acquires; i) uses; j) possesses; k) consents to or enables any of the actions referred to in a) to j); and l) uses an electronic system or device to do any of a) to k): s. 508B (3) of the Criminal Code.
    
37. “Conceals or disguises property” includes concealing or disguising its nature, source, location, disposition, movement or ownership of any rights with respect to it: s. 508B(4) of the Criminal Code.
    
38. “Criminal property” is defined in s. 508A of the Criminal Code to mean (emphasis mine) “property that is, in whole or in part and whether directly or indirectly, derived from, obtained or used in connection with criminal conduct and includes any interest, dividends or other income on or value accruing from or generated by such property, regardless of who carried out the criminal conduct or who benefited from it”. “Property” for the purposes of the division includes assets of every kind, tangible or intangible, corporeal or incorporeal, moveable or immovable, however, acquired.
    
39. “Criminal conduct” is defined in the same section as conduct which (emphasis added):
    

“(a) constitutes an offence in Papua New Guinea for which the maximum penalty is death or a term of imprisonment for at least six months; or

(b) would constitute an offence in Papua New Guinea if it occurred in Papua New Papua New Guinea and for which the maximum penalty under the law of Papua New Guinea is death or a term of imprisonment for at least six months”.

40. Section 508F of the Criminal Code provides that (emphasis added):
    

“To avoid doubt, in order to prove that property is criminal property for the purposes of s. 508B –

(a) it is not necessary to establish –

1. who committed the criminal conduct in relation to the property; or
2. that there is a charge or a conviction relating to the criminal conduct”; and

(b) the prosecution –

1. does not need to prove the property was derived from particular criminal conduct, but must prove either the general type or types of criminal conduct from which the property derived; or
2. can rely on evidence that the circumstances in which the property is handled are such as to give rise to the inference that it can only be derived from conduct.”
   

41. As I said in Bae (supra) at [12] to [16] (emphasis added):
    

“12. In order to establish the offence of money laundering the State must prove that an accused dealt with “criminal property”. It is not necessary, however, for the purposes of s. 508B of the Criminal Code, for the State to establish who committed the criminal conduct in relation to the property; or, that there is a charge or a conviction relating to the criminal conduct: s. 508F(a)(i) and (ii), respectively. It follows from the definition of criminal property contained in s. 508A and the terms of s. 508F(a)(i) that it is possible for a person to launder criminal property generated from their own criminal conduct or that of another person.

13. Nor must the State prove that the property was derived from particular criminal conduct, but “must prove either the general type or types of criminal conduct from which the property was derived”, or “that the circumstances in which the property is handled are such as to give rise to the inference that it can only be derived from criminal conduct”: s. 508F(b)(i) and (ii) of the Criminal Code.

14. Nevertheless, it is my view, having regard to the above, that the State must establish for the purposes of s. 508B past or completed criminal conduct, such that, an offence has already been “constituted” or committed from which the property has been “derived”, whether or not the particular criminal conduct is proved: s. 508A read together with s. 508F of the Criminal Code. This is sometimes referred to in other jurisdictions as the “predicate” or “underlying” offence, the proceeds of which form the subject of the money laundering offence.

15. As I see it, the State may prove criminal property by one of three ways, that is a) by establishing the particular criminal conduct, or the particular underlying or predicate offence, from which the property is derived; b) by proving the “general type or types of criminal conduct from which the property derived”, for example by establishing from circumstantial evidence that the monies came from drug trafficking even if the particular offences of trafficking cannot be established; or c) by proving “that the circumstances in which the property is handled are such as to give rise to the inference that it can only be derived from criminal conduct”, for example because of the lengths the accused went to conceal the money or the complexity of the scheme through which money was moved: 508A and 508F of the Criminal Code.

16. I note here, that except for the financing of terrorist activity, Part VIA of the Criminal Code does not contain an offence of money laundering found in some other jurisdictions which prohibits dealing with money for the purposes of facilitating the commission of an offence envisaged or contemplated in the future. For example, see s. 400.3(1)(b)(ii) of the Crimes Act (Cth) (Australia).

42. It is also clear having regard to ss. 508F(a)(i)(ii) and 508F(b)(i)(ii) of the Criminal Code that it is quite permissible for the prosecution to proceed with a “stand alone” money laundering charge, that is, without charging a specific underlying or predicate offence: Bae (supra) at [18]. In effect, the legislation recognises that it may not always be possible for authorities to identify the particular offences, or the particular instances of criminal conduct, from which the proceeds have derived.
    
43. Whatever facts or circumstances the State rely upon, however, must establish that the property dealt with was criminal property, and that the accused knew or ought to have known that it was criminal property: Bae (supra) at [20]. Neither s. 508F(b)(i) or (ii) apply in this case. The State relies on particular facts which were admitted on the guilty plea.
    
44. The accused admitted on arraignment the elements of the money laundering offence, that is that she dealt with property, that was criminal property, and that she knew or ought reasonably to have known that the property was criminal property.
    
45. The facts admitted on the plea establish that the monies transferred by the accused were criminal property, having derived from completed criminal conduct, namely offences contrary to s. 404(1)(b) of the Criminal Code. The monies which were “dealt with”, or transferred by the accused from the personal accounts of the bank customers (loan recipients) were derived from loan applications submitted by the accused on a false pretence in each case that the loan application in the name of the applicant was genuine when it was not. The false pretence “induced” the bank to “deliver” the monies, in the form of credit, to the bank accounts of each of the customers in whose name the loan applications were made. Furthermore, the false pretence was made with the intent to defraud the bank, that is to induce the bank to do what it would not otherwise have done, if it had known the truth, and thereby act to its detriment: see Alexander Age v The State [1979] PNGLR 589 (which also concerned the delivery of loan monies to another person on the inducement of a false pretence). Given the accused’s role, the facts admitted also establish that she knew or ought reasonably to have known that the property was criminal property at the time that she dealt with it by transferring it from each of the accounts.
    
46. Each of the elements of the offence under s. 508B of the Criminal Code are also supported by the materials contained on the depositions. The amount alleged in the indictment, and on the brief facts, however, is incorrect. Whilst the total value of the loans approved and initially credited to the customers’ accounts by the Lending Support Team was K368,141.68, the depositions show that not all of those monies were subsequently dealt with by the accused. The amount dealt with was that which was transferred out of those accounts by the accused, which was, on my calculation, K300,933.71. This figure also corresponds with the figure obtained when the credit slips in the State’s schedule are added together.
    
47. Pursuant to s. 508E of the Criminal Code, it is permissible for a single charge of money laundering to be laid even though it may include more than one instance of the person engaged in conduct, whether that conduct occurs at the same time or at different times.
    
48. In summary, s. 508F(a)(ii) of the Criminal Code is in emphatic terms. It is not necessary for the State to establish that there is a charge or a conviction in relation to the criminal conduct. The plea to Count 15 by the accused was unequivocal, and the elements of the offence are made out by the facts admitted on arraignment, supported by the depositions. In the circumstances I see no reason not to accept the accused’s guilty plea to Count 15 on the indictment.
    

Misappropriation, contrary to s. 383A(1)(a)(2)(d) of the Criminal Code

49. Turning finally to Count 16, the State alleged that the accused misappropriated the total sum of K368,141.68. It is unclear on the alleged facts when precisely that is said to have occurred. The State’s submissions don’t address this point and the one line entry in the schedule is unhelpful.
    
50. I had assumed that the misappropriation occurred later, i.e. in very simple terms that after laundering the funds the accused then spent them but on closer inspection of the brief facts that is not necessarily the case, nor is it disclosed by the depositions.
    
51. Nevertheless, the accused’s plea, together with the facts alleged, supported by the depositions, establish that the accused manually transferred monies from the loan recipients’ accounts to other bank accounts, including to individual customer accounts and loan ledger accounts. At the time the monies belonged to the bank, in that it retained a legal and equitable interest in the monies for the purposes of s. 383A(3)(d) of the Criminal Code. The accused applied the monies to her own use, that is she diverted the monies from the purposes of the person to whom they belonged, that is the bank, which would not have permitted the transfers had it been aware of the circumstances in which the loans were approved: See Bae (supra) at [22] applying R v Easton [1993] QCA 255; [1994] 1 Qd R 531. And she did so dishonestly. It was dishonest according to the standards of ordinary reasonable people for her to apply monies to her own use which she was aware had been credited to the recipients’ accounts on the basis of false loan applications; and she was aware that it was dishonest according to those standards: see The State v Francis Laumadava [1994] PNGLR 291 applying Brian Kindi Lawi v The State [1987] PNGLR 183.
    
52. It is to be noted that the acts establishing the money laundering and the misappropriation counts, namely the transfers from the loan recipients’ accounts, are the same and thus the application of s. 16 of the Criminal Code will be a consideration on sentence.
    
53. In conclusion, on the basis upon which the State proceeded, I am unable to confirm the accused’s pleas of guilty to Counts 1 to 14 as a matter of law. I thus enter pleas of not guilty to each of those counts.
    
54. I accept and confirm the accused’s pleas of guilty to Counts 15 and 16.

____________________________________________________________
Public Prosecutor: Lawyer for the State
Public Solicitor: Lawyer for the Prisoner