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U.S. Department of State, "Country Reports on Terrorism 2006," April 30, 2007
As Beijing prepares to host the 2008 Olympics, China increasingly reached out to the United States and other nations on counterterrorism cooperation. No acts of terrorism were committed in China this year, but Chinese citizens were victims of terrorist acts in Afghanistan, Iraq, Lebanon, and Pakistan.
China participated in the United States Megaports Initiative designed to improve security for United States-bound cargo. The U.S. Department of Energy and its Chinese counterparts made progress toward implementation of the November 2005 agreement allowing the installation of equipment at China's ports to detect hidden shipments of nuclear and other radioactive materials. China became an initial partner nation in the U.S. Global Initiative to Combat Nuclear Terrorism, attending the first meeting of the Global Initiative in Rabat, Morocco in October. China also continued its participation in the Container Security Initiative.
Chinese officials signed statements with counterterrorism counterparts in the Association of Southeast Asian Nations (ASEAN) Regional Forum (ARF), Asia Pacific Economic Cooperation (APEC), and the Shanghai Cooperation Organization (SCO). In April, China co-hosted the Fourth ARF Meeting on Counterterrorism and Transnational Crime in Beijing. China is a founding member of the SCO and has made counterterrorism one of the group's main objectives. In June, China hosted an SCO summit in Shanghai that included India, Iran, Pakistan, and Mongolia as observers. At the summit, the member states agreed to hold joint counterterrorism military exercises in Russia in 2007, with troops from all six SCO member states participating. In August, China and Kazakhstan held their first-ever joint counterterrorism exercises in Kazakhstan. In August, China signed agreements with Pakistan on border control, terrorism, and crime and, in December, held joint counterterrorism exercises in Pakistan.
China ratified the UN International Convention for the Suppression of the Financing of Terrorism in February and worked to expand its international cooperation on terrorist finance through mutual legal assistance agreements with foreign jurisdictions. In October, China passed a new Anti-Money Laundering Law, which took effect January 1, 2007, broadening the scope of existing anti-money laundering regulations to hold a greater range of financial institutions liable and to expand the powers of the People's Bank of China (PBOC). With the PBOC as the lead agency for all anti-money laundering activities in China, the Ministry of Public Security (MPS) is responsible for criminal investigations, and the State Administration of Foreign Exchange (SAFE) is the primary agency for countering illicit foreign exchange transactions.
Institutional obstacles and rivalries between domestic financial and law enforcement authorities hampered Chinese anti-money laundering work and other financial law enforcement aimed at countering terrorists. Still, China's Financial Intelligence Unit (FIU), established in 2004 to track suspicious transactions, worked closely with the Financial Crimes Enforcement Network (FINCEN) in the United States to develop its capabilities. China began requiring banks and financial institutions to establish anti-money laundering systems, record customer identities, and report suspicious transactions. In January, China launched a national credit information system to more efficiently monitor transactions, information collection, and dissemination. Nonetheless, anti-money laundering efforts were hampered by the prevalence of counterfeit identity documents and cash transactions conducted by underground banks, which, in some regions, reportedly accounted for over one-third of lending activities.
China refused to recognize the Egmont Group, an umbrella body coordinating the activities of over 100 FIUs worldwide, because the Group includes an FIU from Taiwan. Joining the Financial Action Task Force (FATF) remained an important priority for China. In 2004, China joined the Eurasia FATF-style regional group, and, in 2005, China was granted FATF observer status. In November 2006, an FATF Mutual Evaluation Team comprehensively reviewed China's anti-money laundering and counterterrorism finance regime. The results of the review and China's bid to join FATF will be discussed at the June 2007 FATF Plenary Meeting.
Human rights organizations have accused China of using counterterrorism as a pretext to continue efforts to suppress Uighurs, a predominantly Muslim ethnic group that comprises the majority of the population of the Xinjiang Uighur Autonomous Region. In August, Chinese police officials announced that since 1990 they have seized 41 tons of explosives from separatists in Xinjiang, including grenades and materials to make bombs. Also in August, China convicted a Canadian citizen of Uighur ethnicity of involvement in East Turkistan terrorist activities. In November, China gave Canada assurances that he would not be executed for his alleged crimes; he remains in prison.
In May, the United States released five ethnic Uighur Chinese national detainees found not to be Enemy Combatants from Guantanamo (GTMO) to Albania. The Chinese government denounced the move as a violation of international law and demanded the return of the men to China. Some of the remaining Uighur detainees at GTMO were designated for transfer or release and others will have their status reviewed annually.
Formally established in 2004, the FBI Legal Attach� Office in Beijing bolstered U.S.-China cooperation on counterterrorism investigations. China provided substantive intelligence in some counterterrorism cases, but more work remained to be done in terms of its overall responsiveness to U.S. requests. In July, the first meeting between a standing Chinese Minister of Public Security and the Director of the FBI was held in Washington, D.C., where FBI Director Robert Mueller hosted Minister Zhou Yongkang, principally to discuss terrorism matters.
Following Secretary of Homeland Security Michael Chertoff's visit to Beijing in April, the United States and China signed a Memorandum of Understanding (MOU) to allow United States Federal Air Marshals (FAMS) to fly to China and Chinese air marshals to fly into the United States. In addition, the MOU provided for training and information exchanges. The first FAMS mission was completed in August, and the Chinese air marshals completed training at the FAMS Training Facility in September.
In February, the United States Coast Guard Liaison Office was established in Beijing as a focal point for United States-China exchanges to enhance the safety and security of ports around the world in compliance with the Maritime Transportation Safety Act. Activities included a visit by the U.S. Coast Guard Commandant, three expert-level delegations to conduct training and exchanges, two port visits in China by U.S. Coast Guard cutters, and one international exercise.
Although not publicly attributing any particular incident to terrorism, Chinese authorities asserted that terrorists, primarily based in Xinjiang, continued to operate clandestinely on Chinese territory. The Chinese government attempted to restrict foreign support for perceived terrorism and increased the number of deployed security personnel in response to perceived terrorist activities in Xinjiang. The United States has sanctioned Chinese entities for missile and chemical weapons proliferation activities, including transfers to Iran, North Korea, and Libya.
Hong Kong's role as a major transit point for cargo, finances, and people makes it an important counterterrorism partner, and the Hong Kong Special Administrative Region Government (HKSARG) continued to cooperate with the United States on counterterrorism efforts.
The high level of cooperation and the successful implementation of the Container Security Initiative (CSI) by Hong Kong Customs officials received continued praise from visiting U.S. government delegations, which described it as a model for CSI implementation. The U.S. government continued to work with one of Hong Kong's port terminal operators to develop and refine integrated container security architecture.
Hong Kong law enforcement agencies provided full support and cooperation to their overseas counterparts in tracing financial transactions suspected of being linked to terrorist activities. Hong Kong actively participated in various anti-money laundering and counterterrorist financing initiatives, including the Financial Action Task Force (FATF) and the Asia/Pacific Group on Money Laundering. Hong Kong's Joint Financial Intelligence Unit (JFIU), operated by Hong Kong Police and the Customs and Excises Department, is a member of the Egmont Group.
The UN International Convention for the Suppression of Financing Terrorism became applicable to Hong Kong when ratified by the People's Republic of China on April 19. The Hong Kong regional government published the list of individuals and entities designated as terrorists or terrorist associates under UNSCR 1267 and the financial regulators circulated the lists to financial institutions, advising them to check the lists and report any suspicious transactions to law enforcement agencies.
The Hong Kong Monetary Authority recently coordinated the establishment of an Industry Working Group on Anti-Money Laundering that included representatives from some 20 authorized institutions. The group established three sub-groups to address terrorist financing, transaction monitoring systems, and private banking issues.
The Macau Special Administrative Region Government (MSARG) passed both anti-money laundering and counterterrorism finance legislation. Still, Macau's lack of judicial and law enforcement experience in combating financial crimes, combined with its expanding casino industry and history as a base for organized crime, provided a potential site for money laundering and terrorist financing activities.
On March 23, the Macau government passed new counterterrorism legislation aimed at strengthening counterterrorist financing measures. The law made it illegal to conceal or handle finances on behalf of terrorist organizations. Individuals were liable even if they were not members of designated terrorist organizations themselves. The legislation also allowed, in certain cases, prosecution of persons who committed terrorist acts outside of Macau and mandated stiffer penalties. On the same day, the government also passed a money laundering bill that strengthened its oversight of financial institutions. The new law imposed requirements for the mandatory identification and registration of financial institution shareholders, customer identification, and external audits that includes reviews of compliance with anti-money laundering statutes.
The Macau government has the authority to freeze terrorist assets, although a judicial order is required. Macau financial authorities directed the institutions they supervise to conduct searches for terrorist assets using the UN 1267 Sanctions Committee consolidated list and the list of Specially Designated Global Terrorists designated by the United States pursuant to E.O. 13224. Bank examiners reviewed customer profiles, large cash transaction records, and suspicious bank reports. They also interviewed frontline staff, senior management and money laundering compliance officers.
The Government of Macau continued to exchange information with the Hong Kong Special Administrative Region and counterparts in mainland China. Additionally, Macau continued to cooperate internationally in counterterrorism efforts, through INTERPOL and other security-focused organizations within the Asia Pacific Region.
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