Happy Lunar New Year from the USC US-China Institute!
U.S. Department of State, "Country Reports on Terrorism 2009," August 5, 2010
China continued its counterterrorism cooperation with the United States and other nations throughout the year. In September, the United States and China held bilateral counterterrorism talks in Washington, DC. In June, China and Singapore conducted joint counterterrorism exercises in Guilin. Then in July, China held a joint Sino-Russian counterterrorism exercise in Jilin Province. Finally, in November, representatives from the Shanghai Cooperation Organization attended an international counterterrorism conference in Kyrgyzstan. Additionally, the implementation of the Yangshan Deep Water Megaports project was resumed on July 2.
China’s anti-money laundering and counter-financing of terrorism (AML/CTF) system was significantly strengthened during 2009, although several key deficiencies have yet to be addressed. In July, at the U.S.-China Strategic and Economic Dialogue held in Washington, DC, the United States and China agreed to strengthen their cooperation on AML/CTF, including counterfeiting. In August, the Securities Association of China provided AML/CTF guidelines to securities firms in China, in an effort to cut off possible sources of funding to terrorists. In November, the Supreme People’s Court released a judicial interpretation that further expands application of the law to specific non-banking/financial institutions and more widely covers terrorist financing activities.
Terrorist financing is a criminal offense in China. However, the government has yet to develop an asset freezing and confiscation regime that meets international standards or that adequately implements UN Security Council Resolutions 1267 and 1373, according to the Financial Action Task Force (FATF). In addition, China’s cross-border declaration and disclosure system needs strengthening to better prevent terrorist financing activity. China’s Financial Intelligence Unit (FIU), housed within the People’s Bank of China, worked closely with the Financial Crimes Enforcement Network in the United States to develop its capabilities. In addition to its domestic collection and analysis activities, the FIU exchanged information with foreign FIUs.
China expanded its role in international efforts to combat terrorist finance and money laundering by becoming a full member of the FATF in June 2007. Since 2004, China has also been a member of the Eurasian Group (EAG), a FATF-style regional body that includes China, Russia, and most Central Asian countries. In December, China hosted the EAG’s bi-annual plenary, providing China an opportunity to enhance its leadership role in AML/CFT issues. Coordination in countering terrorist finance could be further enhanced through China’s membership in the Egmont Group, an umbrella body that coordinates the activities of over 100 FIUs worldwide. Though China has applied for membership in the Egmont Group, political concerns about Taiwan’s participation in the organization have hampered membership discussions.
The East Turkistan Islamic Party (ETIP), also known as the East Turkistan Islamic Movement (ETIM), was added to the UN Security Council al-Qa’ida and Taliban Sanctions Committee’s Consolidated List of individuals and entities associated with al-Qa’ida or the Taliban in 2002. In April 2009, the Sanctions Committee added ETIP leader Abdul Haq to the Consolidated List.
Human rights organizations have accused China of using counterterrorism as a pretext to suppress Uighurs, a predominantly Muslim ethnic group that makes up a large percentage of the population within the Xinjiang Uighur Autonomous Region of western China. After widespread rioting in urban areas of Xinjiang in July and September, police moved in and arrested more than 200 people according to official estimates, at least 26 of whom have been sentenced to death. The Chinese government claimed that the riots were orchestrated from abroad and therefore terrorist attacks on China.
Formally established in 2002, the FBI Legal Attaché’s Office in Beijing bolsters U.S.-China cooperation on counterterrorism investigations. In 2009, FBI Counterterrorism Division personnel participated in a round table discussion on terrorism issues with the China Institute of Contemporary International Relations. FBI personnel also provided a general overview to Ministry of Public Security Terrorism Department personnel on counterterrorism investigations.
Hong Kong’s position as a major transit point for cargo, international finance, and people, coupled with its open trade and financial regime, make it a potential site for money laundering and terrorist financing activities. Hong Kong is a close partner with the United States in the fight against terrorism. The Hong Kong government successfully participated in the Secure Freight Initiative pilot project through its conclusion on April 30. The Container Security Initiative in Hong Kong remained effective, and cooperation with Hong Kong customs officials received continued praise from visiting U.S. government delegations.
Hong Kong law enforcement agencies provided full support and cooperation to their overseas counterparts in tracing financial transactions suspected of links to terrorist activities, and participated in U.S. government-sponsored training on financial crimes and strategic commodity identification, among other topics.
In October, Hong Kong’s police, fire, health, and other government services held emergency response drills simulating chemical, biological, radiological, and nuclear attacks. During the Hong Kong-hosted East Asia Games in December, Hong Kong deployed its newly established police Counter Terrorist Readiness Unit (CTRU). In addition to providing a counterterrorist deterrent presence, the CTRU assisted police districts with counterterrorism strategy implementation and provided tactical and professional support to existing specialist units, such as the Special Duties Unit and its VIP Protection Unit.
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 (APG) on Money Laundering. Hong Kong is a member of the Egmont Group of Financial Intelligence Units, reporting through its Joint Financial Intelligence Unit operated by the Hong Kong Police and the Customs and Excise Department.
In response to recommendations stemming from the 2007 FATF and APG mutual evaluation of Hong Kong, authorities are drafting legislation to increase supervision of money changers and remittance agents; create statutory requirements for customer due diligence and record-keeping in the banking, securities, and insurance sectors; and establish civil penalties for these infractions. Legislation to establish government oversight for non-financial professions and to create a cross-border currency reporting mechanism is needed to address additional FATF recommendations.
Macau’s position as a major international gambling center makes it a potential site for money laundering and terrorist financing activities. Macau’s financial regulatory authorities directed banks and other financial institutions to search continuously for terrorist financing networks and accounts using lists of individuals and entities designated by the United States under relevant authorities, as well as the UN 1267 Sanctions Committee’s consolidated list of individuals and entities associated with al-Qa’ida, the Taliban, and Usama bin Ladin.
Macau is a member of the Asia/Pacific Group (APG) on Money Laundering. In response to recommendations of the APG evaluation, Macau authorities have taken steps to improve compliance with suspicious transactions reporting requirements in banks, casinos, and professional associations, but the threshold reporting limits remain well above international norms. Macau does not have reporting requirements for cross-border currency movements.
In May, Macau joined the Egmont Group of Financial Intelligence Units through its Financial Intelligence Office (FIO), an independent government unit under Macau’s Secretary for Economy and Finance. The FIO played an essential role in Macau’s Anti-Money Laundering (AML) regime by collecting and analyzing suspicious transactions, providing AML assistance to local authorities, raising the public’s AML awareness, and sharing information with overseas counterparts.
In September, the Macau Monetary Authority (AMCM) strengthened its AML guidelines for financial institutions, money changers, and remittance agents by mandating enhanced customer due diligence measures and the compulsory employment of AMCM-approved AML compliance officers.
Macau cooperated internationally in counterterrorism efforts through INTERPOL and other security-focused organizations within the Asia Pacific Region. Macau’s law enforcement and customs agencies participated in U.S. government-sponsored training in bulk cash smuggling detection, weapons of mass destruction proliferation awareness workshops, and complex financial investigation techniques.
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