Source: 2003
Released by the Bureau for International Narcotics and Law Enforcement Affairs
The People's Republic of China (PRC) remains a major drug-transit country. In addition to its continuing domestic heroin problem, China has seen a surge in the consumption of synthetic drugs, particularly Ecstasy (MDMA) and crystal methamphetamine, known locally as "ice." PRC authorities clearly understand the threat posed by drug trafficking within the PRC and in the region, and they continue vigorous law-enforcement activities to stem the production, abuse, and trafficking of narcotics within the PRC, as well as efforts to integrate the PRC into regional and global counternarcotics initiatives. The PRC is a party to the 1988 UN Drug Convention.
Cooperation with United States counternarcotics officials has strengthened over the past year. A joint U.S.-PRC investigation culminated in May 2003 with the breakup of a major heroin trafficking operation in Fujian Province. In 2003, the Chinese government also continued to provide U.S. counternarcotics officials with samples of drugs seized, including drugs destined for the United States.
China is situated adjacent to the major narcotics producing areas in Asia, the "Golden Triangle" and the "Golden Crescent." While the availability of illicit narcotics produced in the "Golden Triangle" has been a long-standing problem, Chinese officials report that the amount of illicit drugs from the "Golden Crescent" trafficked into western China, particularly Xinjiang Province, is steadily growing. According to the Chinese Government, drug abuse in China continues to rise. As of June 2003, China had one million registered drug addicts, an 11 percent increase from 2001, the majority of which are heroin users. Youths made up 74 percent of the registered drug addicts. Illegal drug use was recorded in 2,148 cities, counties, and districts across China.
As China's economy has expanded in recent years, many Chinese youths have found themselves with increased levels of discretionary income. As a result, China's major metropolitan areas have begun to develop a "rave" culture similar to several Western countries, and young Chinese are increasingly using recreational drugs, such as Ecstasy and amphetamine-type stimulants (ATS), at local nightclubs. Chinese authorities have attempted to combat this trend by placing increased scrutiny on entertainment venues, but results have been limited.
With a large and developed chemical industry, China is a major producer of precursor chemicals, including acetic anhydride, potassium permanganate, piperonylmethylketone (PMK), and ephedrine. China monitors all 22 of the chemicals on the 1988 UN Drug Convention watch list, and, according to statistics released in June 2003, Chinese authorities seized over 300 tons of precursor chemicals diverted into illegal markets. China continues to be a strong partner of the United States and other concerned countries in implementing a system of pre-export notification of dual-use precursor chemicals. Despite these efforts, China is an important source of precursor chemicals, especially ephedrine, used in heroin and ATS production in the region.
Policy Initiatives. In June 2000, the PRC issued a "White Paper" on drugs, which set out China's strategy for combating drug use and trafficking and addresses all the major goals of the UN Convention. It emphasizes education, rehabilitation, eradication, precursor chemical control, and interdiction. In 2003, the PRC continued to follow this strategy. The national budget for counternarcotics efforts has steadily increased. Whereas the MPS's National Narcotics Control Commission (NNCC), China's counternarcotics coordinating body, had an annual budget of less than $1 million in the mid-1990's, by 1998 this amount had increased to approximately $4.5 million and to about $17.5 million in 2003. The total national counternarcotics budget, however, is significantly higher, since each province establishes and administers its own counternarcotics budget.
Accomplishments. The May 2003 dismantlement of a major heroin trafficking ring in Fujian Province is illustrative of strengthened bilateral cooperation with U.S. law enforcement agencies (see below under law enforcement cooperation). China also continued to cooperate with regional and international partners to stem drug trafficking. China has eradicated opium poppy cultivation, and PRC authorities continue efforts to destroy illicit ATS laboratories within China's borders.
Law Enforcement Efforts. The Chinese Government has continued its aggressive counternarcotics campaign. The relationship between China's Beijing-based counternarcotics efforts and those at the provincial level has grown substantially with increased training and exchange programs. In June 2003, the Guangdong Public Security Bureau arrested ten suspects involved in a large-scale methamphetamine distribution organization and reportedly seized four tons of methamphetamine.
In order to increase its effectiveness in law enforcement, the NNCC reorganized its enforcement operations, establishing separate heroin and ATS enforcement groups at both the ministerial and provincial level. Prior to 2003, enforcement was handled by one organization and focused primarily on heroin. The reorganization enables the NNCC to specifically address ATS enforcement. The NNCC is also conducting a program in which officers from different parts of the PRC are seconded to major counternarcotics offices in China. This experience allows officers to deal more quickly and effectively with fast-breaking developments in drug investigations involving their home jurisdictions.
In 2003, PRC authorities advanced and strengthened cooperation with U.S. law enforcement entities. As an example, MPS and the U.S. Drug Enforcement Administration (DEA) conducted a joint investigation that resulted in May 2003 in the dismantling of a major heroin ring in Fujian Province that was involved in smuggling drugs to the United States. This case, known as the "125 case," involved unprecedented cooperation between MPS and DEA. MPS also continues to provide strategic and operational information to its DEA counterparts to actively target drug trafficking rings. In addition, the MPS routinely facilitates travel of U.S. law enforcement personnel based at the U.S. Embassy in Beijing.
The Chinese government has also conducted drug operations with neighboring countries. In April 2003, cooperation with Burma led to closure of a drug processing plant in Burma. The joint operation netted 466 kilograms of drugs and resulted in the confiscation of weapons, ammunition, and the materials for preparing and processing drugs, as well as the apprehension of 37 trafficking suspects.
The MPS reported that China uncovered 93,990 drug-related cases, seizing 9,535 kilograms of heroin, 905 kilograms of opium and 5,827 kilograms of crystal methamphetamine or "ice". Police arrested 63,000 suspects in connection with these drug offenses, and also seized 225,000 Ecstasy tablets, through June 2003.
Corruption. Official corruption in China is a serious problem. Anti-corruption campaigns have led to arrests of many lower-level government personnel and some more senior- level officials. Most corruption cases in the PRC, however, involve abuse of power, embezzlement, and misappropriation of funds. While narcotics-related official corruption exists in China, it is seldom reported in the press. MPS takes allegations of drug-related corruption seriously and, if warranted, will launch investigations. Most drug-related cases appear to involve lower-level district and county officials. There is no evidence indicating senior-level or central government officials are involved in or supportive of drug trafficking. Nevertheless, the quantity of drugs trafficked within the PRC raise suspicions that official corruption is a factor in trafficking in certain provinces bordering drug producing regions, such as Yunnan, and in Guangdong and Fujian, where narcotics trafficking and other forms of transnational crimes are prevalent. Official corruption can not be discounted among the factors enabling organized criminal networks to operate in certain regions of China, despite the best efforts of authorities at the central government level. As a matter of government policy or practice, China does not encourage or facilitate the laundering of proceeds from official drug transactions, nor have any senior PRC officials been known to engage in laundering the proceeds from illegal drug transactions. Narcotics-related corruption does not appear to have had an adverse impact on law enforcement investigations or prosecutions.
Agreements and Treaties. China actively cooperates with a number of countries to combat illicit drug production and trafficking. In 2000, China and the United States signed a Mutual Legal Assistance Agreement (MLAA), which entered into force March 8, 2001. China is a party to the 1988 UN Drug Convention, as well as to the 1961 UN Single Convention and its 1972 Protocol, and the 1971 Convention on Psychotropic Substances. In January 2003, China and the United States reached agreement on the Customs Mutual Assistance Agreement (CMAA). As of September 2003, China has signed over 30 mutual legal assistance agreements with 24 countries. China has signed, but has not yet ratified, the UN Convention Against Transnational Organized Crime.
Cultivation/Production. The PRC has effectively eradicated cultivation of drug-related crops within China. The government continues to target small-scale opium poppy cultivation in remote areas of the country's northwest regions. The PRC is, however, an important source for natural ephedra, which is used in the production of methamphetamine, as well as one of the world's largest producers of synthetic ephedra. ATS is produced in China, and the government has made locating and closing illicit drug laboratories a top priority. In Guangdong and Fujian provinces, MPS seized eleven laboratories during the course of 2002.
Drug Flow/Transit. China continues to be used as a transit route for drugs produced in the "Golden Triangle" and distributed to the international market. Drug trafficking within and through Yunnan and Guangdong provinces has been especially pervasive. While China's southern and southwestern provinces constitute the PRC's major drug transit areas, Chinese authorities report that western China is experiencing significant problems as well. Drugs such as heroin, methamphetamine, and ketamine (a pain reliever for animals) are being smuggled into Xinjiang Province and then distributed throughout China.
Domestic Programs (Demand Reduction). According to the MPS, China had 1.053 million illegal drug users registered by law enforcement departments including 220,000 involved in compulsory rehabilitation. A total of 60,000 drug abusers were sent to reform-through-labor facilities for narcotics rehabilitation last year. Education and rehabilitation play a significant role in China's counternarcotics efforts. The majority of registered drug abusers are addicted to heroin. The Ministry of Education (MOE) has expanded drug education and prevention programs, its goal being to prevent children from ages 12 to 18 from getting involved in drugs. The MOE also uses public service announcements to discourage drug abuse. Chinese officials distributed over 1.16 million drug education posters and 580,000 leaflets in 2002, reaching out to an estimated 300 million people. Reflecting the seriousness of the Chinese government's commitment to drug prevention, in November 2003, a song praising opium sung by a major pop star was forced off the singer's latest album. China's counternarcotics community worked with the Ministry of Health (MOH) to warn of the health risks attributed both to drug use and to the impact drug abuse has on a person's health, for example, intensifying SARS (Severe Acute Respiratory Syndrome). China has also focused new attention on controlling the spread of HIV/AIDS. The MPS also stepped up publicity campaigns targeting young people in its fight against banned narcotics, and created more drug-free residence communities and villages for reforming addicts.
Counternarcotics cooperation between China and the United States is making excellent progress and is yielding significant results, including several successful joint operations against drug-smuggling rings. Chinese authorities also share drug samples with U.S. colleagues when cases have a link with the U.S.
The Road Ahead. The most significant problem in bilateral counternarcotics cooperation remains the lack of progress toward concluding a bilateral Letter of Agreement (LOA) enabling the U.S. to extend counternarcotics assistance. Reaching agreement on the LOA is a major U.S. goal, one that, if successful, will greatly enhance counternarcotics cooperation between the two countries. While China has on occasion provided DEA with samples of drugs seized in the PRC intended for U.S. markets, the U.S. would welcome routinely receiving samples of all drugs seized by Chinese authorities. Despite these issues, bilateral cooperation remains on track and should steadily improve over the coming years.
With a large and developed chemical industry, China is major producer of chemicals required for illicit drug manufacturer. It is a major producer of acetic anhydride, potassium permanganate, ephedrine, and pseudoephedrine, all chemicals on table 1 of the 1988 UN Drug Convention. The country is a party to the 1988 UN Drug Convention and has regulations for record keeping and import/export controls on the 23 chemicals included in it. Several provinces, including Yunnan (which shares a border with Burma), have more stringent controls than called for in the convention.
The Chinese Public Security Bureau maintains a small chemical control unit in Beijing to investigate chemical diversion and to verify the legitimacy of chemical handlers and transactions. In the provinces, provincial police only address controlled chemicals when they are discovered at a clandestine laboratory. China also requests "letters of no objection" from importing countries prior to authorizing exports of methamphetamine precursor chemicals.
Despite the adequate legislation, China remains a significant source country for chemicals diverted worldwide for the illicit production of cocaine, heroin, methamphetamine, and ecstasy. The country lacks the infrastructure to monitor adequately its large chemical production capacity and its international trade in chemicals.
In 2003, Chinese authorities claim to have made significant progress in controlling precursor chemicals. The Executive Director of the National Narcotics Control Commission has emphasized the need to prevent the supply of chemicals to the drug producing countries of the "Golden Triangle." In 2002, the latest year for which figures are available, 28 illicit shipments involving 2288 tons of chemicals were stopped.
U.S. and Chinese cooperation in chemical control is good, within the limits of Chinese capabilities. China is a participant in Operations Purple and Topaz, and Project Prism. Information is exchanged through these operations in the course of normal counternarcotics cooperation. DEA has Diversion Investigators assigned to its Beijing and Hong Kong offices.
Money laundering remains a major concern as the People's Republic of China (PRC) restructures its economy. Most money laundering cases now under investigation involve funds obtained from corruption and bribery. Narcotics trafficking, smuggling, alien smuggling, counterfeiting, and fraud and other financial crimes remain major sources of laundered funds. Proceeds of tax evasion, recycled through offshore companies, return to the PRC disguised as foreign investment, and as such, receive tax benefits. Hong Kong-registered companies figure prominently in schemes to transfer corruption proceeds and in tax evasion recycling schemes.
After having studied how to strengthen the PRC's anti-money laundering regime over the past few years, the People's Bank of China (PBOC) and the State Administration of Foreign Exchange (SAFE) have promulgated a series of anti-money laundering regulatory measures for financial institutions. These include: Regulations on Real Name System for Individual Savings Accounts, Rules on Bank Account Management, Rules on Management of Foreign Exchange Accounts, Circular on Management of Large Cash Payments, and Rules on Registration and Recording of Large Cash Payments.
New measures came into effect in 2003 that further strengthened China's anti-money laundering efforts. In March, a new PBOC regulation entitled Regulations on Anti-money Laundering for Financial Institutions
took effect, strengthening the regulatory framework under which Chinese banks and financial institutions must treat potentially illicit financial activity. The regulation effectively requires Chinese financial institutions to take responsibility for suspicious transactions, instructing them to create their own anti-money laundering mechanisms. Banks are required to report suspicious or large foreign exchange transactions, of more than $10,000 per person in a single transaction or cumulatively per day in cash, or noncash foreign exchange transactions of $100,000 per individual or $500,000 per entity either in a single transaction or cumulatively per day. Banks are also required to report suspicious or large renminbi transactions and to refuse services to suspicious clients. Under the regulation, banks are further required to submit monthly reports to the PBOC outlining suspicious activity and to retain transaction records for five years. Banks which fail to report on time can be fined up to the equivalent of $3,600.
These measures complement the PRC's 1997 Criminal Code, which criminalizes money laundering under Article 191 for three predicate offenses -- narcotics trafficking, organized crime, and smuggling. Additionally, Article 312 criminalizes complicity in concealing the proceeds of criminal activity, and Article 174 criminalizes the establishment of an unauthorized financial institution.
In 2003, the Chinese Government established a new banking regulator, the China Banking Regulatory Commission (CBRC), which assumed substantial authority over the regulation of the banking system. The CBRC has been authorized to supervise and regulate banks, assets management companies, trust and investment companies, and other deposit-taking institutions, with the aim of ensuring the soundness of the banking industry. One of its regulatory objectives is to combat financial crimes. Primary authority for anti-money laundering efforts remained with the PBOC, the country's Central Bank, along with the Ministry of Public Security in terms of enforcement.
For its part, the PBOC established two departments in June 2003 to monitor suspicious transactions and to facilitate coordination among the various Chinese Government agencies involved in the anti-money laundering fight. This reform built on moves made in 2002, when the PBOC set up an anti-money laundering team tasked with developing the legal and regulatory framework for countering money laundering in the banking sector. The team is chaired by the Vice Governor of the PBOC and composed of representatives of the PBOC's 15 functional departments. It also set up an office in the PBOC's Payment System and Technology Development Department to design a system for monitoring the movement of suspicious transactions through PBOC-licensed financial entities. In September 2002, SAFE adopted a new system to supervise foreign exchange accounts more efficiently. The new system will allow for immediate electronic supervision of transactions, collection of statistical data, and reporting and analysis of transactions. The PRC has decided to establish or designate a financial intelligence unit (FIU) to enhance its anti-money laundering regime.
In spite of these efforts, institutional obstacles and rivalries between financial and law-enforcement authorities continue to hamper Chinese anti-money laundering work and other financial law enforcement. Continuing efforts by some Chinese officials to strengthen the relatively weak legal framework under which money laundering offenses are currently prosecuted in the Chinese criminal code have yet to bear fruit. Also, anti-money laundering efforts are hampered by the prevalence of counterfeit identity documents and cash transactions conducted by underground banks. Another structural impediment is the absence of a nationwide automated network to monitor banking transactions through the PBOC. Many inter-banking transactions from one region to another are conducted manually, which delays the PBOC's ability to prevent money laundering. As a result, weaknesses in the Chinese banking and criminal regulatory structure continue to be exploited by both domestic and foreign criminal enterprises.
The PRC supports international efforts to counter the financing of terrorism. Terrorist financing is now a criminal offense in the PRC and the government has the authority to identify, freeze, and seize terrorist financial assets. Subsequent to the September 11, 2001 terrorist attacks in the United States, the PRC authorities began to actively participate in United States' and international efforts to identify, track, and intercept terrorist finances, specifically through implementation of United Nations Security Council antiterrorist financing resolutions.
China's concerns with terrorist financing are generally regional, focused mainly on the western province of Xinjiang, which has a large number of Muslims. Chinese law enforcement authorities have noted that China's cash-based economy, combined with its robust cross-border trade, has led to many difficult-to-track large cash transactions. There is concern that groups may be exploiting such cash transactions in an attempt to bypass China's financial enforcement agencies. While China is proficient in tracing formal foreign currency transactions, the large size of the informal economy makes monitoring of China's cash-based economy very difficult. There were examples in 2003 of Chinese law enforcement's ability to link transactions within the state-run banking sector to suspected terrorist entities, but there has been no such example with regard to cash transactions. Senior representatives of the U.S. Government visited China in February 2003 in an effort to improve bilateral ties between the U.S. and China on the issue of terrorist financing
The PRC signed the UN International Convention for the Suppression of the Financing of Terrorism on November 13, 2001, but had not ratified it as of December 2003. The United States, PRC, Afghanistan, and Kyrgyzstan jointly referred the Eastern Turkistan Islamic Movement, an al-Qaida linked terrorist organization that carries out activities in the PRC and Central Asia, to the UN 1267 Sanctions Committee for inclusion on its consolidated list. In December 2003, China unilaterally decided to list on its own several individuals and East Turkistan groups as terrorists, and requested that domestic and foreign financial entities freeze their financial assets.
The PRC has signed mutual legal assistance treaties with 24 countries. The United States and the PRC signed a mutual legal assistance agreement (MLAA) in June 2000, the first major bilateral law enforcement agreement between the countries. The MLAA entered into force in March 2001 and can provide a basis for exchanging records in connection with narcotics and other criminal investigations and proceedings. The FBI-staffed legal attache's office opened at the U.S. Embassy in Beijing in October 2002. The PRC is a party to the 1988 UN Drug Convention, and in 2003 ratified the UN Convention against Transnational Organized Crime.
The United States and the PRC cooperate and discuss money laundering and other enforcement issues under the auspices of the U.S.-PRC Joint Liaison Group's (JLG) subgroup on law enforcement cooperation. The JLG meetings are held periodically in either Washington, D.C., or Beijing. In addition, The United States and the PRC have established a Working Group on Counter-Terrorism that meets on a regular basis. The PRC has established similar working groups with other countries as well.
As of December 2003, China had not joined the Financial Action Task Force (FATF), due to continuing concerns Beijing had over Taiwanese membership in the Asia Pacific Group (APG). Membership in a regional group is a precondition for membership in FATF.
The PRC should continue to build upon the substantive actions taken in recent years to develop a viable anti-money laundering regime consonant with international standards. Important steps include expanding its list of predicate crimes to include all serious crimes, continuing to develop a regulatory and law enforcement environment designed to prevent and deter money laundering, and establishing an FIU capable of sharing information with foreign law enforcement and regulatory agencies. The PRC should also become a party to the UN International Convention for the Suppression of the Financing of Terrorism.
Under the one country-two systems principle that underlies Macau's 1999 reversion to the People's Republic of China, Macau has substantial autonomy in all areas except defense and foreign affairs. Macau's free port, lack of foreign exchange controls, and significant gambling industry create an environment that can be exploited for money laundering purposes. In addition, Macau is a gateway to China, and can be used as a transit point to remit funds and criminal proceeds to and from China. Macau has a small economy and is not a financial center. Its offshore financial sector is not fully developed.
The IMF conducted a financial sector assessment of Macau, and the results published in August 2002 stated that Macau was "materially noncompliant" with the money laundering principles of the Basel Committee's "Core Principles for Effective Banking Supervision." The assessment concluded that an anti-money laundering legal framework was in place in Macau, but recommended improvements in implementation and enforcement.
Since the IMF's assessment, Macau has taken several steps to try to improve its institutional capacity to tackle money laundering. These will be helpful if they lead to greater legal enforcement. In October 2002, the Judiciary Police set up the Fraud Investigation Section. One of its key functions is to receive all suspicious transaction reports (STRs) in Macau and undertake subsequent investigations. In 2003, the Macau Special Administrative Region Government (MSARG) also prepared an administrative regulation establishing a financial intelligence unit. The FIU will be set up pending passage of the legislation. An interagency body consisting of representatives from the Monetary Authority of Macau, Macau Customs Service, Judicial Police, and other economic and law-enforcement agencies has been working on issues related to the FIU since 2002, according to Macau officials. The government also drafted new money laundering and terrorist financing bills which, if passed and enforced, would strengthen its efforts.
Macau's financial system is governed by the 1993 Financial System Act and amendments, which lay out regulations to prevent use of the banking system for money laundering. It imposes requirements for the mandatory identification and registration of financial institution shareholders, customer identification, and external audits that include reviews of compliance with anti-money laundering statutes. The 1997 Law on Organized Crime criminalizes money laundering for the proceeds of all domestic and foreign criminal activities, and contains provisions for the freezing of suspect assets and instrumentalities of crime. Legal entities may be civilly liable for money laundering offenses, and their employees may be criminally liable.
The 1998 Ordinance on Money Laundering sets forth requirements for reporting suspicious transactions to the Judiciary Police and other appropriate supervisory authorities. These reporting requirements apply to all legal entities supervised by the regulatory agencies of the MSARG, including pawnbrokers, antique dealers, art dealers, jewelers, and real estate agents. There is no significant difference in the regulation and supervision of onshore versus offshore financial activities.
The gaming sector and related tourism are critical parts of Macau's economy. Taxes from gaming comprised 63 percent of government revenue in 2002, while tourism and gaming combined accounted for 40 percent of GDP in 2001. The MSARG ended a long-standing gaming monopoly early in 2002 when it awarded concessions to two additional operators. These two firms have yet to begin gaming operations. Under the old monopoly framework, organized crime groups were, and continue to be, associated with the gaming industry through their control of VIP gaming rooms, and activities such as racketeering, loan sharking, and prostitution. The VIP rooms cater to clients seeking anonymity within Macau's gambling establishments and are particularly removed from official scrutiny. As a result, the gaming industry, in particular, provides an avenue for the laundering of illicit funds.
The Macau Inspectorate of Gaming has not played an active role in preventing money laundering in the casinos. The casinos have not filed any suspicious transaction reports. The MSARG is drafting regulations designed to prevent money laundering in the gambling industry as part of the restructuring of that sector. The legislation aims to make money laundering by casinos more difficult, improve oversight, and tighten reporting requirements. A separate proposed measure governs the granting of credit by casinos, which would make it harder for criminal organizations to penetrate the casinos.
Terrorist financing is criminalized under the Macau criminal code (Decree Law 58/95/M of November 14, 1995, Articles 22, 26, 27, and 286). The MSARG has the authority to freeze terrorist assets, although a judicial order is required. Macau financial authorities directed the institutions they supervise to conduct record searches for terrorist assets, using U.S. Executive Order 13224 and United Nations lists. No assets have been found to date.
The Macau legislature passed an antiterrorism law in April 2002 that increases Macau's compliance with UNSCR 1373. The legislation criminalizes violations of UN Security Council resolutions, including antiterrorist resolutions, and strengthens antiterrorist financing provisions. The UN International Convention for the Suppression of the Financing of Terrorism will apply to Macau when the People's Republic of China accedes to it.
In 2003, the MSARG drafted a new counterterrorism bill aimed at strengthening antiterrorist financing measures. As of December 2003, the bill was under consultation within the administration. The law -- also drafted to comply with UNSCR 1373 -- would make it illegal to conceal or handle finances on behalf of terrorist organizations. Individuals would be liable even if they were not members of designated terrorist organizations themselves. The Macau government drafted additional measures which are still under discussion. These include an administrative regulation giving the Chief Executive of Macau the authority to designate terrorists and freeze assets of terrorists not on UN lists, and permitting assets to be frozen without first obtaining a court order. Additional proposed legislation would allow prosecution of persons who commit terrorist acts outside of Macau and would mandate stiffer penalties.
The increased attention paid to financial crimes in Macau after the events of September 11 has led to a general increase in the number of suspicious transaction reports. From October 1, 2002, to September 30, 2003, 107 STRs were received by Macau's Judiciary Police from individuals, banks, insurance companies and government agencies. That represents a substantial increase over the 55 reports filed from January to November, 2002. In prior years, only a handful of reports were filed each year.
In 2003, the MSARG drafted a new money laundering bill that broadened the definition of money laundering to include all serious predicate crimes. The legislation also mandated greater customer identification, a more comprehensive reporting system regarding suspicious transactions, a duty to refuse to undertake suspicious transactions, more specific guidelines for the nonbanking sector -- such as real estate -- and penalties for entities that fail to report suspicious transactions. In November 2003, the Monetary Authority of Macau issued a circular to banks requiring that STRs be accompanied by a table specifying the transaction types and money laundering methods, in line with the collection categories identified by the Asia Pacific Group on Money Laundering.
In May 2002, the Macau Monetary Authority revised its anti-money laundering regulations for banks to bring them into greater conformity with international practices. Guidance also was issued for banks, money changers, and remittance agents addressing record keeping and suspicious transaction reporting for cash transactions over $2,500.
The United States has no law enforcement cooperation agreements with Macau, though international cooperation can be requested on the basis of international conventions in force in Macau. The Judiciary Police have been cooperating with law enforcement authorities in other jurisdictions through the Macau branch of Interpol to suppress cross-border money laundering. In addition to Interpol, the Fraud Investigation Section of the Judiciary Police has established direct communication and information sharing with authorities in Hong Kong and mainland China.
The Monetary Authority of Macau also cooperates internationally with other financial authorities. It has signed memoranda of understanding with the People's Bank of China -- China's Central Bank -- the China Insurance Regulatory Commission, the China Banking Regulatory Commission, the Hong Kong Monetary Authority, the Hong Kong Securities and Futures Commission, the Insurance Authority of Hong Kong, and Portuguese bodies including the Bank of Portugal, the Banco de Cabo Verde and O Instituto de Seguros de Portugal.
Macau participates in a number of regional and international organizations. It is a member of the Asia/Pacific Group on Money Laundering (APG), the Offshore Group of Banking Supervisors, the International Association of Insurance Supervisors, the Offshore Group of Insurance Supervisors, the Asian Association of Insurance Commissioners, and the International Association of Insurance Fraud Agencies. In 2003, Macau hosted the annual meeting of the Asia Pacific Group on money laundering, which adopted the revised FATF Forty Recommendations and a strategic plan for anti-money laundering efforts in the region from 2003 to 2006. In September 2003, Macau became a party to the UN Convention against Transnational Organized Crime as a result of China's ratification. Macau also became a party to the 1988 UN Drug Convention through the People's Republic of China's ratification.
Macau has taken a number of steps in the past three years to create an effective anti-money laundering regime. Macau is urged to implement and enforce existing laws and regulations. Macau should ensure that regulations, structures, and training are put in place to prevent money laundering in the gaming industry, including implementing, as quickly as possible, the regulations it has drafted on the prevention of money laundering in casinos. Macau should pass legislation to establish a financial intelligence unit as soon as possible. The MSARG should also consider measures that provide for cross-border bulk currency and threshold reporting. Macau should increase public awareness of the money laundering problem, improve interagency coordination, and boost cooperation between the MSARG and the private sector in combating money laundering.