Source: 2006
Released by the Bureau for International Narcotics and Law Enforcement Affairs
I. Summary
The People's Republic of China (PRC) continues to have a significant domestic drug abuse problem. China is also an important transit route for opiates and ATS (Amphetamine Type Stimulants) moving through Asia. China was removed from the list of Major Drug Transit Countries in 2005 because there was no evidence drugs transiting China affected the U.S. to a significant extent. Heroin use persists, particularly in southwest China. There continues to be an upsurge in the consumption of synthetic drugs such as ecstasy (MDMA) and crystal methamphetamine, otherwise known as "ice". Chinese authorities view drug trafficking and abuse as a major threat to national security, the economy and national and regional stability, but corruption in far-flung drug producing and drug transit regions of the PRC limit the accomplishments of dedicated enforcement officials. China has made great strides to integrate regional and global counternarcotics efforts. China is a party to the 1988 UN Drug Convention.
Cooperation with U.S. counternarcotics officials continued to improve over the past year. The signing of a Memorandum of Intent in February 2005 between DEA and the MPS (Ministry of Public Security) Bureau of Narcotics Control yielded a higher level of cooperation. In 2005, the Chinese Government also continued to provide U.S. counternarcotics officials with samples of drugs seized, on a case-by-case basis.
II. Status of Country
The major narcotics producing areas in Asia, Southeast Asia's "Golden Triangle" and Southwest Asia's "Golden Crescent", both border China. The "Golden Triangle" on China's southwestern border is a longstanding problem; Chinese officials now believe that the "Golden Crescent" is an increasing source of illicit drugs trafficked into western China, particularly Xinjiang Province. According to the Chinese Government, drug abuse in China continues to rise and there were, as of 2004, 1.6 million registered drug addicts, double the number in 1995. Youths made up 74 percent of the registered drug addicts. The majority of registered drug addicts are heroin users. Illegal drug use was recorded in 2,148 cities, counties, and districts across China. The Chinese Government reports about 34,000 recent deaths from drug overdose, a significant increase from about 25,000 deaths as of the end of 2003.
China's well-documented economic growth and increasing societal openness over the last decade has dramatically increased the disposable income and leisure time of millions of young urban residents. This phenomenon has led to a rapid increase in drug abuse among the country's youth in large and mid-sized cities. Like large cities of relative affluence all over the world, Chinese cities have seen a significant rise in the urban culture of nightclubs and raves, and their attendant problems of drug abuse. These changes in China have increased abuse of recreational drugs, such as ecstasy and ATS. Officials have responded with several public awareness campaigns and increased enforcement, but abuse of synthetic drugs continues on an up-tick, as in the United States and Europe.
China has one of the largest chemical industries in the world. China is the world's largest producer of certain precursor chemicals, including acetic anhydride, potassium permanganate, piperonylmethylketone (PMK) and ephedra. China monitors all 22 of the chemicals listed in the 1988 UN Drug Convention. Chinese authorities report they seized over 160 tons of precursor chemicals and prevented a further 3,514 tons from leaving the country in 2004. 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.
III. Country Actions Against Drugs in 2005
Policy Initiatives. In June 2000, the PRC issued a "White Paper" on drugs that articulated China's strategy for combating drug abuse and trafficking. The document covers all the major goals of the UN Convention, emphasizing education, rehabilitation, eradication, precursor chemical control and interdiction. It continues as the basic strategy for the PRC's approach to drugs. In November 2005 China passed its first administrative law on precursor chemicals aimed at preventing the illicit use of precursor chemicals. This law represents the first action by the PRC to control domestic sale of precursor chemicals; previous laws and regulations focused solely on imports and exports. In June 2004, the PRC published an authoritative five-year plan to tackle the drug problem, which provided the Ministry of Public Security (MPS) with a mandate to step up counternarcotics efforts. The national budget for counternarcotics efforts has seen regular increases. While the MPS's National Narcotics Control Commission (NNCC), China's counternarcotics coordinating body, received 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 narcotics budget, however, is significantly higher, because each province administers its own counternarcotics budget.
Accomplishments. China continued to cooperate with regional and international partners, including the U.S., to stem the flow of drugs. China has completely eradicated opium poppy cultivation and PRC authorities have increased efforts to destroy illicit drug laboratories within China's borders.
Law Enforcement Efforts. The Chinese Government has increased its counternarcotics efforts through several highly publicized campaigns, including a nationwide "People's War" on Narcotics campaign. The counternarcotics efforts at the national level and those at the provincial level have grown substantially, with increased training and exchange programs with other Asian law enforcement agencies. Some of their successes include: the April 2005 seizure of 26 kilograms of heroin in Xinjiang, the May 2005 seizure of 102 kilograms of methamphetamine in Yunnan, the June 2005 seizure of 41 kilograms of ketamine (a veterinary pain killer widely abused in Asia), in Sichuan, the September 2005, seizure of 1,010 kilograms of ketamine in Shandong and Guangdong and the November 2005 seizure of 110 kilograms of methamphetamine in Yunnan. Additionally, in September 2005, a joint investigation conducted by China, Laos, Thailand and Burma resulted in a combined seizure of 426 kilograms of heroin in Burma. The ringleader of this shipment was a Chinese national who was arrested in Laos and eventually deported to China. The case is an indication of China's increased law enforcement co-operation with its neighbors.
In order to increase its effectiveness in law enforcement, the NNCC reorganized its enforcement operations, establishing separate heroin and amphetamine-type stimulants (ATS) enforcement groups at both the ministerial and provincial levels. Prior to 2003, enforcement was handled by one organization and focused primarily on heroin. With this reorganization, the NNCC can better address ATS enforcement.
U.S.-Chinese law enforcement cooperation continued to improve throughout 2005. The MPS continues to provide strategic and concrete information to its DEA counterparts to actively target drug rings. In addition, the MPS routinely facilitates travel of U.S. law enforcement personnel based at the U.S. Embassy in Beijing. In part due to international cooperation with its neighbors in the Golden Triangle, the MPS reports that poppy cultivation in Laos and Burma has been reduced by 44,000 hectares in recent years, which amounts to a 27 percent decrease in the total area of production since 1995.
Corruption. Official corruption in China is a serious problem. Anticorruption campaigns have led to arrests of many lower-level government personnel and some more senior-level officials. However, most corruption activities in the PRC involve abuse of power, embezzlement and misappropriation of funds, but payoffs to "look the other way" when questionable/illegal commercial activities occur, including drug smuggling, are clearly another major source of official corruption in China. Chinese officials reported that in 2005 there were more than 32,000 people investigated for alleged corruption and that over half were found to be guilty.
While narcotics-related official corruption exists in China, it is seldom reported in the press. The MPS takes allegations of drug-related corruption seriously, launching investigations as appropriate. Most cases appear to have involved lower-level district and county officials. Although there is no substantive evidence indicating senior-level corruption in drug trafficking, the quantity of drugs trafficked within the PRC raises 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 cannot 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. Narcotics-related corruption does not appear to have adversely affected on-going law enforcement cases in which the U.S. is interested. China is engaged in an anticorruption dialogue with the United States through the Joint Liaison Working Group process. China ratified the UN Convention Against Corruption on January 13, 2006.
Agreements and Treaties. China actively cooperates with other countries to fight drug trafficking. In 2000, China and the United States signed a Mutual Legal Assistance Agreement (MLAA), which entered into force March 8, 2001. In February 2005 DEA and MPS Bureau of Narcotics Control signed a Memorandum of Intent on counternarcotics cooperation. China is a party to the 1988 UN Drug Convention, as well as to the 1961 UN Single Convention as amended by its 1972 Protocol and the 1971 Convention on Psychotropic Substances. In January 2003, the United States and China reached agreement on the Customs Mutual Assistance Agreement (CMAA.) The PRC continues to cooperate with DEA's chemical control initiatives, "Operation Purple," "Operation Topaz," and "Operation Icebreaker." China strictly regulates the import and export of precursor chemicals, but chemical diversion from China has been a major problem, despite these efforts.
In October 2005 China hosted the Second International Congress of the "ASEAN and China Cooperative Operations in Response to Dangerous Drugs (ACCORD)." More than 200 delegates from ASEAN law enforcement agencies and the UN Office of Drugs and Crime (UNODC) attended. China, along with its ASEAN partners, held meetings in order to map out a regional counternarcotics cooperative mechanism in pursuit of making the region drug-free by 2015. In June, Burma, China, India, Laos and Thailand signed the Chiang Rai Declaration pledging to implement cooperative counternarcotics programs and exchange counternarcotics information. The PRC also continues to participate in UN Office for Drugs and Crime (UNODC) demand reduction and crop substitution efforts in areas along China's southern borders. China regularly participates in counternarcotics education programs sponsored by the International Law Enforcement Academy (ILEA) in Bangkok, Thailand. The PRC actively participates in the annual International Drug Enforcement Conference (IDEC) and Regional Targeting Meetings, which boost regional law enforcement cooperation against drug trafficking. China has signed over 30 mutual legal assistance agreements with 24 countries, but the U.S. and China have been unable to agree on a narcotics cooperation agreement.
Cultivation/Production. The PRC has effectively eradicated the production of drug-related crops within China. Opium, coca and other drug crops are not produced in China in significant quantities. The PRC is a main cultivator of natural ephedra, which is used in the production of amphetamine. China is also one of the world's largest producers of synthetic ephedra, which is used for medicinal purposes but can be diverted for the production of methamphetamine. The Chinese Government tightly controls exports of this key input for ATS, but like other dual-use chemicals, China remains a significant source of chemicals diverted to illicit uses, some diversions to countries as far away from China as Europe.
The Chinese Government continues to make shutting down illicit drug laboratories a top priority. The MPS seized 198 drug processing laboratories between July and August 2004 (seeking update for 2005).
Drug Flow/Transit. China continues to be used as a transshipment route for drugs produced in the "Golden Triangle" to the international market, despite counternarcotics cooperation with neighbors such as Vietnam, Thailand and Burma. Drug transportation and infiltration in Yunnan and Guangdong Provinces has been especially pervasive; drugs also move along and back and forth between China's border with the Democratic People's Republic of (North) Korea. While China's southern and southwestern provinces constitute the PRC's primary drug flow and transit areas, Chinese authorities acknowledge that western China is experiencing significant problems as well. Drugs such as heroin, methamphetamine and ketamine are being smuggled into Xinjiang Province and then distributed throughout China.
Domestic Programs (Demand Reduction). According to the MPS, China had 1.6 million illegal drug users registered by law enforcement departments. The majority of registered drug users are addicted to heroin. The Ministry of Education (MOE) and the NNCC have expanded drug education and prevention programs, aimed at preventing children from ages 12 to 18 from getting involved in drugs. Chinese officials report the distribution of 25,000 counternarcotics posters in 2004. In 2004, 100,000 drug awareness pamphlets were distributed and 100,000 special action committees were formed to carry out drug control publicity and education activities. The NNCC, Ministry of Health and the State Food and Drug Administration jointly established 34 clinics in 10 provinces to provide treatment to heroin addicts.
IV. U.S. Policy Initiatives and Programs
Bilateral Cooperation. Counternarcotics cooperation between China and the United States continues to develop in a positive way. The information shared by China is leading to progress in attacking drug-smuggling rings that have an impact on the U.S. and is yielding significant operational results.
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. Government to extend counternarcotics assistance to China. Reaching agreement on the LOA is a major U.S. goal that, if achieved, would greatly increase counternarcotics cooperation between the two countries. While China has provided the DEA on a case-by-case basis with some samples of drugs seized in the PRC intended for U.S. markets, the U.S. Government would welcome routinely receiving samples of all drugs seized by Chinese authorities. Despite these issues, bilateral enforcement cooperation remains on track and is expected to continue to improve over the coming year.
China has one of the world's largest chemical industries, producing large quantities of important precursors that can be used for illicit drug manufacture such as acetic anhydride (heroin), potassium permanganate (cocaine), PMK (ecstasy) and pesudoephedrine and ephedrine (methamphetamine). 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. In November 2005, China passed its first administrative law on precursor chemicals aimed at preventing the illicit use of precursors. It regulates the manufacture, distribution, purchase, transport, and import and exports of precursor chemicals. The law represents the first action by the Chinese Government to control domestic sales of precursors, previous laws and regulations focused solely on imports and exports. 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 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's large chemical industry produces significant amounts of chemicals subject to diversion in countries around the world for the illicit production of cocaine, heroin, methamphetamine, and ecstasy. Although on paper China meets or exceeds the chemical control requirements of the 1988 UN Drug Convention, the size of it chemical industry is not matched by a law enforcement infrastructure adequate to effectively monitor its production and international trade.
U.S. and Chinese cooperation in chemical control is good, within the limits of Chinese capabilities. China is a participant in Operation Cohesion and Project Prism. Information is exchanged through these operations and in the course of normal counternarcotics cooperation. China is also a participant in Operation Icebreaker, an effort to combat diversion of precursor chemicals for the production of crystal methamphetamine. DEA has Diversion Investigator positions in its Beijing and Hong Kong offices. The Chinese signed a memorandum of understanding with the Netherlands on October 22, 2004, governing the sharing of information on precursor shipments to prevent diversion, and the Dutch assigned a law enforcement liaison officer to Beijing in July 2005.
Money laundering remains a major concern as the People's Republic of China (PRC) restructures its economy. A more sophisticated and globally connected financial system in one of the world's fastest growing economies will offer significantly more opportunities for money laundering activity. Most money laundering cases now under investigation involve funds obtained from corruption and bribery. Narcotics trafficking, smuggling, alien smuggling, counterfeiting, fraud and other financial crimes remain major sources of laundered funds. Proceeds of tax evasion, recycled through offshore companies, often return to the PRC disguised as foreign investment, and as such, receive tax benefits. Continuing speculation following the July adjustment of the renminbi exchange rate system also fueled illicit capital flows into China throughout 2005. Hong Kong-registered companies figure prominently in schemes to transfer corruption proceeds and in tax evasion recycling schemes. The International Monetary Fund recently estimated that money laundering in China may total as much as $24 billion annually.
In 2005, China drafted a new Anti-Money Laundering Law, under the direction of a ministerial-level coordinating committee created in 2004. This new law is expected to broaden the scope of existing anti-money laundering regulations and to establish more firmly the Central Bank's authority over national anti-money laundering efforts. The new law was submitted to the National People's Congress Standing Committee at the end of 2005, but as of the end of December 2005, the NPC had not reviewed the draft legislation. The authorities expect the law to be passed in 2006.
China has taken steps to enhance its anti-money laundering regime. After conducting studies on how to strengthen the system, the People's Bank of China (PBC) and the State Administration of Foreign Exchange (SAFE) 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.
Measures came into effect in 2004 that further strengthened China's anti-money laundering efforts, including a March 2004 PBC regulation entitled "Regulations on Anti-Money Laundering for Financial Institutions," which strengthens 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 non-cash 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 large renminbi transactions, including single credit transfers of over 1 million RMB (approximately $120,500), cash transactions above 200,000 RMB (approximately $24,000), and domestic fund transfers of over 200,000 RMB, and are expected to report suspicious RMB transactions and refuse services to suspicious clients. Under the regulation, banks are further required to submit monthly reports to the PBC 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 approximately $3,600.
These measures complement the PRC's 1997 Criminal Code, which criminalized money laundering under Article 191 for three categories of predicate offenses, including narcotics trafficking, organized crime, and smuggling. In 2001, Article 191 was amended to add terrorism as a fourth predicate offense. Additionally, Article 312 criminalizes complicity in concealing the proceeds of criminal activity, and Article 174 criminalizes the establishment of an unauthorized financial institution. However, the class of existing predicate offenses needs to be expanded.
While official scrutiny of cross-border transactions is improving, the Chinese Government is also moving to loosen capital-account restrictions. For example, as of January 1, 2005, travelers can take up to 20,000 RMB (approximately $2,400) in or out of the country on each trip, up from 3,000 RMB (approximately $360) previously. New provisions allowing the use of RMB in Hong Kong have also created new loopholes for money laundering activity. Authorities are also allowing greater use of domestic, renminbi-denominated, credit cards overseas. Such cards can now be used in Hong Kong, Macau, Singapore, Thailand, and South Korea. To address online fraud, the PBOC tightened regulations governing electronic payments. In 2005, the Central Bank announced new rules that consumers could not make online purchases of more than RMB 1,000 (approximately $124) in any single transaction or more than 5,000 RMB (approximately $620) in a single day. Enterprises are limited to electronic payments of no more than 50,000 RMB (approximately $6,200) in a single day.
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, asset 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. However, primary authority for anti-money laundering efforts remains with the PBC, the country's Central Bank, along with the Ministry of Public Security in terms of enforcement.
In 2004, the PBC established a central national Financial Intelligence Unit (FIU) -the China Anti-Money Laundering Monitoring and Analysis Center, whose function is to collect, analyze and disseminate suspicious transaction reports and currency transaction reports. This move was an important accomplishment of the Anti-Money Laundering Strategy Team tasked with developing the legal and regulatory framework for countering money laundering in the banking sector. The team is chaired by a Vice-Governor of the PBC and is composed of representatives of the PBC's 15 functional departments
In September 2002, SAFE adopted a new system to supervise foreign exchange accounts more efficiently. The new system allowed for immediate electronic supervision of transactions, collection of statistical data, and reporting and analysis of transactions. A separate Anti-Money Laundering Bureau was established at the PBOC in late 2003 to coordinate all anti-money laundering efforts in the PBC and among other agencies, and to supervise the creation of the new FIU.
In spite of China's 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. Furthermore, the current Anti-Money Laundering Law does not allow certain investigative practices commonly used with success in the United States. Also, anti-money laundering efforts are hampered by the prevalence of counterfeit identity documents and cash transactions conducted by underground banks, which in some regions reportedly account for over one-third of lending activities. China has increased efforts in recent years to crack down on such underground lending institutions. According to Chinese media reports, authorities shut down 155 underground banks dealing in $1.5 billion worth of illegal foreign exchange transactions between April and December 2004. Overall in 2004, 50 money laundering cases were jointly investigated by the police, the PBC and SAFE, according to the Chinese press.
A continued 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 PBC'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.
To remedy these deficiencies, the PBOC launched a national credit-information system in early 2005. The system officially began operation in January 2006. Although still very limited, this system will allow banks to have access to information on individuals as well as on corporate entities. PBOC rules obligate financial institutions to perform customer identification and due diligence, and record keeping. However, there is currently no legislative instrument, only administrative rules, requiring customer due diligence and record keeping. SAFE implemented a new regulation on March 1, 2004 requiring non-residents, including those from Hong Kong, Macau, Taiwan, and Chinese passport holders residing outside mainland China, to verify their real names when opening bank accounts with more than $5,000.
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 U.S. and international efforts to identify, track, and intercept terrorist finances, specifically through implementation of United Nations Security Council counterterrorist financing resolutions.
China's concerns with terrorist financing are generally regional, focused mainly on the western province of Xinjiang. 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 -- estimated by the Chinese Government at about 10 percent of the formal economy, but quite possibly larger -- makes monitoring of China's cash-based economy very difficult.
The PRC signed the UN International Convention for the Suppression of the Financing of Terrorism on November 13, 2001, but has not ratified it. 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 provides a basis for exchanging records in connection with narcotics and other criminal investigations and proceedings. The PRC is a party to the 1988 UN Drug Convention, and in 2003 ratified the UN Convention against Transnational Organized Crime. In January 2006, it ratified the UN Convention against Corruption.
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.
In late 2004, China joined the newly-created Eurasian Group (EAG), a Financial Action Task Force (FATF)-style regional group which includes Russia and a number of Central Asian countries. In January 2005, China became an observer to the FATF and desires to become a full member of the FATF.
In 2005, China's CBRC signed a memorandum of understanding with the Philippine Central Bank, Bangko Sentral ng Pilipinas, to share information on suspected money laundering activity. China's financial intelligence unit, the China Anti-Money Laundering Monitoring and Analysis Center, also signed its first MOU with a foreign counterpart at the end of 2005, with South Korea's FIU, allowing the two to exchange information related to money laundering, terrorism financing and other criminal financial activity.
The Government of the People's Republic of China should continue to build upon the substantive actions taken in recent years to develop a viable anti-money laundering/terrorist financing regime consistent with international standards. Important steps include expanding its list of predicate crimes to include all serious crimes, and continuing to develop a regulatory and law enforcement environment designed to prevent and deter money laundering. China should ensure that the FIU is an independent, centralized body with adequate collection, analysis and disseminating authority, including the ability to share with foreign analogs and law enforcement, and that a system of STR reporting is adequately implemented. It will be important for China's FIU to join the Egmont Group of Financial Intelligence Units as soon as possible to ensure it has access to vital financial information on possible illicit transactions occurring in other jurisdictions. China should provide for criminal penalties for non-compliance with requirements that financial institutions perform customer identification, due diligence, and record keeping, as well as incorporating the suspicious transaction-reporting requirement into law. China should also become a party to the UN International Convention for the Suppression of the Financing of Terrorism.