EB/ESC DAS SIMONS MEETING WITH CHINA CENTRAL BANK

UNCLAS SECTION 01 OF 02 BEIJING 015109 SIPDIS SIPDIS SENSITIVE DEPT FOR EB/ESC/TFS, S/CT, IO/PHO AND EAP/CM NSC FOR VCHA TREASURY FOR U/S LEVEY, A/S ZARATE, DAS GLASER, OASIA/ISA FOR DOHNER/KOEPKE, OCC HOPKINS E.O. 12958: N/A TAGS: PREL EFIN PTER ETTC CH SUBJECT: EB/ESC DAS SIMONS MEETING WITH CHINA CENTRAL BANK REF: BEIJING 11712 ¶1. (SBU) On July 12, 2006, EB/ESC DAS Paul Simons and ECON MinCouns Robert Luke met with Director General Liu Liange of the Anti-Money Laundering Bureau at the People?s Bank of China (PBOC). The meeting focused on anti-money laundering (AML),counterterrorism financing (CTF),Financial Action Task Force (FATF) membership, UN 1267 support, the expanded use of credit, and the use of the Society for Worldwide Interbank Financial Telecommunication (SWIFT) systems internationally for monitoring terrorist financing. -------------- AML Law proceeding smoothly -------------- ¶2. (SBU) DG Liu stated that the issues holding up the draft AML law that he mentioned during Treasury DAS Daniel Glaser?s June visit (reftel) have since been resolved. He expects the AML law to pass its third reading smoothly in August, and subsequently to be promulgated in October. He said that PBOC intends to schedule the FATF mutual evaluation soon after the passing of the law in September. DAS Simons welcomed China?s efforts to speed the passage of the AML and to move forward with the next step in the process to join FATF. ¶3. (SBU) DAS Simons asked about China?s progress in moving towards a credit-based economy. DG Liu replied that PBOC supports a transition towards a credit-based economy to enhance the effectiveness of monitoring AML activity. However, the National People?s Congress (NPC) raised opposing opinions to provisions in the draft AML that encouraged transitioning towards credit. China?s deeply ingrained cultural affinity to using cash may be one reason that opposition to the transition has been raised, he said. DAS Simons noted that other countries that have made such a transition and suggested that China seek out the experience of other jurisdictions through its upcoming FATF mutual evaluation. -------------- Seeking China?s support in UN 1267 Committee -------------- ¶4. (SBU) DAS Simons raised concerns over China?s support of adding discussion of the FATF 40 plus 9 recommendations to the UN Counterterrorism Committee?s (UNCTC) agenda. He said that the United States understands from Treasury Das Glaser?s visit that both the Ministry of Foreign Affairs (MFA) and PBOC support this motion, but noted that similar support from China?s UN representative has not been forthcoming. DG Liu assured DAS Simons that China clearly supports the motion and that MFA has communicated this to its UN mission, but promised to check on the issue. ¶5. (SBU) DAS Simons also expressed hope that China will support the United States? position in the UN 1267 Committee to increase transparency and fairness in the process of designating terrorists. DG Liu stated that he will coordinate with MFA, and emphasized China?s resolve to adhere to its international commitments. -------------- -------------- Chinese concerns over disclosure of SWIFT monitoring -------------- -------------- ¶6. (SBU) DG Liu expressed concern with the recent disclosure that the U.S. government has been monitoring terrorism finances through the SWIFT system. He worried that terrorists will now shift away from formal financial channels and instead turn to the usage of informal, less traceable mechanisms for moving funds to finance their operations. DG Liu also raised concerns that government authorities could violate confidentiality by abusing access privileges. ¶7. (SBU) DAS Simons responded that disclosure of government use of SWIFT to monitor was a great concern of the U.S. government, and that the President has already issued formal statements denouncing the disclosure as a setback on the war on terror. He further noted that the BEIJING 00015109 002 OF 002 monitoring of informal cash flows through charities, cash couriers, and hawalas was very much the centerpiece of recent international cooperation on terrorist financing, and that China?s closer coordination with FATF and the FATF regional style bodies would be important steps toward deeper Chinese engagement on these issues. ¶8. (SBU) EB/ESC DAS Simons cleared this report. RANDT