CHINESE SHOW FLEXIBILITY ON FATF IN CTC

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SUBJECT: CHINESE SHOW FLEXIBILITY ON FATF IN CTC

REF: A. FITZGERALD/WILCOX EMAIL--7/5/06


B. BEIJING 13679


1. The Chinese expert on the Security Council's
Counter-Terrorism Committee (CTC) advised USUN LegalOff on
July 13 that China would not object to having the CTC include
the 40 Recommendations on Money Laundering and the 9 Special
Recommendations on Terrorist Financing of the Financial
Action Task Force (FATF) in a CTC directory of international
best practices, codes, and standards. The CTC will discuss
the directory at its July 20 meeting. If the CTC adopts the
directory, the CTC would make it available to states and
encourage them to apply to maximize their efforts to
implement resolution 1373 (2001). (Mission has emailed the
draft to IO/PSC separately.)


2. The Chinese expert also said China would oppose
references to the export control standards of the Wassenaar
Arrangement in the directory, arguing that the CTC should not
refer to Wassenaar because it is not a United Nations entity
and it is body dealing with disarmament. Finally, he
expressed discomfort at USUN's suggestion that, in addition
to posting the directory on its website and making it
available to States, the CTC separately should issue a
separate document endorsing the FATF standards, saying he
needed instructions.


3. Comment: China's willingness to accept references to the
FATF standards in the CTC's 24-page directory of best
practices is a significant shift from its previous opposition
to the FATF standards. Its acceptance appears to reflect the
fact that the directory does not single out or specifically
endorse the FATF standards. (The directory also lists the
2003 United Nations Model Terrorist Financing Bill, three
products of the Bank for International Settlements (the
December 1988 Basel statement on prevention of criminal use
of the banking system for the purpose of money laundering,
the October 2001 "Customer due diligence for banks"
publication, and the "General guide to account opening and
customer identification" attached to the Basel Committee's
publication No. 95 of February 9, 2003, on "Customer due
diligence for banks"),and a World Customs Organization
recommendation (the Recommendation of the Customs Cooperation
Council on the need to develop and strengthen the role of
customs administrations in tackling money laundering and in
recovering the proceeds of crime, June 25, 2005).


4. Attempting to get China to accept any CTC endorsement of
the FATF standards in addition to the reference in the CTC's
directory of best practices could be counterproductive. In
practice, the CTC and its Counter-Terrorism Executive
Directorate (CTED) already refer to the FATF standards (even
if not by name) in discussions with states. China has never
opposed those references. Once the CTC has adopted the
directory, the CTC and CTED should be able to use it to
heighten states' awareness of the importance of the FATF
standards. The United States has pushed hard for the CTC to
develop information concerning best practices, and the
directory offers a useful resource. Mission believes the
United States should not introduce new issues that could
delay the CTC from adopting the directory and making it
available to states. End comment.
BOLTON