VZCZCXRO5814
RR RUEHCN RUEHGH
DE RUEHBJ #5109/01 2010602
ZNR UUUUU ZZH
R 200602Z JUL 06
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC 2007
INFO RHEHNSC/NSC WASHDC
RUCNDT/USMISSION USUN NEW YORK 1414
RUEHGV/USMISSION GENEVA 1228
RUEATRS/DEPT OF TREASURY WASHDC
RUEHOO/CHINA POSTS COLLECTIVE

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