VZCZCXRO6190
PP RUEHCN RUEHGH
DE RUEHHK #4755/01 3491056
ZNR UUUUU ZZH
P 151056Z DEC 06
FM AMCONSUL HONG KONG
TO RUEHC/SECSTATE WASHDC PRIORITY 9817
RUEAWJA/DEPT OF JUSTICE WASHINGTON DC PRIORITY
INFO RUEHBJ/AMEMBASSY BEIJING 9939
RUEHCN/AMCONSUL CHENGDU 0990
RUEHGZ/AMCONSUL GUANGZHOU 0267
RUEHGH/AMCONSUL SHANGHAI
RUEHSH/AMCONSUL SHENYANG 3459
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC
RUEHIN/AIT TAIPEI 4289
RUEATRS/DEPT OF TREASURY WASHDC
RHMCSUU/FBI WASHINGTON DC

UNCLAS SECTION 01 OF 04 HONG KONG 004755 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/CM 
STATE FOR L/LEI KULISH/JOHNSON 
STATE FOR INL 
 
E.O. 12958: N/A 
TAGS: KJUS EFIN PREL MC
SUBJECT: U.S.-MACAU INTERACTIONS EXPANDING, OPPORTUNE 
MOMENT TO NEGOTIATE MLAA 
 
REF: HONG KONG 4735 
 
------------------- 
SUMMARY AND COMMENT 
------------------- 
 
¶1.  (SBU) SUMMARY AND COMMENT.  U.S.-Macau interactions are 
and will continue expanding rapidly as U.S. investment pours 
into Macau -- US$2.5 billion in 2006, much of it in the 
sensitive gaming and entertainment industries.  Increasing 
interactions between the United States and Macau will 
generate both more opportunity and greater necessity for law 
enforcement cooperation. While U.S. law enforcement agencies 
have already stepped up cooperation, exchanges and training 
with their Macau counterparts (see reftel), negotiating a 
Mutual Legal Assistance Agreement (MLAA) with the Macau 
Special Administrative Region Government (MSARG) will provide 
an important tool to formalize and expand judicial 
cooperation. 
 
¶2. (SBU) The extremely rapid expansion of Macau's gaming and 
entertainment industries, combined with Macau's traditionally 
loose regulatory environment, the historical presence of 
organized crime and increased levels of PRC participation in 
the Macau phenomenon imply a situation potentially ripe for 
exploitation by criminals.  Concern also exists that 
business/economic development in Macau (a great deal of which 
is generated by U.S. investment in Macau's gaming, convention 
and tourism sectors) may be outpacing the MSARG's 
capabilities to effectively regulate, oversee and support. 
 
¶3. (SBU) With the approval of the PRC Central Government, the 
Macau Government enacted a new law on November 1, 2006 that 
provides Macau the authority to undertake negotiations with 
foreign jurisdictions toward establishing agreements 
facilitating mutual legal assistance.  The MSARG government 
has indicated at authoritative levels its willingness to 
explore such an undertaking with the United States. 
 
¶4. (SBU) Consulate General Hong Kong, including the law 
enforcement agencies present here, recommends that the 
Departments of Justice and State review the potential 
benefits of negotiating an MLAA with the MSARG. (In para 11, 
we cite several recent cases in which a U.S.-MSARG MLAA would 
have been useful.)  No such negotiation is easy, but in 
Macau's case the benefits are likely to be substantial. 
Given that one barrier to better law enforcement cooperation 
with Macao is the MSARG's lack of international legal 
expertise and inefficient interagency cooperation, we believe 
that the mere act of getting organized for such a negotiation 
with the United States may spur improvements in MSARG 
responsiveness and law enforcement efficiency.  END SUMMARY 
AND COMMENT. 
 
---------- 
Background 
---------- 
 
¶5.  (U) Since its reversion to the People's Republic of China 
(PRC) in 1999, the MSARG has not engaged actively in 
international bilateral agreements on mutual legal assistance 
in criminal matters; to do so would have risked Macau 
entering into international agreements inconsistent with its 
Basic Law, a mini-constitution hammered out prior to 
reversion of sovereignty from Portugal to China.   Under 
Article 13 of Macau's Basic Law, the PRC central government 
has authority over extradition and other agreements on legal 
cooperation.  The PRC allowed some exceptions for the MSARG: 
the Sino-Portuguese Joint Liaison Group in 1999 approved a 
standard agreement on the "transfer of sentenced persons." 
The MSARG and the Government of Portugal signed an "Agreement 
on the Transfer of Sentenced Persons" on 7 December 1999. 
The Government of Portugal and MSARG also signed a Mutual 
Legal Assistance Agreement on 17 January 2001.  The MSARG and 
the Hong Kong Special Administrative Region signed an 
"Agreement on the Transfer of Sentenced Persons" on 25 May 
¶2005. 
 
HONG KONG 00004755  002 OF 004 
 
 
------------------------------------------ 
Legislation Allows MSARG to Negotiate MLAA 
------------------------------------------ 
 
¶6.  (U) On July 13, 2006, the MSARG passed new legislation 
allowing and regulating international mutual legal assistance 
on criminal matters.  MSARG published the law on July 24, 
2006 and the law became effective on November 1, 2006.  The 
MLAA Law states that the MSARG, with the assistance and 
authorization of the PRC government, can finalize mutual 
legal assistance agreements (MLAAs) with countries (excluding 
the PRC) and territories.  These MLAAs may include areas such 
as: detaining fugitive offenders, transferring cases of 
criminal prosecution, transferring prosecuted persons, 
executing criminal sentences and other forms of judicial 
cooperation in criminal matters. 
 
--------------------------------------------- ----------- 
MSARG Senior Officials View U.S.-Macau MLAA Positively 
--------------------------------------------- ----------- 
 
¶7.  (SBU) In discussions between ConGen Hong Kong and the 
MSARG International Legal Affairs Office in December 2005 
regarding the MSARG's pending MLAA legislation, Macau 
officials told us that the MSARG hoped to conclude MLAAs with 
six countries: the United States, Canada, the Philippines, 
Thailand, Portugal (this likely would augment or replace the 
2001 agreement) and Brazil.  The MSARG chose these six 
countries due to the high number of their nationals in Macau 
or the high number of Macau nationals in those jurisdictions. 
 
¶8.  (SBU) In November 2006, Economic/Political Chief spoke to 
Florinda Chan, the Secretary for Administration and Justice 
(No. 2 in Macau's government) and Ms. Chio Iek, an advisor to 
the Director of the Public Prosecutions Office.  E/P Chief 
mentioned that the USG had noted the passage of this new law 
and its effective date November 1, 2006 and asked whether it 
could provide a basis for Macau to enter into expanded legal 
cooperation with other countries, through the negotiation of 
MLAAs or other instruments.  Secretary Chan said that Macau 
definitely wants to expand its cooperation with other 
countries to better deal with transnational crime and also to 
resolve issues of Macanese being held in prisons in other 
jurisdictions, such as Hong Kong or Southeast Asia.  She said 
that Brazil, Thailand and the EU had already approached Macau 
to explore the possibility of negotiating such agreements. 
Macau will have to vet each of these decisions with the 
Central Government in Beijing; once Beijing approves Macau 
entering such negotiations, however, the Macau government 
will carry out the negotiations itself (maintaining close 
coordination with Beijing, of course). 
 
¶9.  (SBU) Chan remarked on the desirability of the U.S. and 
Macau expanding legal cooperation and would "welcome a 
request" from us to explore this possibility.  Chio - who in 
fact is a PRC official apparently seconded to the Macau 
Prosecutor's office - said the point of the new law was to 
provide a mechanism for Macau to expand legal cooperation 
with other jurisdictions.  She also made positive, though 
vague, comments about expanding the U.S.'s legal cooperation 
with Macau and welcomed further discussions about that. So, 
while neither the USG nor the MSARG have made firm 
commitments, the MSARG at authoritative levels does seem 
positively disposed to discussing whether it would be useful 
to try to reach an agreement between the United States and 
Macau. 
 
--------------------------------------------- -------------- 
U.S. - Macau Interactions (Particularly Economic) Expanding 
--------------------------------------------- -------------- 
 
¶10.  (U) Additionally, the USG's interest in robust 
engagement with the MSARG is expanding.  ConGen Hong Kong is 
increasing its interactions/profile in Macau in the 
commercial/economic, law enforcement, public outreach and 
American Citizen services areas, among others.  Many of these 
areas of endeavor have the potential to generate legal 
 
HONG KONG 00004755  003 OF 004 
 
 
issues.  For Example: 
 
--U.S. private sector investment is growing rapidly in Macau, 
particularly in the gaming, tourism and convention industries. 
 
--In 2006, U.S. investment in Macau is estimated to reach 
US$2.5 billion and in the 3-year period from 2006 - 2008 
likely will surpass US$8 billion. 
 
--Sands opened a casino in Macau in May 2004. 
 
--Wynn Resort opened a resort/casino in Macau in Sept 2006. 
 
--MGM is building a resort/casino in Macau that is scheduled 
to open in 2007. 
 
--The Sands Venetian is building a 3000-room 
resort/casino/convention center that is scheduled to open in 
¶2007. 
 
--Sands Venetian continues to develop Macau's COTAI Strip and 
plans a potential total investment of US$11 billion.  The 
flagship will be the Sands Venetian.  Sands will build eleven 
other hotels on the COTAI Strip as part of its overall 
development plans that ultimately will be managed by renowned 
hotel management firms such as InterContinental, Holiday Inn, 
Four Seasons, Starwood, Sheraton, Hilton, Conrad, Fairmont, 
Raffles, Shangri La, and St. Regis. 
 
--The number of U.S. citizens living/working in Macau has 
increased substantially, from an estimated 700 a year ago to 
an estimated 1,400 now, and continues to grow along with the 
increased U.S. investment. 
 
--In the first nine months of 2006, 110,000 U.S. Tourists 
visited Macau, equaling the total number of U.S. Tourists 
that visited Macau in 2005.  U.S. tourism to Macau in the 
future is forecast to rise along with expected large 
increases in total tourism numbers.  In 1999, 7.4 million 
tourists visited Macau; that number increased to 20 million 
in 2006 and is expected to reach 38 million by 2010. 
 
--The MSARG is cooperating with the USG in some law 
enforcement areas.  Specifically, the Macau Monetary 
Authority has been providing information/documents to the 
U.S. Treasury Department in the ongoing investigation of 
Banco Delta Asia. 
 
------------------------------------------ 
Cases Where an MLAA Would Have Been Useful 
------------------------------------------ 
 
¶11. (SBU) Below are examples of recent cases where an MLAA 
could have helped USG authorities obtain relevant information 
or prosecute cases in the United States: 
 
--Banco Delta Asia - The investigation into North Korean 
money laundering of funds derived from illegal activities 
through Macau-based Banco Delta Asia (BDA).  An MLAA could 
have significantly eased the process for U.S. Treasury 
officials to gain access to BDA accounts and receive 
information from the MSARG, for example, an audit report on 
BDA by the accounting firm Ernst and Young. 
 
--Internal Revenue Service-Criminal Investigation Division 
(IRS - CID) and the Federal Bureau of Investigation (FBI) are 
jointly working on a narcotics related money laundering 
investigation involving about US$2 million in currency that 
flowed through a nominee account at Banco Delta Asia (BDA) in 
Macau.  In January 2006, IRS-CID submitted a law enforcement 
request to the Judiciary Police to seek bank records from BDA 
that would document the transaction, but to date has not 
received the requested information.  An MLAA could 
theoretically provide impetus for Macau to respond and 
provide authenticated evidence that could be used in U.S. 
courts. 
 
 
HONG KONG 00004755  004 OF 004 
 
 
--The U.S. Department of Justice, on behalf of the FBI, had 
submitted a request to Macau in November 2005, seeking bank 
records.  However, Macau directed USDOJ to submit the request 
to the PRC Ministry of Foreign Affairs in Beijing.  The PRC 
Ministry of Foreign Affairs subsequently directed USDOJ to 
submit the request back to Macau.  Macau authorities obtained 
the requested bank documents and sent them back to the PRC 
Ministry of Foreign Affairs.  The PRC Ministry of Foreign 
Affairs forwarded the documents to the U.S. Embassy in 
Beijing, who then sent them to the U.S. Consulate in Hong 
Kong.  This indirect process took over six months.  An MLAA 
between the United States and Macau would significantly 
clarify procedures for requesting and receiving such 
evidence. 
 
--In July 2002, DEA and several other international law 
enforcement agencies began investigating a Taiwan-based drug 
organization led by Chen Kuang-hua, which had been smuggling 
heroin and methamphetamine throughout Asia, Australia, Canada 
and the U.S.  As a result of these investigations, the U.S. 
and Hong Kong issued provisional arrest warrants for Chen 
based on an indictment in Guam.  An MLAA would have permitted 
MSARG to do likewise.  The Macau Judiciary Police provided 
extensive assistance throughout this investigation, including 
critical evidence related to a drug transaction that occurred 
in Macau and Guam.  Given that no MLAA exists, this evidence 
could not be used in the Guam proceedings. 
 
--Since 1998, DEA along with authorities from Macau, Hong 
Kong, Canada and Australia have investigated the activities 
of the LOI Chon-meng international drug trafficking 
organization, active in trafficking methamphetamine and 
heroin.  The Macau Judiciary Police provided extensive 
assistance, including a large amount of evidence obtained 
from their financial investigation of this syndicate. 
Without an MLAA, this critical financial evidence cannot be 
used in U.S. court, making a U.S. indictment highly unlikely. 
 
¶12.  (SBU) ConGen Hong Kong's DEA Office also adds that drug 
traffickers use Macau as a meeting spot to conduct 
drug-related negotiations, money transfers, etc., as well as 
an entertainment venue while "conducting business."  The DEA 
is also interested in money laundering in Macau and its nexus 
to drug trafficking.  Having an MLAA will facilitate 
requesting and obtaining financial records and other official 
records (hotel bill, telephone call lists, etc.) for 
potential court cases which the DEA might be pursuing. 
Cunningham