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TO RUEATRS/DEPT OF TREASURY WASHINGTON DC
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INFO RUEHOO/CHINA POSTS COLLECTIVE

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TAGS: EFIN PREL PGOV PTER CH
SUBJECT: CHINA/AML: DAS GLASER'S MEETING WITH PEOPLE,S BANK 
OF CHINA ANTI-MONEY LAUNDERING BUREAU DIRECTOR GENERAL TANG 
XU 
 
¶1. (SBU) Summary:  The People's Bank of China (PBOC) 
Anti-Money Laundering Bureau was willing to consider 
formation of an anti-money laundering and illicit finance 
working group under the framework of the S&ED, PBOC 
Anti-Money Laundering Bureau Director General Tang Xu told 
Treasury DAS Glaser on October 20.  China was still in the 
initial stages of development in the areas of anti-money 
laundering and illicit finance and appreciated the training 
provided by the United States on these subjects in Thailand. 
China was continuing to work diligently and was willing to 
enhance cooperation with the United States vis-a-vis a 
working group, focused on corruption fund outflows.  The PBOC 
did not show great interest in using the working group to 
discuss Af-Pak illicit finance issues, despite a suggestion 
by the Chinese Ministry of Foreign Affairs to DAS Glaser to 
this effect.  DAS Glaser will draft a proposed agenda for an 
early 2010 working group meeting, and the PBOC will review 
the agenda.  End Summary. 
 
Discussion of Cooperation and Proposal for a Working Group 
------------------ 
 
¶2. (SBU) DAS Glaser began the October 20 meeting with 
Director General Tang Xu of the Anti-Money Laundering Bureau 
of PBOC by expressing his appreciation for the discussions 
held during the morning session of the October 20 meetings at 
Diaoyutai.  DAS Glaser noted that there had been many 
opportunities to discuss big issues with the Chinese, such as 
North Korea and Iran, but there should be a means to discuss 
other areas of cooperation on more regular basis.  One way 
this regular cooperation could take place would be through 
the establishment of a working group under the S&ED 
framework.  DAS Glaser noted that the July S&ED statement 
called for China and the United States to strengthen 
cooperation on illicit finance issues.  Additionally, during 
a meeting with PBOC Director General Xie Duo this past summer 
in Washington, the idea of a working group had been raised, 
and DG Xie had indicated his support for this idea.  DAS 
Glaser reminded DG Tang of a letter he sent him with specific 
information on a proposal for the establishment of a working 
group. 
 
China's Development on Anti-Money Laundering and Illicit 
Finance Efforts 
------------------- 
 
¶3. (SBU) DG Tang responded that he was familiar with these 
issues, had noted the directive in the July S&ED statement, 
and had received a report from DG Xie following his meeting 
in Washington with DAS Glaser.  China was committed to 
addressing the issues of money laundering and illicit 
finance, but was still in the initial stage of work on these 
issues.  During this initial stage, China had established 
laws and regulations and improved investigation mechanisms. 
DG Tang explained that there had been great progress in 
2007-2008, PBOC had referred over 40 cases to law 
enforcement, involving 100 billion renminbi.  DG Tang also 
expressed his appreciation for recent training of Chinese 
officials conducted by the United States in Thailand on the 
subject of complex financial transactions and anti-money 
laundering.  This training had been extremely useful to the 
Chinese banking staff and had increased their level of 
expertise in dealing with such problems. 
 
Brainstorming the Structure and Topics for the New Working 
Group 
--------------------------------------------- --- 
 
¶4. (SBU) DAS Glaser acknowledged the great progress which 
China had made, but noted that there were still areas for 
improvement in the United States and China's systems.  Both 
countries faced similar problems and so creating a regular 
working group would allow for collaboration and cooperation. 
The United States was open to China's suggestions for how the 
group could be structured and was flexible on the topics 
which would be discussed.  This would not be a group to talk 
about North Korea, and would not replace existing mechanisms 
for dealing with sensitive issues.  Additionally, the United 
States Secret Service was prepared to begin work immediately 
with China on the issue of counterfeit currency. 
 
¶5. (SBU) DG Tang inquired what specific areas of discussion 
DAS Glaser proposed for this working group.  Would 
 
discussions of illicit finance be in terms of corruption, 
organized crime or anti-money laundering?  How would the 
working group function in terms of information exchanges? 
Would there be intelligence sharing?  He mentioned that 
intelligence sharing was already taking place between the 
China Anti-Money Laundering Monitoring and Assessment Center 
(CAMLMAC) and other countries.  However, since there is no 
memorandum of understanding on intelligence sharing in this 
area with the U.S., PBOC could not commit to this kind of 
intelligence sharing. 
 
PBOC Unwilling to Discuss Af-Pak Issues in the Working Group 
------------------------ 
 
¶6. (SBU) DAS Glaser said that during a meeting with the 
Chinese Ministry of Foreign Affairs (MFA), the United States 
had proposed a variety of possible working group topics.  MFA 
had suggested that the working group could discuss the issue 
of illicit finance for the Taliban in Afghanistan and 
Pakistan. 
 
¶7. (SBU) DG Tang rejected the suggestion of using the working 
group mechanism to discuss anything related to Afghanistan 
and Pakistan, and suggested that Chinese security bureaus 
would be a more appropriate partner for that type of 
discussion.  The PBOC handled money laundering, but not 
Afghanistan and Pakistan, or criminal issues such as drug 
trafficking. 
 
PBOC Suggests the Topic of Corruption Funds Outflow 
------------------------- 
 
¶8. (SBU) DG Tang raised the issue of corruption funds outflow 
as an issue of extremely high concern for the PBOC.  Any 
mention of the corruption funds outflow issue to the PBOC or 
any other Chinese Ministry would be a welcome topic and would 
likely generate significant interest.  If the proposed 
working group discusses corruption flows and illicit funds 
flows, then the PBOC would have an interest in participating. 
 
Next Steps and Moving Forward 
------------------------- 
 
¶9. (SBU) DAS Glaser agreed to the suggestion to discuss 
corruption funds outflows and offered to draft an agenda for 
review by the PBOC, with the intention of scheduling a first 
meeting in early 2010in either Washington or Beijing.  DG 
Tang responded that he would first need to consult with the 
Chinese S&ED Coordination office and his PBOC colleagues 
before committing to anything. 
 
¶11. (SBU) DAS Glaser passed a page of information from the 
United States Secret Service detailing the necessary 
prerequisite for USSS anti-counterfeit training, such as 
sample Chinese Yuan notes.  The PBOC response and samples 
could be passed via David Dollar or Jean-Paul Duvivier in the 
U.S. Treasury attache office in Embassy Beijing. 
 
¶12. (U) The delegation cleared this message. 
 
HUNTSMAN 
HUNTSMAN