U.S. and Hong Kong (1998)

U.S. Department of State

International Narcotics Control Strategy Report, 1997

Released by the Bureau for International Narcotics and Law Enforcement Affairs
U.S. Department of State
Washington, DC
March 1998

SOUTHEAST ASIA AND THE PACIFIC

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HONG KONG

I. Summary

The Hong Kong Special Administrative Region (HKSAR) continues to focus its attention on both money laundering and the transshipment of drugs. In 1997, Hong Kong conducted an interagency review of all laws and practices related to money laundering, which resulted in strengthened money laundering guidelines for Hong Kong financial institutions, securities firms, and the insurance sector. The reversion of Hong Kong to the sovereignty of the People's Republic of China on July 1, 1997, necessitated a number of actions to establish a new framework, both domestic and international, to address law enforcement cooperation. The HKSAR passed enabling legislation to implement extradition and mutual legal assistance agreements with other countries. The US-Hong Kong Extradition Agreement entered into force in January 1998. The new US-Hong Kong Mutual Legal Assistance Agreement is awaiting Senate action. With Hong Kong's reversion to Chinese sovereignty, the 1988 United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances has for the first time been made applicable to Hong Kong.

II. Status

Hong Kong's role as a major financial center makes it vulnerable to the illicit use of its financial institutions for laundering drug-related proceeds. Similarly, Hong Kong's geographical location and its large and active port make possible the illegal transshipment of containerized narcotics to the US and other markets.

III. Country Action Against Drugs in 1997

Policy Initiatives. Key initiatives undertaken by the Hong Kong SAR in 1997 included the passage of several pieces of enabling legislation, which laid the groundwork for post-reversion law enforcement cooperation with other countries on extraditions (the Fugitive Offenders Ordinance) and criminal investigations (the Mutual Legal Assistance in Criminal Matters Ordinance). Hong Kong also enacted the 1997 Drug Trafficking Order, which allows for the enforcement of confiscation orders made in countries that are signatories to the 1988 UN Drug Convention and is designed to enhance Hong Kong's ability to recover the proceeds of drug trafficking. In addition, Hong Kong amended the Dangerous Drugs Ordinance, providing for the imposition of heavier sentences for adults who exploit persons under the age of 18 in illegal drugs trade.

Hong Kong made further progress with the anti-drug initiatives which were adopted during the local "summit" meetings on drugs held in 1995 and 1996. A total of 125 initiatives have been put forward in the course of the two summits, and 118 of these initiatives--95 percent--have been met.

Hong Kong also conducted a review in 1997 of its "Beat Drugs Fund," which was established to fund counternarcotics initiatives by voluntary agencies. This review resulted in the tightening of the vetting mechanism for applications, a decision to provide briefing sessions for applicants, and the establishment of a monitoring mechanism to ensure that grants are used for their intended purposes. Hong Kong is also reviewing the Drug Addicts Treatment and Rehabilitation Ordinance, which oversees the establishment of centers for treatment and rehabilitation of drug abusers.

As part of its efforts to meet the goals and objectives of the 1988 UN Drug Convention, Hong Kong amended Schedules I and II of the Control of Chemicals Ordinance to place the salts of 17 chemicals under licensing control. Also as part of its precursor chemical control efforts, Hong Kong follows the recommendations in the 1988 Convention for issuing pre-export notifications to destination countries of precursor chemical shipments so that their international movements can be monitored for diversion.

Accomplishments. In 1997, Hong Kong stopped three suspicious chemical shipments, a success that was noted in reports issued by the International Narcotics Control Board.

Law Enforcement Efforts. Hong Kong has over 900 law enforcement officers in the Customs and Excise Department and police force dedicated to full-time drug enforcement. No major restructuring of these personnel took place during 1997. The Police Narcotics Bureau has set up specific teams for liaison with counterparts in different regions of the world and teams which are specifically tasked to concentrate on a particular drug, such as the drug "ecstasy". Due to the increased popularity and use of "ecstasy" among Hong Kong's youth, Hong Kong authorities stepped up their law enforcement measures, resulting in a significant increase in tablet seizures. Close cooperation between Hong Kong law enforcement agencies and the Public Security Bureau of Guangdong Province resulted in a substantial quantity of heroin seized in the mainland which would otherwise have entered Hong Kong. Through October 1997, Hong Kong narcotics officers had seized 157.9 kilograms of heroin, 1.456 kilograms of raw opium, 2.494 kilograms of prepared opium, 106 kilograms of cannabis, 32 kilograms of cocaine, 62.7 kilograms of "ice," and 43,064 methamphetamine tablets. Through November, 9,525 persons were convicted of drug-related offenses.

Corruption. There is no known narcotics-related corruption among senior government or law enforcement officials in Hong Kong. Hong Kong has a comprehensive Anti-Corruption Ordinance that is effectively enforced by an Independent Commission Against Corruption that reports directly to the Chief Executive.

Agreements and Treaties. A network of international agreements helps Hong Kong achieve its counternarcotics goals. At present, Hong Kong's Customs and Excise Department has entered into cooperative arrangements with customs authorities in the United States, the United Kingdom, Canada, Australia, New Zealand, Belgium, France, India, and Korea. Hong Kong has signed bilateral mutual legal assistance agreements with the United States, Australia, and France, and has initialled agreements with Switzerland, New Zealand, and the Philippines. Extradition agreements have been signed with the United States, Australia, the Netherlands, Canada, Malaysia, Indonesia, India, the Philippines, Singapore, and the United Kingdom and one has been initialled with New Zealand.

The US-Hong Kong Extradition Agreement--signed by both parties on December 20, 1996--was ratified by the US in November 1997 and came into force in January 1998. The bilateral Mutual Legal Assistance Agreement was signed on April 15, 1997 and awaits advice and consent to ratification by the US Senate.

Hong Kong continues to maintain close links with the United Nations, the World Health Organization, the Financial Action Task Force, Interpol, and the World Customs Organization. Hong Kong has welcomed the second review of its system by the Financial Action Task Force, which will take place in the spring of 1998. As part of the preparations for this exchange, Hong Kong has carefully reviewed its existing body of narcotics-related laws and practices.

Drug Flow/Transit. US counternarcotics officials believe that Hong Kong traffickers control large portions of Southeast Asian narcotics traffic, arranging both the financing and shipment of narcotics through Asian ports, including Hong Kong. The bulk of heroin seized in Hong Kong in 1997, however, appeared destined for the local market. In 1997, there were no heroin seizures in Hong Kong that appeared destined for the US market and no major seizures in the US either originated or transitted Hong Kong.

There are signs that the direct importation of cocaine by Hong Kong traffickers from South America may be on the rise; through October, Hong Kong authorities seized 32 kilograms of cocaine, double the 15.8 kilograms seized in 1996. Most of the couriers arrested at Hong Kong's airport continue to be from Latin America.

Hong Kong is a source/transshipment point for precursor chemicals such as ephedrine and pseudoephedrine, one of the precursor chemicals used in the production of methamphetamines. There are numerous chemical supply outlets in Hong Kong capable of supplying multi-ton quantities of these chemicals.

Domestic Programs. Hong Kong has in place an active preventive public education program designed to discourage drug use, especially among the young. Part of the annual "Beat Drugs Fund" allocation goes to preventive education. Of the 1997 USD 1.5 million allotment, approximately USD 350,000 was allocated for preventive education and publicity projects; an additional USD 1.17 million went towards treatment and rehabilitation services.

Hong Kong's anti-drug preventive education and publicity programs in 1997 included efforts to:

educate young persons that there is no difference between "hard" and "soft" drugs in terms of harmful effects, and to better equip them with refusal skills;

alert parents to the importance of strengthening parent-child relationships and the role that they can play to steer their children away from drugs; and encourage people, particularly younger people, to adopt a drug-free life style, and to point out that whatever their problems may be, there are alternatives to drugs.

In the first ten months of 1997, a special team within the Narcotics Division visited over 330 primary and secondary schools and technical institutes to provide preventive education talks that reached over 56,000 students. The Education Department supplements these talks by involving parents and students in anti-drug projects; in February, Education Department officials hosted an international conference on drug education in schools. Three new public service announcements were broadcast to promote an anti-drug culture among young people. In addition, 23 district anti-drug campaigns were organized by district "Fight Crime" committees.

IV. US Policy Initiatives and Programs

US Policy Initiatives. The USG stresses joint investigations with Hong Kong law enforcement officials to develop prosecutable cases--either in Hong Kong or in the US--against major Hong Kong-based traffickers. In the coming year, US Drug Enforcement Administration (DEA) personnel will assist the Hong Kong Customs and Excise Department with the further development of Hong Kong's chemical control program and work with Hong Kong to identify and monitor suspicious container shipments as part of a continuing effort to maintain the high degree of support in the area of precursor chemical control enforcement, monitoring, and legislation. USG officials will continue to encourage Hong Kong authorities to strengthen their laws governing money laundering and asset forfeiture.

Bilateral Cooperation. Hong Kong and USG investigators cooperated on several international narcotics investigations in 1997, resulting in a number of arrests and drug seizures. In two drug-related financial investigations, the Hong Kong Customs and Excise Department facilitated the forfeiture of USD 1.8 million and the Hong Kong Police provided assistance which led to the restraining of USD 2.1 million in Hong Kong.

In August, US, Hong Kong, and Mexican authorities coordinated a controlled delivery to Mexico of approximately 150 kilograms of pseudoephedrine which originated in China. Mexican authorities seized the shipment, and the investigation is continuing.

Hong Kong Customs and Excise authorities provided two instructors to assist DEA's diversion training team in conducting two one-week seminars in China. Hong Kong Customs and Excise and Hong Kong Police Narcotics Bureau officials accompanied US investigators to the annual Asian Organized Crime Conference in Florida and to the International Crime Conference in Hawaii. DEA sponsored several Hong Kong Customs and Excise officials attending international chemical control conferences in Prague, Vienna, and Lisbon. Local DEA officers continue to provide monthly briefings at the Hong Kong Police Command School.

The Road Ahead. The USG will continue to encourage Hong Kong to play an active role on narcotics and money laundering issues consistent with its international stature. In practical terms, this means: 1) improving the enforcement and implementation of existing laws and guidelines, especially regarding money changers and remittance agents; 2) increasing police funding and staffing for the aforementioned, as the police are now tasked with this function; 3) enhancing the legal framework to include tighter company registration procedures to discourage "shell" companies (especially off-shore corporations); 4) requiring reporting of transactions exceeding specified amounts and putting in place "structuring" provisions to counter evasion efforts; and 5) establishing and enforcing currency entry/exit reporting requirements. The US will also continue its emphasis on the chemical control program, in particular, regarding precursor chemicals.

TABLES for CY			1997	1996	1995	1994	1993	1992	1991	1990
Seizures /a
	Opium	[mt]	0.003	0.013	0.007	-	0.042	0.029	0.051	0.066
	Heroin	[mt]	0.157	0.309	0.411	0.338	0.223	0.563	0.138	0.212
	Cocaine	[kg]	32.0	13.9	1.8	9.0	42.0	0.2	7.5	1.0
	Cannabis	[mt]	0.106	8,823	1,052		1	3	0	2
Arrests			9,525	14,827	16,143	12,689	12,733	6,645	7,813	7,600

(a) Figures for 1997 from the Royal Hong Kong Police Bureau January-October only.

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