TEXT: DRUG CERTIFICATION STATEMENT OF EXPLANATION FOR HONG KONG
(Hong Kong target for money launderers, drug traffickers)

Washington -- Following is the text of the State Department's statement of explanation on Clinton's 1998 narcotic certification decision for Hong Kong:

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STATEMENT OF EXPLANATION

HONG KONG SPECIAL ADMINISTRATIVE REGION

The Hong Kong Special Administrative Region remains a target point for money launderers and drug traffickers. USG officials believe that Hong Kong traffickers control large portions of Southeast Asian narcotics destined for the West, including the United States. In 1997, however, there were no seizures of heroin destined for the United States which could be tied to Hong Kong itself. Hong Kong has strengthened money laundering guidelines applicable to its financial institutions, securities firms and the insurance sector. It also enacted the 1997 Drug Trafficking Order, which allows for the enforcement of confiscation orders issued by countries that are signatories to the 1988 U.N. Drug Convention, thus enhancing Hong Kong's ability to recover the proceeds of drug trafficking. With Hong Kong's reversion to Chinese sovereignty in July 1997, the 1988 U.N. Drug Convention has for the first time been made applicable to Hong Kong. The U.S.-Hong Kong Extradition Agreement was ratified by the United States in November 1997 and came into force in January of this year. The new U.S.-Hong Kong Mutual Legal Assistance Agreement awaits Senate action.

Close cooperation between Hong Kong law enforcement agencies and the Public Security Bureau of Guangdong Province resulted in increased seizures on the mainland of heroin which would otherwise have entered Hong Kong. In conformity with the 1988 U.N. Drug Convention, Hong Kong amended Schedules 1 and 2 of its Control of Chemicals Ordinance to place the salts of 17 chemicals under licensing control. Hong Kong also issues pre-export notifications to destination countries of precursor chemical shipments sodas to prevent diversions. As noted by the International Narcotics Control Board, Hong Kong stopped three suspicious chemical shipments in 1997. Hong Kong will face the second review of its system by the Financial Action Task Force in 1998 and has carefully reviewed its existing body of narcotics-related legislation and practices in preparation for that review.

There is no reported narcotics-related corruption among senior government or law enforcement officials in Hong Kong. Cooperation between the United States and Hong Kong on counternarcotics matters remains both wide-ranging and excellent. Hong Kong and USG personnel conducted several joint narcotics investigations in 1997, resulting in a number of arrests and drug seizures, as well as in financial seizures. In August, U.S., Hong Kong and Mexican officials also successfully coordinated a controlled delivery to Mexico of 150 kilograms of pseudoephedrine originating in China. Hong Kong Customs and Excise authorities provided two instructors to assist DEA's diversion training team in conducting two one-week seminars in China. Locally posted DEA officers continue to provide monthly briefings at the Hong Kong Police Command School.

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