Text: 1999 Narcotics Report on the Asia-Pacific Region
(Explanation Statement and Report on Hong Kong)STATEMENT OF EXPLANATION
HONG KONG
Although the USG continued to view Hong Kong as a major drug transit center in 1999 because of its location and developed infrastructure, Hong Kong's role as a major transit/staging area for the shipment of heroin and methamphetamine to the United States appears to have diminished over the last three years.
In 1999 Hong Kong continued its exemplary efforts to stop illicit drugs from being trafficked across its border with China and through its port. Through October 1999, Hong Kong officials seized 205 kilograms of heroin (nearly the amount seized in all of 1998), 35.8 kilograms of cannabis, 16.7 kilograms of cocaine, and 9,811 kilograms of methamphetamine. In the same period, 7,620 individuals were arrested for drug-related offenses. Drug-detection capabilities were enhanced in several important areas: the number of drug-sniffing dogs at the border and airport increased from 124 to 133; and high-tech equipment was procured to detect illicit drugs in packages, facilitate the inspection of baggage and cargo, and use in clearing air and sea cargo.
With respect to precursor chemicals, Hong Kong amended legislation to tighten control of the transshipment, removal, awl storage of potassium permanganate and to require a license from the Commissioner of Customs and Excise before potassium permanganate can be imported, exported, or manufactured. Control of several additional chemicals was also tightened in 1999 in response to resolutions passed by the U.N. Commission on Narcotic Drugs. The legislature also began working to amend legislation to enhance control of norephedrine.
Hong Kong also introduced new legislation to strengthen the anti-money-laundering regime and laws affecting drug profits and organized crime. New reporting requirements for financial transactions went into effect, and sentences for money laundering have been lengthened.
Hong Kong and U.S. law enforcement agencies continued to cooperate effectively on investigations into the movement of illegal drugs and on money-laundering cases. The Mutual Legal Assistance Agreement received legislative approval in Hong Kong arid will enter into force in early 2000. The Transfer of Sentenced Persons Agreement with the United States and with Sri Lanka came into force. Hong Kong also concluded similar agreements with other countries and the European Union.
In 1999 Hong Kong continued to implement new initiatives to strengthen its already outstanding counter-drug efforts, and Hong Kong authorities at ail levels continued their close cooperation with the United States and other countries to defeat drug trafficking.
Hong Kong
I. Summary.
Hong Kong's close geographical proximity to areas where drugs are cultivated, as well as its well-developed commercial transport infrastructure, have historically made it a natural transit point for drugs moving from Southeast Asia to the U.S. Although the U.S. continues to view Hong Kong as a major drug transit/staging area, it appears that Hong Kong's role as a transit/staging area for the shipment of heroin and methamphetamine into the U.S. has diminished over the last three years. This change could be attributed to the rapid development of economic and transportation infrastructure in southern China over the past five years. Development in mainland China includes the construction of new deep-water ports and road systems that dramatically reduced shipment costs and risks to movers of contraband who elect to ship from southern China rather than through Hong Kong. In addition, the counternarcotics efforts of Hong Kong's law-enforcement agencies have proven to be a strong deterrent to drug trafficking through Hong Kong. In the last three years counternarcotics officers made no seizures in Hong Kong of heroin en route to the U.S. Hong Kong residents were deeply involved in a significant heroin case in Australia, however, and counternarcotics officials in neighboring countries continue to report that Hong Kong criminal elements are involved in narcotics trafficking in the region.
Hong Kong adopted a multi-pronged strategy to combat drug trafficking and abuse consisting of effective law enforcement, anti-drug education and publicity programs, treatment and rehabilitation programs, research efforts, and international cooperation. Hong Kong's role as one of the world's major financial centers makes it an attractive venue for laundering money. Although Hong Kong is a source/transshipment point for precursor chemicals such as potassium permanganate, its role has begun to diminish. The 1988 UN Drug Convention, to which China is a party, applies to Hong Kong.
II. Status of Hong Kong
Hong Kong is not a producer of illegal narcotics. Hong Kong's close geographical proximity to the Golden Triangle and mainland China, as well as its well-developed commercial transport infrastructure, have historically made it a natural transit point for drugs moving from Southeast Asia to the United States. Because of Hong Kong's geographical, commercial, and economic profile, coupled with Hong Kong's highly developed port facilities that historically have been used by narcotics traffickers to transport illicit drugs from Asia to the U.S., Hong Kong continues to be designated as a major drug-transit point. Hong Kong's strong law-enforcement efforts over the past several years on the one hand and the rapid development of an economic and transportation infrastructure with rapid growth in direct trade in southern China on the other indicate that Hong Kong's role as a major drug-transit center has been diminishing. The lack of recent seizures of drugs destined for the U.S., despite Hong Kong's stringent enforcement regime, suggests a reduced role for Hong Kong as a transit point for drugs. Nevertheless, drugs secreted in any of the millions of containers transiting Hong Kong each year may escape detection, despite Hong Kong's vigorous enforcement efforts. Moreover, organized criminal gangs and syndicates, many involved in narcotics trafficking, continue to operate from Hong Kong. A recent large heroin seizure in Thailand, for example, yielded investigative leads indicating involvement of Hong Kong criminal elements in managing and financing the trafficking of a series of large heroin shipments to the U.S. During 1999, Hong Kong law-enforcement officials continued to cooperate fully with their U.S. counterparts on all investigations related to illicit drugs and money laundering.
In the first half of 1999, a total of 9,928 drug abusers were reported to the central registry of drug abuse, representing a decrease of 7 percent compared to the first part of last year. Authorities believe most narcotics entering Hong Kong are destined for domestic consumption. In the first half of 1999, the most commonly abused drugs were heroin (87.5 percent), cannabis (7.8 percent), amphetamines (6.3 percent), and triazolam (4.4 percent). There was an increase of 1.8 percent in the abuse of crystal methamphetamine in the first half of 1999.
Hong Kong's role as a major financial center continues to make it vulnerable to the illicit use of its financial institutions for laundering drug-related proceeds. Money laundering in Hong Kong involves not only drug proceeds, but also funds stemming from other criminal activities, such as tax evasion. The level of money laundering from tax evasion and other criminal financial activity is believed to be significant (albeit not quantifiable). Hong Kong continues to tighten controls to prevent money laundering.
Although Hong Kong is a source/transshipment point for precursor chemicals, such as potassium permanganate, ephedrine and pseudoephedrine, its role has diminished because of the recent reclassification of potassium permanganate from Schedule 3 to Schedule 2 on the "Control of Chemicals Ordinance."
III. Hong Kong Actions Against Drugs in 1999
Policy Initiatives. In accordance with the resolution passed at the Special Session of the UN General Assembly held in June 1998, Hong Kong amended its legislation to tighten control of potassium permanganate by upgrading it from Schedule 3 to Schedule 2 on the "Control Of Chemicals Ordinance." The new legislation requires a license from the Commissioner of Customs and Excise to import, export and manufacture potassium permanganate. In addition, the transshipment, removal, and storage of potassium permanganate are strictly controlled.
In response to another resolution passed by the UN Commission on Narcotic Drugs, Hong Kong plans to amend its legislation to tighten the control of norephedrine and expects to have amended legislation completed by mid-2000.
As of April 1, 1999, Hong Kong significantly tightened control of the following additional substances by moving them from Schedule 4 to Schedule 2 of the "Dangerous Drugs Ordinance": morphine, acetyldihydrocodeine, codeine, dihydrocodeine, ethylmorphine, nicocodine, norcodeine, pholcodine. In addition, amfepramone, cathine, etryptamine, mesocarb, and zipeprol were added to Schedule 1 of the Ordinance. Also in response to a recent decision passed by the UN Commission on Narcotic Drugs, in 2000 Hong Kong will tighten control of remifentanil and dihydroetorphine by including them in Schedule 1 of the "Dangerous Drugs Ordinance."
In April 1999 the government began to strengthen its anti-money-laundering regime by introducing legislation to impose a recording requirement for large cash transactions completed at remittance centers and through exchange agents. Remittance centers and exchange agents must record information on customers making transactions of HK$20,000(U.S. $2740) or more. The records must be retained for six years. The amendment is expected to go into effect in early 2000. The government has also introduced an amendment to strengthen the "Drug Trafficking (Recovery Of Proceeds) Ordinance" and "the Serious Crimes Ordinance." The amendment will improve the reporting requirement for suspected money-laundering transactions by reducing the threshold from reasonable grounds to "believe" to reasonable grounds to "suspect" money-laundering activities. The proposed amendment will also increase the penalties for money-laundering offences from a maximum of 14-years to 20-years imprisonment and for the failure to report suspicious transactions from 3-months to 12-months imprisonment.
During the second half of 1999, the government completed a six-month policy review of the "Drug Addicts Treatment and Rehabilitation Ordinance." As a result of the review, the government is drafting new legislation to bring drug treatment and rehabilitation centers under uniform control and to improve the quality of services.
Accomplishments. As noted above, Hong Kong tightened control over several precursor chemicals, including the cocaine precursor potassium permanganate, by moving them from Schedule 3 to Schedule 2 on the "Control Of Chemicals Ordinance" and introduced legislation to strengthen its anti-money-laundering laws. Hong Kong signed a Mutual Legal Assistance Agreement with Switzerland, and in May 1999 Hong Kong Customs and Excise entered into a cooperative agreement with the European Union.
Law Enforcement Efforts. During 1999, Hong Kong's law-enforcement community continued a focused, intelligence-based, operational approach. Resources were allocated in accordance with trends in drug manufacture, smuggling, trafficking, and consumption. Conforming to the government's "Enhanced Productivity Program," the Narcotics Bureau of the Hong Kong police force will be restructured in early 2000. The new structure will reflect the bureau's move towards intelligence-led investigations and will result in a greater allocation of resources to intelligence gathering and analysis. Liaison officers will be placed into one division, which will enhance communication with international law enforcement agencies, and will emphasize regional drug enforcement.
In the past two years, the Hong Kong police force has added 955 new officers and has spent over U.S. $3.7 million on adding to and upgrading its computer systems to improve the collation and dissemination of criminal intelligence. At the border and airport, additional police dogs have been deployed to assist in the detection of smuggled drugs. The number of police dogs increased from 124 to 133. Customs procured high-tech equipment, including ion scanners, x-ray checkers, mobile x-ray vans, and scanners, to detect microscopic traces of drugs on packages and to facilitate the efficient and effective inspection of baggage and cargo. High-tech equipment was also used in the air cargo clearance system for airport inspection, in the customs' control system for sea cargo inspection, and in the land boundary system for border checkpoints. A total of U.S. $64.1 million was budgeted for the procurement of high-tech equipment.
Heroin remains the drug of choice in Hong Kong. Heroin seizures through the end of October 1999 nearly equaled the total seized in calendar year 1998. As of October 31, a total of 205 kgs of heroin were seized. As of January 1999, the price of street-level heroin had risen dramatically, while the purity level had fallen, suggesting reduced supply. From January through October, Hong Kong narcotics officers seized 35.8 kilograms of cannabis, 16.7 kilograms of cocaine, and 98.1 kilograms of methamphetamine and arrested a total of 7,620 individuals for drug-related offenses.
Corruption. There is no known narcotics-related corruption among senior government or law-enforcement officials. Hong Kong has a comprehensive anti-corruption ordinance that is effectively enforced by an independent commission against corruption. The commission's record of enforcement efficiency is recognized worldwide.
Agreements And Treaties. In 1999 Hong Kong signed a Mutual Legal Assistance Agreement with Switzerland, and mutual legal assistance agreements with New Zealand, France, and Australia also came into force in 1999. Arrangements were completed to allow the U.S.-Hong Kong Mutual Legal Assistance Agreement to enter into force on January 20, 2000. Hong Kong also signed a "Surrender of Fugitive Offenders Agreement" with Sri Lanka, and transfer of sentenced persons agreements with the U.S. and another with Sri Lanka came into force in 1999. In May 1999, the Customs and Excise Department entered into a cooperative agreement with the European Union. The 1988 UN Drug Convention is applicable to Hong Kong.
Cultivation/Production. Hong Kong is not a producer of illicit drugs.
Drug Flow/Transit. Hong Kong officials believe that Hong Kong's role as a major drug flow/transit center continued to diminish in 1999. Seizures indicate that shipments of heroin and methamphetamine directly from Hong Kong to the international market seem to be few in number and of relatively small quantities, usually fewer than 10 kilograms. Although illicit narcotics transit through Hong Kong, the known volume of traffic has decreased significantly over the past few years. In addition, no coordinated effort or systematic approach to the shipment of drugs through Hong Kong's territory appears to be used; many seizures involved small quantities of narcotics carried by individual couriers. In 1999, there were no seizures in Hong Kong that appeared destined for the U.S. Hong Kong traffickers continue to control large portions of Southeast Asian narcotics traffic, however, arranging both the financing and shipment of narcotics and using various routes and methods throughout the region.
Domestic Programs. During 1999, Hong Kong's drug education and public awareness programs continued to focus on Hong Kong's youth and their parents. In March Hong Kong initiated a pilot program with several non-government organizations to conduct education talks at the primary school level. In addition, the government started the "Outstanding Anti-Drug Workers' Award."
In March Hong Kong initiated a review of its methadone treatment program to evaluate the program's effectiveness and to identify areas for improvement. In August the narcotics division began preparing the second three-year plan on drug treatment and rehabilitation services. The review will examine major developments in drug treatment and rehabilitation centers and will develop recommendations on improving the quality of the programs.
In 1999 Hong Kong announced that the U.S. $40 million "Beat Drugs Fund" set up in March 1996 awarded U.S. $2.4 million to 49 projects. Of that total, U.S. $1.8 million was awarded to preventive education and publicity projects and the balance was granted for treatment and rehabilitation services.
IV. U.S. Policy Initiatives And Programs.
Policy Initiatives. U.S. law-enforcement officials continue to conduct joint investigations with their Hong Kong counterparts to develop cases that can be prosecuted either in Hong Kong or in the U.S.
In October 1999 Hong Kong hosted the Second International Operational Meeting on potassium permanganate, which was co-sponsored by the U.S. Drug Enforcement Administration (DEA) and the Hong Kong Customs and Excise Department. Hong Kong sent a total of 12 law enforcement officials to the International Law Enforcement Academy (ILEA) in Bangkok to participate in two courses, one on clandestine laboratories and the other on precursor chemicals and methamphetamine investigations. In addition, 5 customs and excise officers attended a six-week ILEA supervisory criminal investigator course, which included instruction on regional drug enforcement. In December, local U.S. drug-enforcement officials and a criminal investigator from the U.S. Internal Revenue Service provided training to Hong Kong law-enforcement officials on money laundering investigative techniques. In September, one officer from the Hong Kong Customs and Excise Department attended the DEA-sponsored "operation jetway" training course.
Road Ahead. The U.S. Government encourages Hong Kong to continue playing an active role consistent with its international stature in combating narcotics and money laundering. The U.S. also encourages Hong Kong to strengthen the enforcement and implementation of existing laws and guidelines, especially regarding financial crimes and money laundering; to tighten business registration procedures to discourage "shell" companies, especially off-shore corporations; to introduce lower threshold reporting requirements for transactions at financial and banking institutions; to institute "structuring" provisions to counter evasion efforts; and to establish and enforce currency exit/entry reporting requirements.
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