Chinese Intelligence Services and Triads Financial Links in Canada........PART 2

Sidewinder Secret RCMP-CSIS Joint Review Committee Draft Submission SECRET Joint RCMP Study Information as of 24 June 1997 Translated text Chinese Intelligence Services  and Triads Financial Links in Canada Draft Submitted  to the RCMP-CSIS  Joint Review Committee 24 June 1997 CHINESE INTELLIGENCE SERVICES PENETRATION OF CANADIAN COMPANIES 46.  All areas of the Canadian economy are targeted, but high technology is the one most at risk.  Several cases of theft of Canadian proprietary information and/or technology have been reported to and investigated by Canadian authorities.  For example, Ontario Hydro believes it was the victim of theft of information in the nuclear technology field by an individual of Chinese origin.  This individual sent unauthorized faxes (some containing hours worth of data) to a telephone number in China, associated with the State Science and Technology Commission.  In another case, a Chinese employee of a major computer company based in Canada was accused of copying the company's proprietary information onto diskette, for the purposes of selling the information to China.  In a third instance, a Canadian company alleged that one of their former employees, who had previously served in the Chinese military, stole proprietary information regarding energy technology and sold it to the Chinese government.  (S) 47.  The Chinese government also takes advantage of growing business ties between China and Canada to provide cover for intelligence activities.  For example, a company owned by a Chinese-Canadian sponsored what was ostensibly a Chinese business delegation to come to Canada.  In reality, the "delegation" was comprised of Ministry of State Security officials travelling to Canada to conduct an intelligence operation.  Another delegation that travelled to Canada under the cover of representing a Chinese company was actually composed of officers from a sensitive sector of the People's Liberation Army, who were attempting to make arrangements to purchase secure communications technology for military purposes.   48.  The ChIS do not hesitate to expend great energy on pursuing their activities.  They have established companies on Canadian soil solely for traditional and economic espionage purposes.  These companies are used as cover for ChIS agents to help gain them an entree into Canadian business circles.  These front companies have been observed to have contacts with the triads in Canada.  (S) INTERFERENCE BY FINANCING OF CANADIAN POLITICAL PARTIES 49.  One of the means used by the Hong Kong business people and triads associated to Beijing is to seek influence and support among Canadian politicians by financing political parties.  This practice, is not unique to Canada.  Recently, a stir was caused in the US media over the illegal Chinese funding of the Democratic Party.  Over 2,000 American companies suspected of being used by Chinese are currently under investigation by the FBI.  In 1993, Britain was wracked by a similar scandal when over £1.5 million (or nearly CDN $3 million) was donated to the British Conservative Party by Hong Kong financiers such as Li Ka-Shing (CDA $1.8 million), Stanley Ho ($200,000), Tsu Tsin-Tong ($100,000) and even C.H. Tung ($70,000) who is now Beijing's man in Hong Kong.  (C) 50.  Canada also allows "Canadian corporate citizens" to make financial contributions to political parties, but the parties are obliged by the Canada Elections Act to report the amounts.  Many of the companies identified in this research have contributed sometimes several tens of thousands of dollars to the two traditional political parties, the Liberals and the Conservatives.  As examples, in 1994, Merrill Lynch Canada gave the Liberal party $20,432.94.  Between 1991 and 1194, Husky Oil, which is owned by Li Ka-Shing, alone contributed over $100,000 to the same two parties.  North American Studio (Canada), which was affiliated with the triads, also contributed.  Set within their Canadian and regional contexts, the total amount of these contributions to local organizations is substantial.  Further, an "entrepreneur" may have several businesses in an area that will also contribute to the parties' funds.  In the end, large sums are distributed by various hands but from the same wallet.  It is precisely the total amount distributed at several places that makes the interplay of influence and political 'friendships" so important.  (S) 51.  The information presented here represent only a very partial view of the real situation and brings questions to the amount of influence gain through donations.  To obtain a complete picture, further research would be needed.  (S) THE IMPORTANCE OF CHINESE DIASPORA 52.  The key to the Chinese riddle lies in understanding the unique culture of the Chinese people.20  The core of this culture is to be found in the importance of developing and maintaining a very broad network of privileged contracts based on the fact of being Chinese, your backers (Hou Tui) and an individual's obligations towards others (Guanxi).  Furthermore, no other ethnic group in the world can equal the economic power of the Chinese diaspora.  Their numbers are estimated at over 60 million, and their financial power is put conservatively at over US $2 trillion.  With the wave of immigration from Hong Kong, this financial power has grown again exponentially.  Most Southeast Asian countries have long found their national economics to be dominated sometimes by as much as 90 per cent, by the Chinese community.  While not supporting its political views, most Chinese retain a strong attachment to the Motherland remains.  The Chinese diaspoa is present on every continent and has always been, willingly or not, the point of entry into and the centre of operations in a foreign country for the ChIS and the triads.  (S)  CONSEQUENCE FOR CANADA 53.  Because of its strategic alliance with some important and influential Hong Kong business people, and with organized crime syndicates, the Chinese leadership appears to be today in a position to developing a potential of influence over the international market and particularly on the Canadian economy and political life of the country.  Why Canada?  Because Canada always been somehow favourable in China.  It has also an important Chinese community and very important economic tides with Hong Kong.  Having bought significant real-estate holdings and established companies in Canada, gain some access to political leaders and business people, it is now in a position to seek power by influence.  What make it difficult to argue against it the fact that most of it has been done legally.  Even more, the threat is manifold and very elaborated in a complicated web of businesses.  It diffuses itself through a not so tangible network.  If you look at a single individual, the threat does not seem to be there but because of their associations and their alliances with China, the facts analysed lead to the believe that a gain of influence is been the object of a concerted plan and that could constitute a threat to Canada.  (S) 54.  Some Chinese owners are now in a position to use the Canadian companies they have bought and some political channels that they have developed to obtain subsidies for research and even classified contracts.  Once access is gained, little is in place to prevent them from repatriating the fruits of the research or classified information to China.  (S) 55.  The triads and their associates also used these positions to transfer large sums of money derived from criminal activities into the Canadian economy.  Buying Canadian property or a Canadian business affords a "window" of opportunity to pursue their illegal activities in Canada, such as money-laundering and drug-trafficking.  (S)   56.  One of the important dimension of the Chinese financial holdings is its ownership over important Canadian real estate.  The nerve centre of the Canadian economy is concentrated in three or four large urban centres.  Already, a large part of these financial centres are in the hands of Chinese interests.21  Canada is not the only country where we observe this situation.  One has only to look at the profile of the Southeast Asian economy or the investigations currently underway in the United States.  The Canadian economy, however, is more vulnerable because of many legislative loop hole governing finance and the concentration of financial power in the hands of few.  The potential of threat also lies in the fact that, at present, a foreign power, China, seems to be in a position to influence the Canadian economy and politics.  (S) 57.  Several Canadian companies in the security field, such as computer management and video surveillance, are now owned by Chinese interests.  When a contract is awarded by federal departments to private companies, the usual security investigations are done on the persons who will eventually be working on a project or installing equipment.  Now a new threat seems to be itself in relation with the ownership of some companies.  The case of Data Crown is a good example of this situation.  Although some verifications to investigate foreign companies are done by a group of people at the Department of Public Work, it is not impossible that this shortcoming has already been exploited by no one is able at the moment to answer this question with any certainty because of the complexity of the ramifications involving Chinese companies owned or the ones with some special interest with China.  (S) 58.  There is no longer any doubt that the emigration process in Hong Kong has been abused, and that individuals are being corrupted in some of the Western immigration services.  The entry of triad members and the cases of 13 illegal migrants laid against an ex-judge of the immigration services are not the only cases of malpractices and had caused in the past problems to the immigration system.  This situation places Canada in a vulnerable position regarding illegal immigration and shows the interest by the Chinese of the Canadian immigration system.  (S)  59.  China remains one of the greatest ongoing threats to Canada's national security and Canadian industry.  There is no longer any doubt that the ChIS have been able to gain influence on important sectors of the Canadian economy, including education, real estate, high technology, security and many others.  In turn, it gave them access to economic, political and some military intelligence of Canada.  The great difficulties in determining the threat is that it is diverse and multi-layered.  It diffuses itself through elaborated networks hold by a cultural practise that still is not well understood by Western Services.  (S) RECOMMENDATIONS 1.  An expanded task force including analysts from at least the RCMP, CSIS, DFAIT, Immigration Canada and Revenue Canada (Customs and Excise) should be formed to pursue the research begun by this document.  (S) To assess the actual control of Chinese companies over the Canadian economy. (S) To review who the influential Canadian figures are on the boards of the Canadian companies. (S) To consult the FBI, which has recently undertake a similar study; such consultation could prove mutually beneficial. (S) 2.  Support a series of presentations to CSIS regional directorates and RCMP divisions to alert operational managers to the need to investigate Chinese activities the better to grasp the links among the Chinese Intelligence Services, the triads and entrepreneurs in the service of Chinese Companies.  (S) 3.  Organize a series of presentations for senior members of the Canadian security and intelligence community.  (S) 4.  Organize presentations for specific government departments affected by the problem other than those in the intelligence community, such as Justice and Industry.  (S) 5.  Undertake review of security companies which have installed security systems for federal government departments and Crown corporations to determine the real control and ownership of the companies and the potential risk to the integrity of the systems.  (S)  6.  Carry out thorough research to determine the extent of contributions to Canadian political parties by Chinese companies established in Canada.  (S) 7.  Produce a strategic analysis of the activities and involvement of the government of China and the triads in Chinese entertainment and media in Canada.  (S) Appendixes ANNUAL NUMBER OF CERTIFICATES OF PERMANENT RESIDENCE IN CANADA FOR PERSONS FROM HONG KONG SINCE 1990: "ENTREPRENEUR" AND "INVESTOR" CATEGORIES22 Entrepreneur Investor Total 1990 4294 2293 6587 1991 3622 2500 6122 1992 8130 4458 12588 1993 7698 5246 12944 1994 5758 5437 11195 1995 3623 2046 5669 1996 4352 2694 7046 1997 (March) 504 268 772 1990-1997 37981 24942 62923 ANNUAL BREAKDOWN OF THE CHOICE OF PROVINCE BY PERMANENT RESIDENTS FROM HONG KONG:  "ENTREPRENEUR" AND "INVESTOR" CATEGORIES23 1990 1991 1992 1993 1994 1995 1996 1997 (Mar) 1990-97 Newfoundland 13 3 9 8 9 1 0 0 43 P.E.I. 6 2 4 12 5 13 27 0 69 Nova Scotia 22 42 79 160 243 168 204 19 (937) New Brunswick 9 12 21 17 13 14 4 0 90 Quebec 1481 1555 4354 3379 855 586 738 64 (13012) Ontario 1857 1595 3099 3627 3399 1839 2196 346 (17958) Manitoba 76 89 142 119 143 22 28 3 (622) Saskatchewan 115 73 286 261 138 39 13 4 (929) Alberta 341 329 825 1048 1025 428 559 61 (4616) British Columbia 2663 3417 3762 4313 5354 2559 3269 275 (25612) NW Territories 4 5 0 0 7 0 4 0 20 Yukon 0 0 7 0 4 0 4 0 15 Total 6587 (7122) (12588) 12944 11195 5669 7046 (772) (63923)      (corrected summations) ORIGIN AND DESCRIPTION OF THE TRIADS 1.  The origin of the triads remains blurred by romantic legend, heroic myths and patriotic folklore.  "Triad" is an English term given to describe the three-sized symbols found on many of the early flags and banners of various Chinese political and social organizations.  The three sides represent the three primary forces of the universe-heave, earth and man.  Triads originated in China during the 17th century in the form of secret societies.  They were dedicated to the political cause of overthrowing the Mongolian (Manchu (or Ch'ing) Dynasty.  While their original intentions were patriotic in nature, by the late 1800s, triads had evolved into widely feared criminal societies. 2.  During the upheavals in China in the early part of this century, they aligned themselves with the nationalist Chiang Kai Shek, himself a major triad leader.  When the communists seized control of mainland China in 1949, these syndicates fled to Hong Kong and Taiwan. 3.  Triads today remain extremely secretive and closed criminal fraternities.  The triads also developed highly ritualized initiation ceremonies meant to instill a strong sense of secrecy, and more importantly, loyalty to other triad members.  Thirty-six oaths, most dealing with loyalty to the triad, traditionally are part of these imitations.  For example, Oath number 4 states: "I will always acknowledge my Hung brothers when identify themselves.  If I ignore them, I will be killed by myriads of swords."  Oath number 20 states that if a brother gives away the secret ceremonies of the society, may he be eaten by a tiger or have his eyes bitten out by a snake.  Each oath ends with a promise of death if the oath is broken. 4.  An individual gains considerable benefits from being a triad member.  These benefits include: 1)    FREEDOM OF MOVEMENT - membership gives the automatic right to operate socially or criminally in an area controlled        by the triad. 2)    FINANCIAL AID - when arrested by Police, he can rely on fellow members to provide financial aid for legal expenses and        his family. 3)    CONFIDENCE - triad members who are involved in syndicated crime require continuous contact with their fellow        conspirators and the fact that all have taken a oath instills a greater degree of mutual trust. 4)    FEAR - the fact that a criminal is a triad member and tells his victim so, often reduces the necessity for violence. 5)    FACE - this is very important and there is no doubt that triad membership increases one's status in the criminal        community. 6)    POWER OR PHYSICAL SUPPORT - if involved in a dispute he can summon fellow members to his aid to intimidate or        assault the opposing party. 5.  All triad societies display some degree of hierarchy, and a typical triad has members organized by rank.  Each rank carries a title and a numerical value, based on triad ritual.  The leader of a triad is known as the "Dragon Head' or the Mountain Lord, and carries the rank "489."  Other "office bearer" positions include the deputy head of a branch also known as Assistant Mountain Lord, who carries the rank "438".  This rank goes as well to the Vanguard and Incense Master, both of whom officiate at ceremonies.  The White Paper Fan, who holds the rank "415", is the advisor on administration, finance and organization of the branch.  The Red Pole, who holds the rank "426", is the head fighter and battle strategist.  The Straw Sandal, holding the rank "432", is responsible for organizing battle and meeting with other societies.  He also delivers demand notes when necessary, for ransom or protection money.  All other triad members are know as ordinary members or soldiers, and hold the rank of "49".     6.  the relationships among individual triad members are based on ties between "Dai-Lo's" (big brothers), and "Sai-Lo's" (little brothers).  The Sai-Lo's give loyalty, support and sometimes money to their Dai-Lo, in exchange for protection and advice. 7.  Triad societies are in fact a collection of loose-knit groups or gangs rather than a complete monolithic criminal organization, such as the Mafia whose power is diffused from a central core through an organized chain of command.  Instead, triad members frequently branch out into their own criminal enterprises.  While the triad leadership does not always initiate and direct the criminal activities of all the triad members, triad clearly serve as international networks to facilitate such activity.  Moreover, monetary profits from criminal activity of triad members often flow to the top in indirect ways, such as through gifts. 8.  Even though it is now a criminal offence even to be a member of a triad in Hong Kong, that city is the undisputed capital of modern day triads.  While exact numbers are difficult to corroborate, according to the Royal Hong Kong Police there are today in Hong Kong over 50 triad societies, of which 15 to 20 regularly come to the attention of the police through their involvement in crime.  The clandestine nature of the triad movement precludes an accurate assessment of the total number of triad members, society membership ranging in size by considerable degrees.  In Hong Kong, triads can be divided into four main categories: The Chiu Chao Group 9.  This group consists of four criminal syndicates.  The oldest of the four is know as the Fuk Yee Hing and it continues to operate in Hong Kong.  The membership of this triad is comprised mainly of descendants of the earliest immigrants from China.  The youngest triad of this group is the Sun Yee On triad, established in 1919.  The Sun Yee On Triad is currently the most powerful of the Hong Kong-based triads with extensive international interests (United States, New Zealand and Canada.) The Big Four 10.  This group is composed of nine triad organizations whose name characteristically starts with one of the following words: Tang, Tung, Luen, and Ma.  This group is involved in extortion, prostitution, and robbery.  The Luen Kung Lok is one of the most important triads in Canada.  The Wo Group 11.  Thirteen triad organizations now belong to the Wo, including the Wo Hop To and Wo Shing Wo.  The Wo triads are principally noted for their large-scale robberies and gangland-style killings. The 14K 12.  The 14K is the third largest society of modern times.  The society was formed in 1949 by refugees from the Chinese mainland.  14K has a large number of sub-branches and independent groups.  This triad has become international in scope with branches in Japan, Taiwan, Southeast Asia, Europe, United States and Canada.   Taiwan 13.  After 1949, the triads also fled to Taiwan.  Today there are believed to be 700 or so gangs and triads in Taiwan.  One of the most famous and largest is the United Bamboo Triad.  The United Bamboo has an estimated membership of over 20,000.  It now operates internationally in the United States, Canada and throughout the Far East.  The group is particularly active in Los Angeles, Houston, New York and Vancouver, and has been linked to murder, kidnapping, alien smuggling, illegal gambling, and loan sharking. PROFILES OF TYPICAL TRIAD MEMBERS These profiles are used by the Immigration Control Office and the RCMP Liaison Office in Hong Kong to assess applicants. Profile A: Young Adult24 Sex: Male Age: 11-25  Occupation:  The status of an individual can range within this category depending on the position within a society.  At lower levels, some well be unemployed and will be living off their girlfriends, who in many cases may be willing prostitutes.  If employed, employment will be in a business of a cash generating nature, e.g. hawkers, night clubs, restaurants, interior decorating firms, fish markets, health clubs, massage parlours, mahjong schools, billiard halls, sports or martial arts clubs, film or video distribution companies, and transportation companies.  Generally, the education level will not be beyond a secondary education.   Travel: Asian Counties, North America. Residences Outside Country of Origin: Generally, this group will not have real estate outside their country of origin. Foreign Counties Used for Criminal Activities:  Although this list is by no means exhaustive, North America, Thailand China, Taiwan, Singapore, Nepal and Vietnam have been identified as primary areas of operation. Outside Activities: Gambling, Horse races, triad affiliation. Arrest Convictions:  Juvenile record for minor violence, petty thefts, gambling, fighting, and weapons offenses.  In later years, a more serious record of crimes of a more sophisticated nature will be noted: i.e. extortion, pimping, drug trafficking, triad affiliations, bookmaking and loan sharking.  This would indicate an individual being a member of a youth gang and then graduating to an affiliated street gang and then as a senior gang member.  Some may have tattoos such as dragon, phoenix, snake, etc. Profile B: Mature Member25 Sex: Male Age: Over 25  Occupation:  Within this age bracket, it is still possible to see some of the characteristics of younger members, however, with age it can be assumed that if triad associated, the individual will move farther and farther away from the actual criminal activities and will appear as a manager/owner of a cash generating business.  Subjects will possess a substantial amount of wealth and would apply under the business immigration program, but may also appear in other immigration categories.  Likely has had involvement in past or currently with businesses listed in Profile A on previous page.   Education:  The educational level will generally be no more than a secondary education, although some exceptions do exist. Travel: Extensive in Asia and will show considerable travel to North America prior to making application for immigration. Residences Outside Country of Origin: May have an interest in North American businesses which will likely be in the form of a hotel, restaurant or finance affiliated business.  May already own property and/or business in Canada. Foreign Counties Used for Criminal Activities:  Asian countries such as China, Vietnam and Thailand for drug-related activities, and Taiwan, Hong Kong and Singapore for money laundering. Outside Activities: Will be involved in the business community to the greatest extent possible in order to give the appearance of legitimacy and may be on the executive or an active member of many well know charitable organizations such as the Boy Scouts, Rotary clubs, etc.  By donating to charitable causes and organizations, may attempt to cultivate political friends and make a habit of associating with prominent members of the community to gain influence.  May be a gambler, frequent the races and attend triad-associated functions. Arrest Convictions:  As in Profile A, a progression may be noted with criminal convictions in early years.  Later on, subject may have a clean record, but intelligence may reflect triad association and/or gambling offences or being a triad member.  This would indicate an individual may have progressed through a triad hierarchy and is now controlling a certain criminal group. GUANXI OR NETWORKING 1.  Influenced by the Chinese, but practised in a variety of Asian societies, "guanxi" means to gain access to social resources, acquire social status and advance economically.  Although this practice is not totally foreign to Westerners, they would generally apply individual initiative to advance themselves economically and socially.  Asians have mastered the art of gaining advancement through the development of a network of relations. 2.  Asian society is relational, while Western society is an individualistic society.  Asian society regulated by the collective morality of relational networks and the rules of law plays a secondary role.  Western society, on the other hand, is a legalistic society in which the individual is subordinate to the law.  "These major differences produce an Asian society that sees behaviour on a moral continuum which proceeds from black through shades of gray to white, while Western society only sees behaviour that is black and white."26 3.  When a relational society is coupled with a monetary objective, any venture that is profitable can and will be pursued.  Therefore, one can say that Asian crime is a form of business and Asian criminals organize and conduct their criminal activities just as they conduct any business; through vast networks of relations.  A globally distributed population and an influential and powerful infrastructure in virtually every country in the world, enables Chinese crime groups to carry out transnational and domestic criminal  activities on a much bigger scale than the Italian mafia, the Colombian drug cartels and Russian-based organized crime. THE CHINESE DIASPORA 1.  the dynamics of Asian's extra ordinary growth cannot be understood without a thorough examination of the Overseas Chinese also known as Hua Quiao.  The Overseas Chinese community is a borderless nation, united by ties of family, clan, language and motherland.  It is estimated that there are some 60 million Overseas Chinese who contribute much to the overall economic strength of their ancestral homeland, providing ready-made linkages and networks (guanxi) for legal and illegal business. 2.  Hua Quiao influence, power and wealth are disproportionate to its size.  "In some Asian countires, the small population of Overseas Chinese control an amazing percentage of the economy.  in Thailand, the Overseas Chinese comprise only 10 per cent of the population (8 million) but have 60 per cent control over the economy: in Malaysia 35 percent and 60 percent; in the Philippines, 2 percent and 60 percent; in Vietnam, 5 per cent and 60 per cent; in Indonesia, 2 percent and 85 percent.  In countries where Chinese have been the dominant group for much longer, the percentages are higher: in Singapore, 75 per cent and 95 percent; in Taiwan, 100 percent and 100 per cent. 27 3.  "The Overseas Chinese community has one of the world's largest pools of liquid capital, amounting approximately US$ 2 trillion.  Their 'GNP' is estimated to be one quarter larger that of China, that is, approximately US$ 450 billion.  This is a staggering amount considering that Japan with a population double that of the Overseas Chinese, has only US$ 3 trillion in assets in 1990."28   This power base is the result of a pragmatic cohesion of ethnic solidarity aided by official and unofficial networks.  This cohesion is complemented by sophisticated resources supporting information and technology on a global scale.  Source Notes 20  See Appendix VI, The Chinese Diaspora. 21  For example, Li Ka-Shing owns several building in the core of Toronto financial district.  It is also estimated that he currently      owns one-sixth of downtown Vancouver.  Among some of his projects, he bought the largest undeveloped site in any downtown      core in Canada: the lands around the CN Tower and obtained with it the exclusive right to use the tower for $2 billion dollars,       Expo '86 lands in Vancouver for $3billion dollars, Harbor Castle Westin in Toronto ($93 million (1981)). 22  Citizenship and Immigration Canada, Permanent Resident Databank, April 1997 23  ibid. 24. Garry W.F. Clement, RCMP (Hong Kong) and Brian McAdam, Immigration Canada (Hong Kong).        Triads and Other Organized Crime Groups. 25  ibid. 26.  Willard R. Myers III, Guanxi and Its Role in Asian Crime: A System of Social Organization and Resources Distribution        Is the Foundation of Organized Crime, Center for the Study of Asian Organized Crime, 1995 27.  Douglas D. Daye, A Law Enforcement Sourcebook of Asian Crime and Cultures, Tactics and Mindsets.         CBC Press, New York, 1997, pp. 170-171 28.  Mark Craig, Chinese Organised Crime,  Queensland Police Service, Australia, 1996, p.10.