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By Yimou Lee
YANGON, March 22 One of China's biggest
state-owned lenders has suspended an account used to fund ethnic
rebels fighting government troops in Myanmar, halting an
arrangement that could have stoked diplomatic tensions between
Beijing and Myanmar.
The Myanmar National Democratic Alliance Army (MNDAA), which
clashed with government forces this month, said Agricultural
Bank Of China (AgBank) was no longer
accepting funds into an account it used to receive donations
Reuters was unable to confirm what prompted AgBank's move.
It came after Reuters sent AgBank a list of questions regarding
the transactions, which compliance experts said could point to a
weakness in controls aimed at stopping the global financial
system being used to fund terrorism or facilitate crime.
AgBank declined to comment on Reuters' specific questions
about the MNDAA account, citing client confidentiality. It said
in a statement that it paid high attention to anti-money
laundering and counter-terrorist financing work, and "diligently
obeyed relevant laws, regulations and regulatory requirements".
There is no evidence that Agbank, or other financial
entities that handled transactions for the MNDAA, have broken
The MNDAA is not designated as a terrorist organisation by
any government or transnational body.
Still, several compliance experts contacted by Reuters said
acceptance of the group's funds could leave the bank exposed to
questionable or potentially illegal activities.
The MNDAA has refused to disarm or play an active part in
Myanmar's peace process, and defence analysts say it continues
to acquire weapons.
Its leader, Peng Jiasheng, has been identified as a major
drugs trafficker by the U.S. Drug Enforcement Agency, according
to U.S. diplomatic cables, dated 2009, released by Wikileaks.
Yan Zhen Kun, an MNDAA representative who oversees donations
for the group, said he was informed by AgBank of the account
shutdown at the weekend.
"We were told by the bank that we need to finalise some
procedures," he told Reuters. "It did not tell us how long this
The MNDAA attacked troops in northeastern Myanmar this
month, sending more than 20,000 people fleeing across the border
to China. It said it was responding to "continued military
pressure" from the army.
Myanmar says it accepts Beijing's assurances it is not
supporting the MNDAA.
Zaw Htay, director general of Myanmar leader Aung San Suu
Kyi's office, said Myanmar was "fully convinced" by assurances
from China's leadership that it was not backing ethnic armed
groups on the border. Still, Myanmar had complained to Beijing
about low-level Chinese officials it believed were helping the
rebels for their own gain, he said.
Records on the MNDAA's website show it collected more than
half a million dollars over nearly two years after making a
"crowdfunding" appeal for donations.
Donors either deposited the money directly in an AgBank
account or sent it via two mobile payment services - Tencent
Holdings' WeChat Pay and Alipay, part of Ant
Financial, which is affiliated with U.S.-listed Chinese
e-commerce giant Alibaba.
Ant Financial declined to comment specifically on Reuters'
questions about the MNDAA's use of its Alipay platform, but said
it was investing a lot in risk management.
"There are a lot of bad actors out there who try to take
advantage of these accounts so we've built a pretty good system
at detecting those early and then enabling ourselves and our
partners to stop transactions," said Douglas Feagin, head of
Ant's international strategy.
Tencent did not respond to Reuters' emailed requests for
Some compliance experts believe the deposits ought to be
enough to raise red flags within financial institutions that
follow global counter-terrorist financing and anti-money
Financial contacts with an organisation linked to drug
trafficking or the arms trade pose a regulatory and reputational
risk to firms even if they have not themselves done anything
illegal, experts say.
"If I handed this case to an internal committee there is
absolutely no way they would do anything other than shut the
account down immediately," said an anti-money laundering officer
at a global bank.
Banks and financial firms in China, as elsewhere, are
required by "know-your-customer" rules to check the identity of
people or companies using their systems.
Compliance experts said global financial firms typically use
a number of automated tools to screen for individuals or groups
that may even loosely be linked in media coverage or other
publicly available information to potential criminal activity,
and would view any such connections as a reputational risk.
Some bankers working in China said it was very difficult to
police cash flowing through their system, given the network was
less mature than in the West and criminal and armed groups were
They added that the sheer volume of transactions on mobile
platforms made it impossible to monitor them all, so smaller
payments were effectively invisible to banks and regulators.
Insurgents openly raising tens of thousands of dollars from
mainland supporters through Chinese platforms risks straining
China's relations with Suu Kyi, who has made ending decades of
ethnic war her top priority, according to people who have
studied Myanmar's border conflicts.
Beijing says it follows a policy of non-interference in
domestic affairs of other countries.
But some analysts such as Yangon-based Richard Horsey, a
former United Nations diplomat in Myanmar, have long suggested
China uses ethnically Chinese insurgent groups such as the MNDAA
as a means of leverage over the government in Myanmar.
In 2015, after another bout of fighting between the MNDAA
and government forces, a Myanmar official accused China of
meddling in the peace process, which Beijing denied. An MNDAA
spokesman did not respond to requests for comment.
"Allowing the MNDAA to fundraise in such an open manner
within China will inevitably damage relations with Myanmar,"
The MNDAA says it is fighting for the rights of the
Chinese-speaking ethnic Kokang people.
China's Ministry of Foreign Affairs did not respond to
Reuters' emailed request for comment. Beijing called for a
ceasefire earlier this month after 30 people were killed in
clashes between the MNDAA and troops in the Kokang region.
MNDAA has gathered money online since 2015, according to
records on its website. It made a crowdfunding plea in
mid-January, as it was being increasingly outflanked by the
Myanmar military in the hills straddling the border.
The plea was ostensibly for money to support refugees from
the conflict, but Li Jian Hua, listed on the website as the
holder of MNDAA's account with AgBank, told Reuters it was used
to sponsor the group's offensive.
"The money is not meant for refugees. It's used to support
MNDAA," said Li.
Since April 2015 - when the blog started publishing
disclosures of donations - it has gathered $531,853.
($1 = 6.9030 Chinese yuan renminbi)
(Additional reporting Chyen Yee Lee in SINGAPORE, Wa Lone in
YANGON, Engen Tham in Shanghai, Michelle Price in Hong Kong and
Shu Zhang in Beijing; Editing by Antoni Slodkowski and Alex