UPDATE 2 (2013-5-23): Many NGOs are now unable to transfer funds to the DPRK. According to Reuters:
Aid agencies helping millions of people in North Korea could be forced to pull out after a Chinese bank cut ties with main foreign exchange bank, a humanitarian group said on Wednesday.
Some aid workers are now resorting to bringing in cash in person, putting them at personal risk. It is thought some agencies have only enough reserves to last a couple of months.
“All agencies with offices in Pyongyang are affected and everyone is extremely concerned,” Mathias Mogge, director of programmes for German aid group Welthungerhilfe, told the Thomson Reuters Foundation.
“This could eventually reduce our ability to carry out projects or even force a complete close down. If all the agencies had to pull out, it would affect millions of people,” said Mogge, who has just returned from the secretive country.
UPDATE 1 (2013-5-10): Additional Chinese banks are cutting ties with the DPRK. According to the Asahi Shimbun:
China’s four largest state-owned commercial banks have suspended money transfers to North Korea as part of sanctions against Pyongyang’s missile launch and nuclear test.
The action was based on a direct instruction from a government agency, sources close to the banks said.
The Bank of China, the Industrial and Commercial Bank of China, the China Construction Bank and the Agricultural Bank of China took the step following North Korea’s third nuclear test in February, the sources said.
“North Korea came under sanctions over issues including the launch of ballistic missiles,” said a senior official at a branch of the China Construction Bank.
A source close to the Bank of China, which trades heavily in foreign currency, said the bank received instructions from a government agency that manages foreign currency trade.
A Chinese trading company in Dandong, a city in Liaoning province bordering North Korea, has been unable to transfer money to North Korea, a source close to the company said.
North Korean workers in China are also believed to be having difficulties sending money home.
However, the effectiveness of these financial sanctions remains to be seen since the amount of money North Korea’s Foreign Trade Bank has handled is unknown.
Much of the trade between China and North Korea is settled in cash or barter, a diplomatic source in Beijing explained.
An official at a Chinese trading company also said money can be brought into North Korea by human couriers.
The Financial Times offers additional information:
Nevertheless, the blockade is far from watertight. A smaller bank based in northeastern China across the border from North Korea said it was still handling large-scale cross-border transfers, an indication that Beijing is not willing to entirely cut off North Korea.
ORIGINAL POST (2013-5-7): According to the New York Times, the Bank of China has cut ties with the DPRK’s Foreign Trade Bank:
The state-controlled Bank of China said on Tuesday that it had ended all dealings with a key North Korean bank in what appeared to be the strongest public Chinese response yet to North Korea’s willingness to brush aside warnings from Beijing and push ahead with its nuclear and ballistic missile programs.
Ruan Zongze, a former Chinese diplomat in Washington who is now a vice president of the China Institute of International Studies in Beijing, said the Chinese government was responding to a recent United Nations resolution imposing further sanctions on North Korea after its nuclear and ballistic missile tests and was not responding to American pressure. He noted that the Chinese government had recently encouraged state-controlled enterprises to follow the resolution in their dealings with North Korea.
In a single-sentence statement on Tuesday afternoon, the Bank of China said it has “already issued a bank account closing notice to North Korea’s Foreign Trade Bank, and has ceased accepting funds transfer business related to this bank account.”
A spokeswoman for the bank declined to say whether money in the account would be frozen or returned to North Korea. The spokeswoman, who insisted that her name not be used in keeping with bank policy, said the account had been closed by the end of April.
The Bank of China was the overseas banking arm of China’s central bank until the 1980s and is still majority-owned by the Chinese government, playing an important role in diplomatic and financial policy.
Mr. Cai said that the move by the Bank of China appeared to be “predominantly symbolic,” but later added, “It could have practical consequences, because North Korea is already under such heavy international sanctions, and China is such an important economic channel for it.
“If China narrows the door to North Korea, then its economic operations or financial flows could be affected,” he said. “But primarily this appears to be a way of China showing its views about their behavior, so that North Korea is more likely to rethink its actions.”
Read the full stories here:
China Cuts Ties With Key North Korean Bank
New York Times
Keith Bradsher and Nick Cumming-Bruce
4 major Chinese banks halt money transfers to North Korea