Archive for the ‘Banking’ Category

North Korea opens its first toll expressway

Thursday, January 18th, 2018

 

Pictures above via @EricTalmadge (Jan 26, 2018)

Institute for Far Eastern Studies (IFES)

According to the Russian embassy in Pyongyang, starting January 20, 2018, North Korea will begin collecting tolls on the expressway between Pyongyang and Wonsan—a first time for the country to collect such tolls.

According to the Seoul-Pyongyang News, the Russian embassy explained in its Facebook on January 17 that it would be “the first time for the North Korean drivers to pay 8 euros (equivalent to 10,450 won in the South Korean currency) to take the Pyongyang-Wonsan Tourist Motorway.”

This recently resurfaced motorway first opened in September 1978, connecting Wonsan (Kangwon province) on the east and Pyongyang City on the west.

The recent photos provided by the embassy reveal an electronic payment station collecting the toll at the entrance of the expressway. They also reveal a map showing the Pyongchon Kwangmyong Technology Exchange Station, where drivers can purchase (or recharge) electronic payment cards and Mirae electronic cards issued by Mirae Bank.

In the meantime, more than one foreign diplomat in Pyongyang said that the North Korean authorities had sent a letter to the foreign missions and the representatives of international organizations in Pyongyang on January 15 to inform them of the new policy, Radio Free Asia reported.

Another Western diplomat in Pyongyang, who wanted to remain anonymous, said that the letter included the highway toll policy and detailed regulations, which explained that it would cost about 8 euros (0.02 euro per kilometer) or about USD10 for a total of 194 kilometers round trip between Pyongyang and Wonsan (or 3.88 euro for one way), if one is traveling by ordinary passenger car. However, large-sized buses will be charged a toll of about 27 euros for a roundtrip—Pyongyang to Wonsan and back—or 13.58 euros for a one-way trip.

The new tolls are expected to be applied to not only foreign residents in Pyongyang, such as diplomats and the agents of international organizations, but also the general public.

UPDATE: Here are most of the images posted by the Russian Embassy Facebook Page:

The toll fees are being managed by “Mirae Bank”. Mirae Bank Cards are available on Mirae Street.

 

This is the first toll booth outside of Pyongyang:

 

Share

DPRK resolves debt with Poland

Wednesday, October 25th, 2017

According to Yonhap:

North Korea cleared off its debt to Poland in 2012 after the European country signed a deal with the North to write off 61 percent of the debt the previous year, Voice of America reported Thursday.

The Polish Treasury Department told VOA’s Korean Service that Poland held talks with North Korea on a debt write-off in 2011 and the North implemented what it was required to do under the agreement the same year.

According to the contract obtained by VOA, the agreement, signed in Pyongyang on June 1, 2011, stipulates that the North’s debt amounted to roughly US$4.31 million as of the reported year, including the production and delivery costs of Mi-2 military helicopters for which the Polish communist regime struck a deal with the North in 1986.

The report also said Poland’s debt relief was linked to the North’s provision of US$1.5 million in cash to purchase a ship to a North Korea-Poland joint venture shipping firm established in 1967.

Under the debt write-off deal, the North was also required to foot the bill of $200,000 to repair the Polish Embassy in Pyongyang. The repair project was based on an agreement between representatives from the two countries’ foreign ministries and the North was obligated to transfer the money to the embassy’s account.

In case the obligations are fulfilled, the agreement says, Poland will write off 61 percent of the North’s debt that corresponds to around $2.61 million.

North Korea currently owes debts to Sweden, Switzerland and Finland. The countries earlier said they had no intention of writing off the North’s debts.

Read the full story here:
N. Korea settles bill with Poland in 2012 after 61 pct of its debt written off: report
Yonhap
2017-10-25

Share

China closes more RMB bank accounts linked to North Korea

Monday, September 11th, 2017

UPDATE 2 (2017-9-12): According to the Global Times/Reuters (PR China):

Large State banks halt services for North Korean clients, tellers say

The big four Chinese State-owned banks have stopped providing financial services to new North Korean clients, according to branch staff, amid US concerns that the Chinese government has not been tough enough over North Korea’s repeated nuclear tests.

Tensions between the US and North Korea have increased after the sixth nuclear test conducted by Pyongyang on September 3 prompted the United Nations Security Council to impose further sanctions on Tuesday.

Chinese banks have come under scrutiny for their role as a conduit for funds flowing to and from North Korea.

China Construction Bank (CCB) has “completely prohibited business with North Korea,” said a bank teller at a branch in Northeast China’s Liaoning Province. The ban started on August 28, the teller said.

A person answering the customer hotline at the world’s largest lender, Industrial and Commercial Bank of China (ICBC), said the bank had stopped opening accounts for North Koreans and Iranians since July 16. The person did not explain why or answer further questions.

The measures taken by the largest Chinese banks began as early as the end of last year, when the city branch of Bank of China (BOC) in Dandong, Liaoning Province, which borders North Korea, stopped allowing North Koreans to open individual or business accounts, said a BOC bank teller who declined to be identified.

Existing North Korean account holders could not deposit or remove money from their accounts, the BOC teller said.

At Agricultural Bank of China (ABC), a teller at a branch in Dandong said North Koreans could not open accounts. The teller did not provide further details.

Official representatives for BOC, ICBC, CCB and ABC could not be reached for comment.

Banks in Dandong have been under the microscope as tensions have risen, given the city’s proximity to North Korea.

In June, the US accused the Bank of Dandong, a small lender, of laundering money for North Korea.

Attempts to slowly choke off the flow of funds to and from North Korea come after the US imposed sanctions on a Chinese industrial machinery wholesaler that it said was acting on behalf of a Pyongyang bank already covered by UN sanctions for supporting the proliferation of weapons of mass destruction.

UPDATE 1 (2017-9-11): According to the Financial Times:

China’s biggest banks have banned North Koreans from opening new accounts in an unprecedented move to clamp down on financial flows with the country’s unruly neighbour.

Multiple bank branches, including those of the country’s top four lenders, told the Financial Times they had imposed a freeze on new accounts for North Korean people and companies. Some are going even further, saying they are “cleaning out” existing accounts held by North Koreans by forbidding new deposits.

Banks implementing a ban on new accounts include the country’s big five — Bank of China, China Construction Bank, Agricultural Bank of China, and Industrial and Commercial Bank of China and Bank of Communications.

Branches of each of these banks in China’s north-eastern border towns, where trade with North Korea is concentrated, said they had been instructed to stop opening new bank accounts for North Korean individuals or companies.

Branches of three of the banks said they were in the process of cleaning out existing accounts, while the remainder did not comment on procedures for existing accounts.

Although some bank branches said they had received notice of the freeze on North Korean accounts last month, others said they had been told as early as January.

“Branches didn’t implement the rule all at the same time but it started recently,” said one branch of ABC in Dandong, the border city through which roughly 70 per cent of China’s trade with North Korea flows.

“Current bank accounts held by North Koreans should be cleared out,” said a representative of a branch of ICBC in Yanji, the trading hub closest to the nuclear blast site at Punggye-ri. “We implemented the restrictions long before last month’s sanctions.”

However, traders pointed out that there were ways to get around the account ban to continue doing legal business with North Korea.

“We always use Chinese citizens living in North Korea as intermediaries when doing business,” said one groceries trader in Dandong who wished to remain anonymous because of the political sensitivity around North Korean trade.

“There’d be no reason to freeze Chinese nationals’ accounts, unless they’re sanctioning individuals,” he added.

Two Chinese businesspeople who run companies in North Korea — one of whom is based in the Chinese border town of Hunchun and one in Pyongyang — said all their transactions, such as payments to North Korean staff, were made in cash in Chinese renminbi, avoiding the need to have dealings between North Korean and Chinese banks.

Read the fulls story here:
China’s biggest banks ban new North Korean accounts
Financial Times
Yuan Yang and Xinning Liu
2017-9-11

Here is additional coverage in the BBC.

ORIGINAL POST (2017-9-9): Daily NK reports that Beijing orders banks to close accounts for North Koreans:

Chinese banks have reportedly banned North Koreans living in China from opening up new accounts, and have ordered existing accounts to be closed.
.
“The Chinese authorities have made no distinction between North Korean consular officials, laborers, or traders; all are banned from opening accounts,” a local source reported to Daily NK. “Previously, the banks were happy to open accounts for North Koreans living in China for personal reasons (mostly visiting relatives), provided they present their personal identity documents. This practice has ended as well.”

According to the source, the new order applies to the four major state banks, as well as the Construction Bank of China, and regional private banks such as Pudong Bank.

The new measures do not come without precedent. After North Korea’s third nuclear test, China implemented a provision of United Nations Security Council Resolution 2094 that involved suspension of a deal with North Korea’s Joson Trade Bank. However, the UN resolution did not address individual accounts.

Following this, the North Korean authorities began circumventing international financial sanctions by opening accounts in individuals’ names and remitting investment capital and commercial payments to and from Chinese companies.

Because the bank accounts of North Koreans residing in China are being closed, North Korean laborers are having difficulties remitting money back home.

“Under the old system, the monthly wages of North Koreans working in Chinese factories were transmitted through the bank account of the North Korean factory manager. This is no longer possible, so they are being paid in cash,” the source explained.

Also relevant to the measure is that North Korean-Chinese collaborative ventures have been banned from using bank accounts, so seed money is now required in cash.

“Normally, when North Korean merchants want to start a new business in China, they make a business plan and submit it to Pyongyang. Upon approval, they seek out cooperation and investment from Chinese investors. But now, even if the investment request is approved, it isn’t possible to open a bank account so the investor needs to use a third party to provide cash directly,” the source said.

A March 2017 Radio Free Asia (RFA) investigation reported a similar trend, noting, “Private Chinese banks are beginning to close bank accounts held by North Korean nationals. North Korean laborers earning foreign currency in China have been issued an emergency alert.”

The Chinese Ministry of Commerce announced on August 25th that it is banning new joint ventures with North Koreans in China and additional investments.

“The Chinese government is publicly announcing that they are banning business projects with North Koreans and closing North Korean bank accounts, but many loopholes remain in place. Money can be laundered on the North Korean side and passed through Southeast Asian nations,” a separate source in China with knowledge of the matter said.

Read the full story here:
Beijing orders banks to close accounts for North Koreans
Daily NK
2017-9-9

Share

US government seizes millions from big banks though to have dealt with North Korea

Thursday, July 6th, 2017

Benjamin Katzeff Silberstein?

Reuters reports:

U.S. authorities have tried to seize millions of dollars associated with several companies that deal with North Korea, including the country’s military, from eight large international banks, according to court filings made public on Thursday.

The effort was revealed two days after North Korea tested a long-range missile capable of reaching Alaska, ratcheting up tensions with the United States and adding to worries about North Korea leader Kim Jong-un’s nuclear weapons plans.

Thursday’s filings show that Chief Judge Beryl Howell of the federal court in Washington, D.C. on May 22 granted U.S. prosecutors’ applications for “damming” seizure warrants against Bank of America Corp (BAC.N), Bank of New York Mellon Corp (BK.N), Citigroup Inc (C.N), Deutsche Bank AG (DBKGn.DE), HSBC Holdings Plc (HSBA.L), JPMorgan Chase & Co (JPM.N), Standard Chartered Plc (STAN.L) and Wells Fargo & Co (WFC.N).

Prosecutors believe the banks have processed more than $700 million of “prohibited” transactions on behalf of entities tied to North Korea since 2009, including the period after Donald Trump was elected U.S. president, the filings show.

Some of the transactions were processed for Dandong Zhicheng Metallic Material Co and four affiliated “front” companies that prosecutors said tried to evade sanctions through transactions that would benefit North Korean entities, “including the North Korea military and North Korea weapons programs,” according to the filings.

The filings did not say any of the banks knowingly violated sanctions against North Korea.

In her decision, Howell authorized warrants requiring the eight banks to accept incoming transactions but not allow outgoing transactions involving the five companies for 14 days, and thereafter to seize what they collected.

Full article:
U.S. seeks funds tied to North Korea from eight big banks
Jonathan Stempel
Reuters
2017-07-06

Share

US tightens sanctions against DPRK’s UN diplomats

Wednesday, December 21st, 2016

According to Reuters:

The U.S. Treasury Department tightened sanctions against North Korean diplomats to the United Nations, requiring banks to get special permission before granting them accounts, the agency said in a notice posted online Tuesday.

The United States removed an exemption in the broad economic sanctions against Pyongyang that had allowed U.S. banks to service North Korean diplomats without getting specific permission from the Treasury Department Office of Foreign Assets Control (OFAC).

Banks will now have to obtain a special license from OFAC before opening bank accounts, processing transactions or extending credit for North Korean diplomats or their family members, OFAC said. North Korea’s U.N. mission did not immediately respond to a request for comment.

U.S. officials have long said North Korea uses the bank accounts of diplomats to help Pyongyang conduct business around the world, despite economic sanctions.

A U.S. intelligence official, speaking on condition of anonymity, said North Korea “seeks to alleviate its economic isolation” by bringing back currency from overseas “using all available avenues.”

For example, said another U.S. intelligence official, North Korea sells cigarettes and illegal drugs outside the country and use diplomatic packages to send the cash back home.

Washington has been ramping up economic sanctions against Pyongyang since a nuclear test and rocket launch this year, seen as provocations by the United States and its allies.

Under new U.N. sanctions adopted last month in response to North Korea’s fifth and largest nuclear test in September, countries are required to limit the number of bank accounts to one per North Korean diplomatic mission and one per diplomat.

Here is the official statement from OFAC:

Publication of Updated North Korea-related General License
12/20/2016

The Office of Foreign Assets Control (OFAC) has amended General License 1 pursuant to E.O. 13722 of March 15, 2016, “Blocking Property of the Government of North Korea and the Workers’ Party of Korea, and Prohibiting Certain Transactions With Respect to North Korea.” General License 1-A no longer authorizes U.S. financial institutions to open and operate accounts for the diplomatic mission of North Korea and its employees and their families. It now requires that funds transfers to or from the mission or its employees be conducted through an account at a U.S. financial institution that has been specifically licensed by OFAC.

I am generally behind on blog posts this year and plan to catch up, including coverage of sanctions, in the next.

The Reuters story can be found here:
U.S. tightens sanctions against North Korea’s U.N. diplomats
Joel Schectman; Additional reporting by Michelle Nichols in New York
Reuters
2016-12-20

Share

Daesong Bank launches Kumgil Card

Friday, December 16th, 2016

Simon Cockerell of Koryo Tours has posted images of a new prepay card offered by Daesong Bank (대성은행/Taesong Bank) called “Kumgil” (금길) or “Gold Road”:

The front of the card contains the brand name, logo (a diamond?), sponsoring bank name, and the phrase “electronic payment card”. I spoke with James Pearson at Reuters about the 16 digit number, and based on his research it does not appear to be directly related to the Foreign Trade Bank (FTB). Mr. Cockerell reports on his Instagram page that the card uses the same retail payment equipment as the Narae Card (which is controlled by the FTB), so that means the two banks (Daesong and FTB) have an established clearing mechanism to settle electronic balances (Q: Are other NK banks using this same equipment/part of the same network?). FTB is supposedly the official repository of the state’s hard currency reserves for the purposes of managing foreign trade and domestic hard currency transactions for imported goods, though it apparently does not have a monopoly on individual/company hard currency accounts. Daesong Bank (Taesong) is has been linked to the KWP’s Office 39.

The back of the card reads:

주의사항 (Caution)
1. 카드앞면의 전자요소가 손상되지 않도록 주의하여주십시오.
Be careful not to damage the chip on the front of the card
2. 암호를 련속 3번 틀리게 입력하면 카드의 사용이 중지됩니다.
The card will stop working if you enter the wrong password 3 times.
3. 카드를 분실한 경우에는 즉시 카드발급지점에 알려주십시오.
If you lose the card, immediately notify the branch that issued the card.
4. 기타 제기되는 문제들은 카드발급지점에 문의하여주십시오.
For any other issue, consult the branch that issued the card.

This card is apparently for hard currency purchases only, and it was launched in early 2016. It is functionally the same as the Golden Triangle Bank Electronic Payment Card, Jonsong Electronic Payment Card, KoryoBank Electronic Payment Card, Narae Electronic Payment Card, Ryugyong Commercial Bank Electronic Payment Card, and Sowol Electronic Payment Card.

I should also mention that none of these are “debit cards” since they are not linked with a specific checking (demand) deposit. These are pre-pay cards only. These cards are essentially private digital currency issued by an established bank. The bank maintains control of the hard currency used to top off the cards, which it uses to generate income (float), while the card holder gains the convenience of not having to carry cash, which does offer some security from petty crime, but makes retail transactions more observable to security agencies.

Mr. Cockerell also posted the picture of a loyalty card for the Moran Shop (“Bar”):

He reports that “every time you spend money there it’s recorded on the card and when you reach $500 equivalent in total then there’s some free gift.”

I have written about some other loyalty programs here and here.

Share

Orascom’s Ora Bank closes

Monday, December 5th, 2016

According to the Egyptian Daily News:

Orascom Telecom Media and Technology Holding will shut down Orabank, its affiliate bank in North Korea, due to US sanctions on the nation, according to an announcement on Sunday.

The company, owned by business tycoon Naguib Sawiris, added in a note to the Egyptian Exchange that shutting down the bank in Korea is a result of force majeure due to the sanctions imposed by the US Office of Foreign Assets Control on North Korea.

Orascom noted that its subsidiary in Korea will transfer all cash and liquid assets.

The company added that its subsidiary, Koryolink, will continue operating in Korea despite the sanctions.

Shortly after the banks closing was announced, Naguib Sawiris announced his resignation as CEO of OTMT . You can read the Press Release and coverage in Forbes.

According to the Chosun Ilbo:

Naguib Sawiris resigned a day after Orascom decided to shut down a branch of its affiliate bank Orabank in Pyongyang under sanctions imposed by the UN Security Council and the U.S. Treasury Department.

“Sawiris has done brisk business in the U.S. and Europe and has much of his assets in the West,” a source said. “So he has no choice but to look for an exit in the face of the sanctions.”

Sawiris has a U.S. passport and is therefore directly affected by sanctions that penalize U.S. citizens from doing business with the North, according to investigative website Finance Uncovered.

Orabank in Pyongyang is linked to Foreign Trade Bank of North Korea, which has been blacklisted by the U.S. for serving as a funnel for the regime’s nuclear weapons development.

Here are links to previous posts on cell phones, Orascom, and Ora Bank.

Here is coverage in North Korea Tech.

 

Read the full story here:
Sawiris shuts down affiliate bank in North Korea due to US sanctions
Egyptian Daily News
2016-12-4

Share

US Treasury “311s” North Korea

Thursday, June 2nd, 2016

Here is the statement from the Treasury Department:

Treasury Takes Actions To Further Restrict North Korea’s Access to The U.S. Financial System

6/1/2016

Action Responds to the Threat that North Korea Poses to the Global Financial System; the United States Calls on International Partners to Similarly Takes Steps toward Severing Banking Relationships with the Dangerous Regime

WASHINGTON – Today, the U.S. Department of the Treasury announced a Notice of Finding that the Democratic People’s Republic of Korea (North Korea) is a jurisdiction of “primary money laundering concern” under Section 311 of the USA PATRIOT Act. Treasury, through its Financial Crimes Enforcement Network (FinCEN), also released a notice of proposed rulemaking (NPRM) recommending a special measure to further isolate North Korea from the international financial system by prohibiting covered U.S. financial institutions from opening or maintaining correspondent accounts with North Korean financial institutions, and prohibiting the use of U.S. correspondent accounts to process transactions for North Korean financial institutions.

Section 311 gives the Secretary of the Treasury the authority to identify a foreign jurisdiction to be a primary money laundering concern. Once identified, the Secretary can require U.S. financial institutions to take appropriate countermeasures. The special measure proposed in today’s NPRM would impose the most significant measure available to the Secretary under Section 311.

“The United States, the UN Security Council, and our partners worldwide remain clear-eyed about the significant threat that North Korea poses to the global financial system. The regime is notoriously deceitful in its financial transactions in order to continue its illicit weapons programs and other destabilizing activities,” said Adam J. Szubin, Acting Under Secretary for Terrorism and Financial Intelligence. “Today’s action is a further step toward severing banking relationships with North Korea and we expect all governments and financial authorities to do likewise pursuant to the new UN Security Council Resolution. It is essential that we all take action to prevent the regime from abusing financial institutions around the world – through their own accounts or other means.”

Reasons for This 311 Determination

Treasury is taking this action consistent with the North Korea Sanctions and Policy Enhancement Act, enacted on February 18, 2016, which requires Treasury to determine within 180 days whether reasonable grounds exist for concluding that North Korea is a jurisdiction of primary money laundering concern, and if so, to propose one or more special measures. In addition, the United Nations Security Council adopted Resolution 2270 on March 2, 2016, which in part requires UN Member States to sever correspondent banking relationships with North Korean financial institutions within 90 days of the adoption of the resolution.

North Korea is proposed for action under Section 311 because (1) North Korea uses state-controlled financial institutions and front companies to conduct international financial transactions that support the proliferation and development of WMD and ballistic missiles; (2) North Korea is subject to little or no bank supervision anti-money laundering or combating the financing of terrorism (“AML/CFT”) controls; (3) North Korea has no diplomatic relationship, and thus no mutual legal assistance treaty, with the United States and does not cooperate with U.S. law enforcement and regulatory officials in obtaining information about transactions originating in or routed through or to North Korea; and (4) North Korea relies on the illicit and corrupt activity of high-level officials to support its government.

Impact of the 311 Notice of Finding and the NPRM Special Measure

While current U.S. law already generally prohibits U.S. financial institutions from engaging in both direct and indirect transactions with North Korean financial institutions, this NPRM, if finalized, would require U.S. financial institutions to implement additional due diligence measures in order to prevent North Korean banking institutions from gaining improper indirect access to U.S. correspondent accounts. While North Korea’s financial institutions do not maintain correspondent accounts with U.S. financial institutions, North Korean financial institutions frequently conduct transactions on behalf of the North Korean government and state-controlled corporations. The NPRM, if finalized, would prohibit the use of third-country banks’ U.S. correspondent accounts to process transactions for North Korean financial institutions.

Italics added for emphasis.

The “Notice of Finding” is here, and is also worth reading.

According to the Wall Street Journal:

Treasury Department officials said they are moving to ban non-U.S. banks and entities from processing dollar transactions on behalf of North Korea, an arrangement known as a U-turn, in a move to block its international trade.

China is by far Pyongyang’s largest trading partner, and Chinese firms could be caught in the crosshairs, according to current and former U.S. officials.

Zhu Haiquan, the spokesman for China’s embassy in Washington, repeated Beijing’s warnings against what it considers “unilateral sanctions taken by any country.”

He added that “we should avoid any move that may further aggravate tensions” on the Korean peninsula, and said “the unilateral sanctions must not affect and harm the legitimate rights and interests of China.”

U.S. officials were pleased that China agreed in March to support the new U.N. sanctions, which could significantly impair North Korea’s ability to generate hard currency and ship its exports.

Still, U.S. officials have voiced skepticism that Beijing would significantly punish Pyongyang, a longtime ally. China has rebuked North Korea in the past for its nuclear and missile tests, only to increase investment and trade with the country.

The issue is likely to be among the topics discussed when Messrs. Kerry and Lew meet top Chinese officials in Beijing for the Strategic and Economic Dialogue, a series of annual bilateral meetings.

According to the New York Times:

As a practical matter, that would largely affect Chinese banks, which facilitate North Korea’s financial transactions with Beijing, its largest trading partner. It could also affect some institutions in the nominally autonomous Chinese regions of Macau and Hong Kong, as well as in Singapore, where Pyongyang has often gone to hide the true nature of its banking activities, and to pay for missiles, nuclear fuel and the huge infrastructure it has built around those programs.

It is hard to assess how much the action will hurt North Korea. Such sanctions against financial institutions doing business with Iran proved effective because Tehran had billions of dollars in monthly oil and other energy exports that could be choked off; North Korea has none. Oftentimes Pyongyang deals in cash. Until a few years ago it was one of the largest counterfeiters of $100 bills. But that once-lucrative fraud was largely cut off by the redesign of the $100 bill.

Banks in the United States are already prohibited from doing business with financial institutions in North Korea. But the recommended rules would require them to perform additional due diligence to ensure they are not inadvertently transacting with North Korean financial institutions or the Pyongyang government through shell companies or other fictitious entities.

Notice of the new rules has been published by the Federal Register. Feel free to comment if you like.

Josh also writes a walk-through of how this works.

Here is information from Choson Exchange.

Troy Stangarone writes about the sanctions for KEI.

The UK also strengthened financial sanctions against the DPRK.

Share

Russia sanctions DPRK

Monday, May 23rd, 2016

According to the Choson Ilbo:

Russia has halted financial transactions with North Korea, and the EU has added 18 individuals and one organization to its North Korea sanctions list.

The international sanctions aim to strangle the flow of hard currency into the North’s nuclear and missile programs.

The Russian central bank last Thursday told all Russian banks to halt financial dealings with North Korean agencies, organizations and individuals on the UN Security Council sanctions list, Radio Free Asia reported.

The order said the banks must immediately freeze bonds held by sanctions targets and close accounts related to the North’s development of nuclear weapons and missiles.

A Russian presidential decree will also take effect soon to close North Korean bank branches and joint venture firms.

But Russia will continue to allow financial transactions between Russian and North Korean banks authorized by the UN.

The measures deal a blow to North Korea because the two countries have only recently increased cooperation.

Russia has been criticized for giving the North Korean regime a lot of leeway by allowing its banks to open accounts for North Korean banks and settling business with North Korea in roubles.

“What’s important is whether the international community including Russia and Switzerland will put their decisions into action,” a diplomatic source said. “If they do, the North will suffer a lot.”

A recent gasoline price hike in the North seems due to Russia’s downsizing of supplies to the North.

The EU has announced its third round of sanctions since the North’s latest nuclear test. This has brought the number of sanctions targets to 66 individuals and 42 organizations. They will be banned from entering EU countries and their assets will be frozen.

Here is coverage in the Joong Ang Ilbo:

Russia’s central bank called for a suspension of all transactions with North Korea, media outlets reported Friday, which follows Switzerland’s toughened sanctions on the regime earlier this week.

The move is in line with the strongest-ever United Nations Security Council resolution adopted in early March to penalize North Korea for its fourth nuclear test and long-range missile launch and curb its weapons of mass destruction program.

The Russian central bank was reported to have issued an order to local banks and financial institutions to suspend transactions with Pyongyang on Thursday, according to Radio Free Asia.

The order stated that transactions with Pyongyang were possible only with the permission of the United Nations.

The central bank further declared an immediate freeze on bonds held by North Korean individuals, agencies and organizations blacklisted by the UN Security Council.

Likewise, Russian financial institutions will have to close any accounts that have possible links to the North’s nuclear and missile programs.

On Wednesday, Switzerland imposed tighter sanctions on North Korea, ordering the freezing of assets held by North Koreans in the country and closure of their bank accounts as well as blocking funds owned by the North Korean government.

The Swiss government made the move to block all funds and economic resources connected with North Korea’s nuclear and missile programs in line with UN Security Council Resolution 2270, which was adopted in March in response to Pyongyang’s nuclear test in January and a ballistic missile test in February.

This included mandatory inspections of all cargo going in and out of North Korea, a ban on exports of coal, iron and other mineral resources from the North, as well as prohibiting aviation and rocket fuel exports into the country.

Russia and China, two of the five permanent members of the 15-member Security Council, have generally defended Pyongyang’s stance in the council. They also negotiated some room for leeway in the March resolution on North Korea. How they implement the sanctions will be crucial to cutting the cash flow into Pyongyang’s WMD program.

The Swiss government extended an existing ban on exports of luxury items to include more goods and prohibited North Koreans from studying in Switzerland in higher physics or nuclear engineering.

On Thursday, the European Union expanded its sanctions against Pyongyang, adding 18 individuals and an entity it deemed related to its weapons program to its blacklist.

This brings the EU blacklist to 66 individuals and 42 entities considered to be involved with North Korea’s nuclear and missile development.

When asked about the government’s position on Russia’s sanctions, South Korean Ministry of Unification spokesman Jeong Joon-hee said in a briefing Friday, “We strongly welcome that countries around the world, including China and Russia, are actively taking part in these strong sanctions.”

Read the full story here:
Russian Central Bank Halts Dealings with N.Korea
Choson Ilbo
2016-5-23

Share

DPRK and FATF (UPDATED)

Tuesday, May 17th, 2016

UPDATE 10 (2106-5-19): Wendy Zeldin has published an analysis of the DPRK’s AML statue at the Library of Congress Global Legal Monitor. Here is a simplified version of her report:

On April 20, 2016, the Presidium of the Supreme People’s Assembly of the Democratic People’s Republic of Korea (DPRK) issued a decree on the adoption of the Law on Anti-Money Laundering and Combating Financing of Terrorism. The Law has 40 articles divided among six chapters. According to the decree, the former Law on Anti-Money Laundering, which was adopted on October 25, 2006, no longer has any binding force.

The subjects covered by the new Law are:

-the Law’s objectives, the establishment of a national coordinating committee for anti-money laundering and combating financing of terrorism (AML/CFT) actions, and the scope of the Law’s application;
-the obligations of reporting institutions on verification of customer identification data, the establishment of an internal reporting system for large or suspicious transactions, and the reporting procedures for such types of transactions and confidentiality;
-the placement in and status of the financial intelligence unit (FIU) in the government structure, the FIU’s obligations and powers, and the operation of its database, among other matters;
-AML/CFT supervisory and regulatory institutions, obligations and powers of the Financial Supervisory Bureau, the tasks of customs agencies, and the obligations and powers of law enforcement institutions;
-the principles of international cooperation, the institutions involved in international cooperation, and the types of international cooperation for AML/CFT purposes; and
the property subject to sanctions and handling of complaints in connection with AML/CFT activities and the settlement of such complaints.

Expert observers are of the view that the adoption of the new Law indicates North Korea’s desire to join the Financial Action Task Force (FATF), the international AML organization. More specifically, they suggest, it seems that North Korea is seeking to become a full member of the Asia Pacific Group on Money Laundering (APG), a regional body of the FATF that North Korea joined as an observer in July 2014. However, the FATF has blacklisted North Korea, along with Iran. North Korea and Iran are identified by the FATF as being among 13 “high risk and non-cooperative jurisdictions” and the only two for which there is a “call for action.”

The blacklisting entails enhanced monitoring of and restrictions on financial access of North Korean financial institutions by the international financial system, according to Tristan Webb, former senior DPRK research analyst for the Foreign and Commonwealth Office of the United Kingdom. (Choi, supra.) In addition, according to article 34 of Resolution 2270 of the United Nations Security Council, adopted in March in response to North Korea’s nuclear test of January 6, 2016, “States shall prohibit financial institutions within their territories or subject to their jurisdiction from opening new representative offices or subsidiaries, branches or banking accounts in the DPRK.” Webb noted that even if the DPRK meets the FATF standards, the financial sanctions will not necessarily be lifted.

Adoption of the new Law alone will not lead to full APG membership; North Korea will also have to “reveal annual reports for three years for the purpose of monitoring to judge its sincerity,” according to Rhee Yoojin, a research fellow with the Korea Development Bank based in Seoul. (Id.) On the other hand, although the Law’s adoption does not necessarily mean that North Korea will institute an open door policy or aggressive economic reforms, “it does signify its desire to overcome international sanctions” that have prevented foreign financial organizations from seeking to enter the country, Rhee stated.

UPDATE 9 (2016-5-17): KCNA announces that the DPRK has passed a law on anti-money laundering:

Law on AML/CFT Adopted in DPRK

Pyongyang, May 17 (KCNA) — The Law of the Democratic People’s Republic of Korea on Anti-Money Laundering and Combating Financing of Terrorism was adopted.

The Presidium of the Supreme People’s Assembly of the DPRK promulgated a decree on the adoption of the law on April 20.

The Law on AML/CFT consists of 6 chapters with 40 articles.

Chapter 1 (Articles 1-6) defines the fundamentals of the law such as its objective, principle in the AML/CFT efforts, the establishment of the National Coordinating Committee and the scope of application.

Chapter 2 (Article 7-24) specifies the obligations and principles of reporting institutions concerning the verification of identification data obtained from the customer, establishment of internal reporting system of large or suspicious transactions, reporting large or suspicious transactions and confidentiality.

Affiliation and status of the financial intelligence unit (FIU), obligations and powers of FIU, operation of database, etc. are stipulated in Chapter 3 (Articles 25-28).

Chapter 4 (Articles 29-31) concerning the supervisory and regulatory institutions clarifies the obligations and powers of the Financial Supervisory Bureau, functions of customs and obligations and powers of law enforcement institutions.

Principles in international cooperation, institutions involved in international cooperation, types of international cooperation for AML/CFT purposes are defined in Chapter 5 (Articles 32-34).

Chapter 6 (Articles 35-40) stipulates the property subject to sanctions, complaints in respect of AML/CFT and their settlement.

The Law on Anti-Money Laundering adopted on Oct. 25, Juche 95 (2006) has no binding force any longer, the decree said.

UPDATE 8 (2015-6-29):  FATF says member states should pay “special attention” to financial transactions with North Korea. According to VOA:

The Paris-based Financial Action Task Force last week reaffirmed its earlier decision to put the community country on its watch list because of North Korea’s “failure to address the significant deficiencies in its anti-money laundering and combating the financing of terrorism,” the task force said in a public statement released on its website. It said that failure poses “serious threat … to the integrity of the international financial system.”

The task force had a plenary meeting last week in Brisbane, Australia.

“The FATF reaffirms its 25 February 2011 call on its members and urges all jurisdictions to advise their financial institutions to give special attention to business relationships and transactions with the [Democratic People’s Republic of Korea], including DPRK companies and financial institutions,” it said.

The group also expressed concern about the North’s noncompliance with its recommendations to fight money laundering.

In an apparent attempt to ease financial sanctions by the United States and the United Nations, the North promised steps to address money laundering concerns. In July 2014, Pyongyang announced it had joined the Asian affiliate of the anti-money laundering body as an observer. Later, the North sent a letter to the FATF indicating its commitment to implementing actions recommended by the group.

The FATF, created in 1989, has 36 members, comprising 34 member countries and territories and two regional organizations.

UPDATE 7 (2015-3-16): Following the FATFs statement regarding the DPRK on February 27, the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued a new advisory.

Read the full advisory here (PDF)

Here is coverage in Yonhap.

UPDATE 6 (2015-2-17): The FATF has issued another statement on North Korea:

The Financial Action Task Force (FATF) is the global standard setting body for anti-money laundering and combating the financing of terrorism (AML/CFT). In order to protect the international financial system from money laundering and financing of terrorism (ML/FT) risks and to encourage greater compliance with the AML/CFT standards, the FATF identified jurisdictions that have strategic deficiencies and works with them to address those deficiencies that pose a risk to the international financial system.

Jurisdictions subject to a FATF call on its members and other jurisdictions to apply counter-measures to protect the international financial system from the on-going and substantial money laundering and terrorist financing (ML/FT) risks emanating from the jurisdictions.

Iran
Democratic People’s Republic of Korea (DPRK)

Jurisdictions with strategic AML/CFT deficiencies that have not made sufficient progress in addressing the deficiencies or have not committed to an action plan developed with the FATF to address the deficiencies. The FATF calls on its members to consider the risks arising from the deficiencies associated with each jurisdiction, as described below.

Algeria
Ecuador
Myanmar

———–
Democratic People’s Republic of Korea (DPRK)

Since October 2014, the DPRK sent a letter to the FATF indicating its commitment to implementing the action plan developed with the FATF.

However, the FATF remains concerned by the DPRK’s failure to address the significant deficiencies in its anti-money laundering and combating the financing of terrorism (AML/CFT) regime and the serious threat this poses to the integrity of the international financial system. The FATF urges the DPRK to immediately and meaningfully address its AML/CFT deficiencies.

The FATF reaffirms its 25 February 2011 call on its members, and urges all jurisdictions, to advise their financial institutions to give special attention to business relationships and transactions with the DPRK, including DPRK companies and financial institutions. In addition to enhanced scrutiny, the FATF further calls on its members, and urges all jurisdictions, to apply effective counter-measures to protect their financial sectors from ML/FT risks emanating from the DPRK. Jurisdictions should also protect against correspondent relationships being used to bypass or evade counter-measures and risk mitigation practices, and take into account ML/FT risks when considering requests by DPRK financial institutions to open branches and subsidiaries in their jurisdiction.

UPDATE 5 (2015-2-4): NK News picked up the Choson Sinbo piece and offered these comments:

But other regime watchers suggested that there are at least certain segments of the North Korean elite who do indeed want money laundering combated.

“There’s a cohort of DPRK businessmen who want the country to take more active steps in dealing with financial improprieties because they are losing money or opportunities,” said Michael Madden of North Korea Leadership Watch. “The DPRK leadership, particularly Foreign Minister Ri Su Yong, is thinking more long-term on this.”

And Christopher Green of the Daily NK suggested that this was an effort by the North Korean government to not only avoid sanctions, but assert its control over the domestic financial industry by cracking down on money launderers.

“The state wants to bring into its remit all those rogue financial elements that occasionally tend to fall outside the remit of the ruling coalition,” he said. “The state is in a constant battle to stay as top dog in the financial sector in a country where so much is illegal for historical and political reasons – and illegality is always exploited eventually.”

And Daniel Pinkston of the International Crisis Group suggested that the North may have its eye on its northern neighbor with this move.

“I think it will be helpful – from the DPRK perspective – if Pyongyang ever needs to plead their case with Beijing to avoid financial sanctions that include Chinese banks since they are critical for the DPRK’s international financial linkages,” Pinkston said.

Kim Chon Gyun told the Choson Sinbo that the nation’s penal code has already been revised to reflect international standards when punishing money laundering.

UPDATE 4 (2015-2-3): Yonhap reports on the recent Chosun Sinbo article:

North Korea has created a national committee on efforts to fight money laundering and terrorist financing, a senior Pyongyang official confirmed Tuesday.

The communist nation’s move came after it joined the Asia/Pacific Group on Money Laundering (APG), the Asia-Pacific arm of the Financial Action Task Force (FATF) under the Organization for Economic Cooperation and Development (OECD), last year.

“The National Coordinating Committee is an organ to guide projects to prevent money laundering and financing of terrorism,” Kim Chon-gyun, head of North Korea’s central bank said in an interview with the Chosun Sinbo. The newspaper is published by the pro-Pyongyang General Association of Korean Residents in Japan, or Chongryon.

The panel, chaired by a deputy premier of the Cabinet, involves officials from the central bank, the foreign ministry, the finance ministry, and law-enforcement authorities, he added.

The North has already revised its penal code to take punitive measures against related violations in accordance with international norms, said Kim.

In January, Pyongyang said that it sent a letter to the FATF, based in Paris, pledging the sincere implementation of an action plan to meet global anti-money laundering standards.

UPDATE 3 (2015-2-3): The Chosun Sinbo has posted an article on anti-money laundering measures in the DPRK. Here is a rough translation:

[Interview] Kim Chon-kyun, the President of the Central Bank of the DPRK, Cooperation with International Organizations for Prevention from Money Laundering and Terrorist Financing.

“Establishment of the National System for Preventing from Illegal Acts”

By Kim Ji-young, reporter from Pyongyang

Kim Chon-kyun, the President of the Central Bank of the DPRK presented, at the interview with the Choson Sinbo, the opposite stance of North Korean government against money laundering and terrorist financing as follows.

“What cannot be allowed according to institutional characteristics”

– A letter from the president of the Central Bank of the DPRK that pledged to implement plans for action for prevention from money laundering and terrorist financing was submitted to Financial Action Task Force (FATF) on Jan 1st. How has the negotiation between North Korea and FATF proceeded?

The implementing recommendations of the plans for action we pledged this time were consented at the negotiation between North Korea and Asia/Pacific Group on Money Laundering in Cambodia on September 2014.

When looking into the recommendations, it included maintaining cooperative relations such as sharing data and proceeding cooperation with organizations, joining as a member state, devising a means to sanction and to punish on money laundering and terrorist financing, reinforcing the confirmation procedure of traders, establishing financing watching and information business system including reporting surreptitious trade, joining in international agreement, assessing loca, etc. These measurements are, in a word, that we should establish national system to punish severely illegal acts like internal/external money laundering and terrorist financing.

North Korea institutionally does not allow those illegal acts.

Long before such “international standard” appeared, North Korea already set legal, organizational measurement adequate for our society to prevent from money laundering –like acts. This is specifically described on our laws and those regulations have renewed according to the need for development in reality.

It is interesting that the head of the central bank is the point man for this operation because the DPRK’s central bank does not have the authority to hold foreign currency accounts–only accounts denominated in DPRK won. It seems to me that international money laundering should also be of concert to the Foreign Trade Bank, a sanctioned entity that is responsible for managing hard currency deposits in the DPRK.

UPDATE 2 (2015-1-24): According to the Pyongyang Times:

DPRK commits itself to anti-money laundering action plan

The Governor of the DPRK Central Bank on January 15 sent a letter to the Financial Action Task Force on Anti-Money Laundering, assuring it that the country would implement the Action Plan of International Standard for Anti-Money Laundering and Combating the Financing of Terrorism, a spokesman for the DPRK National Coordinating Committee on Anti-Money Laundering and Combating the Financing of Terrorism told KCNA on January 16.

He described this as a manifestation of the DPRK government’s political will based on its consistent stand to step up international cooperation in this field.

Recommendations of the action plan are legislative and organizational measures to criminalize and punish money laundering and financing of terrorism, and almost all of them have long been implemented in the DPRK to suit its actual conditions, according to the spokesman.

The DPRK will sincerely implement the action plan as it has pledged itself for the promotion of mutual understanding with member nations in the face of the obstructive moves of the US and some other countries that are reluctant to cooperate with the international organization, he stated.

He requested the organization to positively respond to the DPRK’s cooperative efforts as it assured in negotiations with the country.

UPDATE 1 (2014-10-24): FATF issues a public statement from Paris that includes the following:

Jurisdictions subject to a FATF call on its members and other jurisdictions to apply counter-measures to protect the international financial system from the on-going and substantial money laundering and terrorist financing (ML/FT) risks emanating from the jurisdictions.

Iran
Democratic People’s Republic of Korea (DPRK)

Democratic People’s Republic of Korea (DPRK)

Since June 2014, the DPRK has further engaged directly with the FATF and APG to discuss its AML/CFT deficiencies. The FATF urges the DPRK to continue its cooperation with the FATF and to provide a high-level political commitment to the action plan developed with the FATF.

The FATF remains concerned by the DPRK’s failure to address the significant deficiencies in its anti-money laundering and combating the financing of terrorism (AML/CFT) regime and the serious threat this poses to the integrity of the international financial system. The FATF urges the DPRK to immediately and meaningfully address its AML/CFT deficiencies.

The FATF reaffirms its 25 February 2011 call on its members and urges all jurisdictions to advise their financial institutions to give special attention to business relationships and transactions with the DPRK, including DPRK companies and financial institutions. In addition to enhanced scrutiny, the FATF further calls on its members and urges all jurisdictions to apply effective counter-measures to protect their financial sectors from money laundering and financing of terrorism (ML/FT) risks emanating from the DPRK. Jurisdictions should also protect against correspondent relationships being used to bypass or evade counter-measures and risk mitigation practices, and take into account ML/FT risks when considering requests by DPRK financial institutions to open branches and subsidiaries in their jurisdiction.

Here is the web page for FATF. You can learn more about FATF here.

ORIGINAL POST (2014-7-19): North Korea joins OECD anti-money laundering group. According to the JoongAng Daily:

North Korea has joined the Asia Pacific Group on Money Laundering (APG), whose purpose is to prevent funding of terrorism and development of nuclear weapons.

Members of the APG unanimously decided to accept North Korea and Tuvalu as observers during its general meeting held in Macau yesterday.

APG is the Asia Pacific unit of the Financial Action Task Force under the Organization for Economic Cooperation and Development (OECD).

The Financial Action Task Force (FATF) has 41 member countries including the U.S., South Korea, China and Japan and observers include countries such as Germany, France and the U.K., as well as 27 international organizations such as the Asia Development Bank and World Bank.

Since North Korea has been accepted as an observer, it has to follow several rules including the prevention of money laundering, funding of terrorist organizations or actions, sharing its knowledge and experience and following global regulations and laws.

The APG will decide later whether to elevate North Korea from observer status to a member country once it evaluates Pyongyang based on its annual reports to the organization and visits by the representatives of the group over the next three years.

South Korea and many other members are trying to figure out the motive behind the unexpected move by Pyongyang, because North Korea was previously opposed to joining the APG.

“[North Korea’s motive] is a mystery to us,” said a high ranking government official, who requested anonymity. “We suspect that North Korea, while looking for ways to ease the international financial restrictions imposed on them, decided to show their efforts in improving their global image [by joining the APG].

“But since the lists that they need to follow are long, we will probably have wait and see how sincere and determined they are with their decision.”

In other words, it could be a facade as a way for North Korea to ease the sanctions imposed on it, since the possibility that Pyongyang will give up its nuclear ambitions is low.

The action is particularly suspicious because up until last year’s APG meeting held in Shanghai, North Korea refused to join the organization because of the rule requiring members and observers to follow global standards. North Korea at the time argued that it would join the APG only after the agreement to follow UN resolutions was taken out.

The resolutions include prevention of money laundering, nuclear terrorism and development of nuclear weapons, which is the opposite of the North Korean government’s goal of securing both economic growth and nuclear weapons.

But now, North Korea has agreed to follow all regulations presented by APG.

The tide seemed to have turned as financial sanctions imposed by the international community and led by the U.S. have intensified.

Pyongyang suffered heavily last year after the U.S. and China closed the accounts of the Foreign Trade Bank of North Korea, which was known as the money laundering window for Pyongyang. The money laundered through the trade bank is suspected of being used in funding the regime’s control over the country.

In May, the state-run Bank of China said it had notified the Foreign Trade Bank of North Korea that it was closing all of its accounts and suspending all financial transactions. It did not specify the number of accounts in the bank.

The move came as a shock considering China and North Korea’s strong ties. China was previously the lifeline of North Korea, whose economy has been heavily dependent on its close ally.

Last year wasn’t the first time that North Korea’s accounts have been shut down. In 2005, the U.S. froze North Korea’s accounts at Macau’s Banco Delta Asia, which was a heavy blow to Pyongyang’s ability to secure foreign capital.

The recent change of heart seems to have been triggered by a report by the U.S. State Department in May designating North Korea as a country that is non-cooperative against terror, citing its decision not to join either the FATF or APG.

Although suspicious, the South Korean government isn’t disapproving of the move by the North, as there are positive aspects such as better transparency of Pyongyang’s finances if it conforms to the APG’s regulations.

And if Pyongyang doesn’t follow the rules and loses its license as an observer, the sanctions against North Korea will further tighten.

“North Korean representatives, after their acceptance was approved [in Macau], stressed that they will work on following the APG’s international standards and our [South Korean] government has emphasized the importance of following the resolutions set by the United Nations Security Council,” said a government official.

Read the full story here:
North Korea joins OECD anti-money laundering group
JoongAng Daily
Jung Won-yeop and Park Jin-seok
2014-7-19

Share