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.