US blocks access to banks by North Korea

Tens of thousands of North Koreans, brandishing red flags and chanting slogans, parading through Kim Il Sung square in Pyongyang on Wednesday to celebrate the start of the regime's latest five-year economic plan.
Tens of thousands of North Koreans, brandishing red flags and chanting slogans, parading through Kim Il Sung square in Pyongyang on Wednesday to celebrate the start of the regime's latest five-year economic plan.PHOTO: XINHUA

Bid to halt Pyongyang's 'abuse' of financial systems to fund its weapons programmes

WASHINGTON • The United States has declared North Korea a "primary money-laundering concern" and moved to further block its ability to use the US and world financial systems to fund its wea- pons programmes.

The US Treasury called for a prohibition on certain US financial institutions opening or maintaining correspondent accounts - which are used to receive deposits from or make payments on behalf of a foreign institution - with North Korean financial institutions.

Crucially, the US Treasury also prohibited the use of third parties' US correspondent accounts to process transactions for North Korean financial institutions.

The announcement came days after the latest failed missile launch by the isolated state. Tensions in the region have been high since January when North Korea conducted its fourth nuclear test and then followed that with a satellite launch and test launches of various missiles. Those efforts have fuelled calls in Washington, and abroad, for a clampdown on Pyongyang.

US law already generally prohibits US financial institutions from engaging in transactions with North Korean institutions, but the US Treasury's latest actions impose additional controls, especially the prohibition on the use of third-country banks' US accounts to process transactions for North Korea.

"This is meaningful," said Mr Victor Cha, Korea chair at the Centre for Strategic and International Studies in Washington. "This is designating the entire country, which means essentially that any entity that is interested in interacting with US financial institutions should no longer have any business with North Korea.

"Most, if not all, entities, if faced with the choice of having access to the US financial system or doing business with North Korea, are going to make the obvious choice."

South Korea's Foreign Ministry welcomed the move, which it said would boost the effectiveness of existing sanctions on the North and have a broader impact than a 2005 US Treasury measure that targeted a bank in Macau. About US$24 million of North Korean funds was frozen at Macau's Banco Delta Asia after the US Treasury accused it of helping to channel earnings from the North's illicit activities, leading to a frantic attempt by Pyongyang to retrieve the money.

The North has since developed tactics to skirt financial restrictions by resorting to informal means of transferring money, including officials carrying bulk cash by hand.

Mr Adam Szubin, the US acting under-secretary for terrorism and financial intelligence, said Washington expected other governments and financial authorities to make similar moves to prevent Pyongyang from "abusing" global financial institutions to support its weapons development.

"The regime is notoriously deceitful in its financial transactions in order to continue its illicit weapons programmes," he said.

REUTERS

A version of this article appeared in the print edition of The Straits Times on June 03, 2016, with the headline 'US blocks access to banks by North Korea'. Print Edition | Subscribe