China issues warning shot to North Korea banks

SEOUL (REUTERS) - Chinese regulators appear to have issued a warning shot to North Korean banks, telling them to stay within the remit of their permitted operations in China or risk penalties after a new round of U.N. sanctions sought to cut Pyongyang's funding.

A report from South Korea's Yonhap news agency on Tuesday cited a Beijing-based source as saying the warning had been given to four North Korean financial institutions, some of whom have been named in United Nations and United States sanctions for aiding Pyongyang in its nuclear and missile programmes.

The report said Chinese authorities had so far turned a blind eye to the short-term lending and remittance operations by the banks, which may have allowed the North to save on fees and have access to preferred exchange rates.

Asked to confirm the report, Chinese Foreign Ministry spokesman Hong Lei said he was unaware of it. If true, the measures would not amount to anything close to the kind of clampdown called for in new U.N. sanctions aimed at curtailing North Korea's nuclear and ballistic missile programmes.

The March 7 sanctions tighten financial curbs on North Korea and order mandatory checks of suspicious cargo.

"But I want to stress that China is a responsible country and has consistently, in accordance with domestic law and including the U.N. Security Council resolutions and its international obligations, handled the relevant problem," Hong told reporters in Beijing.

The China Banking Regulatory Commission and the central bank did not immediately respond to a request for comment.

Yonhap said Tanchon Commercial Bank, Korea Kwangson Banking Corp (KKBC), Korea Daesong Bank and Golden Triangle Bank had received notices from the banking regulator ordering them to conduct business according to their permits.

"These Chinese measures that ban illegal operations by North Korean banks in China came about as part of implementing U.N. Security Council resolutions, so it would be difficult to see them as bilateral sanctions imposed by China," the source in Beijing said.

"China is in effect putting pressure on North Korea by saying they'll do things according to the law."

The report came ahead of a visit to Beijing by a senior U.S. Treasury official amid Washington's push for implementation of the U.N. sanctions.

Beijing has joined every round of U.N. sanctions although questions remain over how closely it imposes restraints on its neighbour.

Tanchon is listed in the latest round of U.N. sanctions for its role in facilitating North Korea's weapons programmes. KKBC and Korea Daesong Bank are on U.S. blacklists.