China state banks curbing deals by N. Korean clients

Rules could make trading harder between two countries, and help avoid US sanctions

YANJI (Jilin) • China is said to have ordered its state banks to start suspending transactions through accounts held by North Koreans, potentially making trade between the two countries more difficult.

Branch offices of at least three major state banks - Bank of China, China Construction Bank, and Agricultural Bank of China - in the north-eastern border city of Yanji have banned North Koreans from opening accounts, Tokyo-based Kyodo News reported, citing sources.

North Korean clients can still withdraw money from their existing accounts, as the banks have not frozen them, said Kyodo News. But they can no longer make deposits or send remittances. "This is being influenced by international sanctions against North Korea," an employee of one bank told Kyodo News.

News of the curbs comes as the United States pushes for harsher sanctions against North Korea following its sixth nuclear test. The US has circulated a revised draft resolution among its United Nations Security Council partners.

The draft includes a progressive oil embargo on North Korea, diplomats said on Sunday, according to Agence France-Presse. The Security Council was set to vote yesterday.

The bank restrictions have also been applied in Liaoning province, the main region of trade between China and North Korea, Kyodo News said, indicating that Beijing is becoming more serious about curbing Pyongyang's nuclear ambitions.

The new rules could also help major Chinese banks avoid being hit by sanctions imposed by the US.

Chinese banks are especially vulnerable to sanctions as they had US$144 billion (S$193 billion) of assets in the US at end-December, Federal Reserve data shows.

Earlier this month, US Republican congressman Peter King called out Bank of China as a potential sanction target, Bloomberg reported. He tweeted on Sept 3 that if China vetoed UN oil sanctions on North Korea, "US must sanction (anyone) doing business with (North Korea), including Bank of China".

China is North Korea's major oil supplier and accounts for 90 per cent of North Korea's official trade.

In June, the US Treasury Department set sanctions on the Bank of Dandong, severing it from the US financial system, as it accused the bank of laundering North Korean cash, AFP reported.

Chinese banks are especially vulnerable to sanctions as they had US$144 billion (S$193 billion) of assets in the US at the end of December, Federal Reserve data shows. Most of those assets are held by Bank of China and the Industrial and Commercial Bank of China.

North Korea tested its most powerful nuclear bomb yet on Sept 3, saying it was a hydrogen device.

Yesterday, China said it has concluded that radiation levels remain normal in the provinces near the North Korean border.

Japan and South Korea last week said they had not found any atmospheric radiation in their countries.

A version of this article appeared in the print edition of The Straits Times on September 12, 2017, with the headline 'China state banks curbing deals by N. Korean clients'. Subscribe