By Loke Hoe Yeong
North Korea has been known to be at the receiving end of sanctions due to its nuclear programme and its human rights violations. But now, it has been slapped with sanctions for something else.
On 1 June, the US Treasury Department designated North Korea a “primary money laundering concern” under the Patriot Act. The new steps that it would be taking will “further isolate North Korea,” a cash-starved pariah state that operates with few friends in the international community.
The US Treasury explained in a statement, North Korea’s financial institutions operate with little or no international supervision, unlike most banks that the international community would be familiar with. This state of affairs, it said, therefore makes it easier for North Korea to shift money around for illegal ends, which the international community would deem acceptable anyway.
Adam Szubin, the US Treasury’s Acting Under-Secretary for terrorism and financial intelligence, issued a statement saying that the US and its international partners “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 destabilising activities,” Szubin stated.
A bill that was passed by the US Congress and signed into law by President Barack Obama earlier this February led to this latest directive from the Treasury, to crack down on money laundering transactions that North Korea is responsible for.
Predictably, North Korea as denounced the US Treasury’s latest move through a statement which released through the country’s state news agency – albeit in a more measured tone that in its typically dramatic flourishes. That statement underscored the regime’s stance of opposing money laundering, and that it has also played a part in combating the financing of terrorism, another key concern of the US.
“The US is sadly mistaken if it calculates it can attain its sinister political goal through the above-said action,” that statement said.
US sanctions on North Korea: purely politically-motivated?
Not all of international opinion is on the side of the US, with regard to its use of sanctions on the pariah state for purported money laundering activities though.
John McGlynn, a Tokyo-based independent foreign policy and financial analyst, has alleged that the charges “are politically motivated and rest on no solid evidentiary basis.”
Scholars and researchers like McGlynn made such an assessment based on surveying the official record of charges of counterfeiting and money laundering around the world since the early 1990s. McGlynn has described the US Treasury ‘s decision back in 2005 to blacklist the Banco Delta Asia of Macau as the start of the US’s concerted worldwide campaign of sanctions against North Korea to cripple the pariah state financially.
The US Treasury’s latest move, thought to be targeted in part at getting Chinese banks to stop doing business with North Korea, means any financial institutions doing business with the country face their own potential US sanctions.
What do the new sanctions entail?
With the new US Treasury designation in place, financial institutions in the US would need to ensure that North Korean individuals or entities are not using overseas banks to conduct transactions with them.
The US made such an arrangement because it believes that 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.”
The US Treasury also noted that “North Korea is subject to little or no bank supervision anti-money laundering or combating the financing of terrorism controls.” It added that “North Korea relies on the illicit and corrupt activity of high-level officials to support its government.”
Despite the wide range of international sanctions it faces, the North Korean government has managed to keep its military and nuclear programme largely unchanged, financing them through a range of largely illegal channels.
It is also known that North Korea has also managed to forge US hundred-dollar bills to such a high quality of duplication that the US Federal Reserve redesigned the hundred-dollar bill which made counterfeiting less easy.
Some analysts slightly more sympathetic towards North Korea have explained the pariah state’s practices as a means of bypassing the sanctions imposed on it by the international community.
Nevertheless, yet other observers regard the North Korean regime as effectively a sovereign “mafia” state that uses practices akin to organised transnational criminal organisations.