The United States has designated North Korea a “primary money laundering concern” under section 311 of the Patriot Act, the U.S. Department of Treasury announced on Wednesday.
The designation – which puts at risk of sanctions any bank which does business with the DPRK – applies further financial measures against North Korea with the aim of isolating the country from the U.S. and international banking systems.
“Today’s action is a further step toward severing banking relationships with North Korea and we expect all governments and financial authorities to do likewise pursuant to the new UN Security Council Resolution,” Acting Under Secretary for Terrorism and Financial Intelligence Adam J. Szubin was quoted as saying in a press release.
“It is essential that we all take action to prevent the regime from abusing financial institutions around the world – through their own accounts or other means.”
The press release also said that the Treasury’s Financial Crimes Enforcement Network (FinCEN) released a Notice of Proposed Rule Making (NPRM), imposing the “most significant measure available to the Secretary under Section 311.”
The measure calls for prohibitions for U.S. financial institutions to open or maintain correspondent accounts with North Korean financial institutions and to ban U.S. correspondent accounts from processes transactions for North Korean financial institutions.
“It really is the nuclear option when it comes to financial sanctions,” said Victor Cha, senior advisor and Korea chair at the Center for Strategic and International Studies (CSIS).
“Foreign financial institutions will start to position away from DPRK business (U.S. banks don’t deal directly with NK), rather than go through the hassle of trying to convince Treasury that whatever meager business they have with NK does not violate the 311,” he explained by email. “No one wants to be blacklisted in the U.S. financial system over business with NK”
However, Cha added that “this is a preliminary finding so it has not yet gone into effect, because Treasury must follow with a final finding.”
On Wednesday the Department of Treasury outlined four reasons for the notification under Section 311.
Firstly, due to North Korea’s use of state-controlled financial institutions and front companies “to conduct international financial transactions that support the proliferation and development of WMD and ballistic missiles.”
Secondly, as “North Korea is subject to little or no bank supervision anti-money laundering or combating the financing of terrorism (“AML/CFT”) controls.”
Thirdly, as U.S. has no has no diplomatic relationship with North Korea or mutual legal assistance treaty and “does not cooperate with U.S. law enforcement and regulatory officials in obtaining information about transactions originating in or routed through or to” the country.
Finally, the press release cites the country’s reliance on “illicit and corrupt activity of high-level officials to support its government.”
Main picture: Wikimedia Commons
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