The United States Department of the Treasury has unveiled sanctions on a Chinese shipping company and two Chinese nationals, as well as proposing the exclusion of a Chinese bank from the U.S. financial system, in a new round of North Korea-focused sanctions on Thursday.
The measures against a shipping company and two individuals are pursuant to Executive Orders while the proposal to designate the Bank of Dandong as a financial institution of primary money laundering concern is pursuant to Section 311 of the Patriot Act.
“Treasury’s Financial Crimes Enforcement Network (FinCEN) announced a finding that Bank of Dandong, a Chinese bank that acts as a conduit for illicit North Korean financial activity, is a foreign bank of primary money laundering concern, and FinCEN has proposed to sever the bank from the U.S. financial system,” the press release read.
“In addition, Treasury’s Office of Foreign Assets Control (OFAC) designated two Chinese individuals and one Chinese company in response to North Korea’s ongoing WMD development and continued violations of UN Security Council resolutions,” it added.
While the Treasury sanctions against Dalian Global Unity Shipping and two Chinese nationals are immediate, the proposal to sever the Bank of Dandong from the U.S. financial system is subject to a 60-day review.
In its notice of proposed rulemaking (NPRM) submitted to the federal register for review, the Treasury identified the Bank of Dandong as a primary money laundering concern and a key player in facilitating North Korea’s access to the U.S. financial system.
It also identified the bank’s involvement with entities known for proliferation activities.
“In early 2016, accounts at Bank of Dandong were used to facilitate millions of dollars of transactions on behalf of companies involved in the procurement of ballistic missile technology,” the notice reads.
Kwangson Banking Corporation (KKBC), an entity designated by both the U.S. and the UN Security Council – for which China is a permanent member – was among the examples given by the Treasury.
KKBC, which was sanctioned for providing financial services in support of North Korean WMD proliferators, was able to maintain several accounts with the Bank of Dandong, the notice reads.
As was the Korea Mining Development Trading Corporation (KOMID), an entity sanctioned by both the U.S. and UN and which is widely known to be one of North Korea’s primary arms dealers.
“As of early 2016, a front company for KOMID maintained multiple bank accounts with Bank of Dandong,” the notice reads. According to the notice, these financial services provided to designated entities were not a rare occurrence.
“FinCEN assesses that at least 17 percent of Bank of Dandong customer transactions conducted through the bank’s U.S. correspondent accounts from May 2012 to May 2015 were conducted by companies that have transacted with, or on behalf of, U.S.- and UN-sanctioned North Korean entities, including designated North Korean financial institutions and WMD proliferators,” it read.
It also identified a Chinese entity – Dandong Hongxiang Industrial Development Co. Ltd. (DHID) – as having a minority ownership interest in the Bank of Dandong until December 2016.
DHID was previously indicted by the U.S. Department of Justice and sanctioned by the Treasury in September 2016 for violating North Korea sanctions.
Despite the action, vessels associated with DHID and their various subsidiaries appear to be operating as before, and continue their trips between China and North Korea.
The move to impose measures against Chinese entities and individuals is significant, according to sanctions experts.
“Today’s action confirms that Chinese banks, companies, and individuals play a key role in North Korea’s sanctions evasion,” Anthony Ruggiero, Senior Fellow at the Foundation for Defense of Democracies, told NK News.
“This is a message to China’s leadership that it needs to act against North Korea and Chinese banks are also warned to increase scrutiny of North Korea-related transactions.”
The timing of the measures is also noteworthy, according to Andrea Berger, a Senior Research Associate at the Middlebury Institute of International Studies.
“This is a politically significant step at an important moment,” Berger told NK News. “Just as the South Korean President lands in Washington, the Trump administration has decided to put its unilateral approach to North Korea policy into sharper relief.”
“The move is designed to show the administration’s ‘strategic impatience’ towards China for its lack of cooperation in implementing UN sanctions on North Korea,” she added.
It is as yet, however, unclear if the unilateral measures against the Bank of Dandong will result in further cooperation by China in North Korean sanctions implementation.
Washington previously designated a Chinese financial institution called the Bank of Kunlun under a different sanctions regime in 2012, but the results were mixed.
“It is possible that Bank of Kunlun’s designation as a money laundering concern will mirror a similar move taken by the U.S. in 2012 with regards to Iran sanctions,” Berger told NK News.
“At the time, the U.S. sanctioned the small Bank of Kunlun in China for its Iranian business. Rather than stemming Kunlun’s illicit activity and promoting Chinese compliance, however, Kunlun went on to become a more active payment channel for Iran.”
Dalian Global Unity Shipping Co., Ltd was designated by the Office of Foreign Assets Control (OFAC) pursuant to Executive Order (EO) 13722 for operating in the transportation industry for the North Korean economy.
“Dalian Global Unity is reported to transport 700,000 tons of freight annually, including coal and steel products, between China and North Korea,” the press release said.
The statement also cited a UN Panel of Experts (PoE) report from 2013, which implicated the company in eight cases of smuggling luxury goods to North Korea and added further details about UN sanctions evasion.
“Middlemen from Dalian Global Unity gave specific instructions about how shipments and transactions could evade the UN-mandated luxury goods ban,” it added.
Japan told the PoE that Dalian Global Unity – which is also registered in the Marshall Islands – often worked on behalf of several DPRK companies, including Korea Rungrado General Trading Company.
Rungrado is already designated by OFAC for smuggling scud-missile parts to Egypt, while there is some evidence its shipping arm continues to carry coal to China, a possible breach of UN resolutions and China’s own domestic laws.
Dalian Global Unity Shipping does not appear to own or manage any vessels, instead appearing to have given instructions on how North Korea could evade Japan’s luxury goods restrictions.
The group has helped North Korean companies obtain electronic items, alcoholic beverages, cosmetics, tobacco and automobiles in breach of Japanese laws which prohibit all trade with the DPRK.
The OFAC designation did not specify if Dalian Global Unity continued to ship coal to North Korea after the passage of UN Resolution 2321, which limited member states from importing numerous DPRK commodities.
Two Chinese individuals were also designated for their role in providing financial services to the DPRK and for links to already designated North Korean banks.
The first individual was identified as Sun Wei, who the Treasury says was closely aligned with the Foreign Trade Bank (DTB) – sanctioned by the U.S. in 2013 for “facilitating transactions on behalf of North Korea’s WMD proliferation network.”
Sun Wei, the press release said, established and ran a “cover company” on behalf of the bank.
The second individual, Li Hong Ri, was sanctioned for establishing front companies for Ri Song Hyok, an official representing the Koryo Bank and the Koryo Credit Development Bank – both of which are already sanctioned by the U.S.
Edited by Oliver Hotham
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