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Jacob Fromer is NK News's Washington DC correspondent. He previously worked in the U.S. Senate.
North Korea engaged in a “multi-year scheme” to evade global financial sanctions and funnel $2.5 billion from abroad into the country, the U.S. Department of Justice alleged in a new criminal indictment unsealed on Thursday.
The allegations state that 33 individuals — five Chinese nationals and 28 North Koreans — engaged in a sprawling plot across a half-dozen countries to open covert branches of a major North Korean bank, illegally access potentially billions of dollars in hard currency, and siphon the funds back to the DPRK.
The alleged transactions took place over much of the last decade, including as recently as January of this year.
“The defendants in this case used more than 250 front companies to allegedly obscure $2.5 billion in illicit financial dealings conducted by North Korea’s Foreign Trade Bank,” Michael R. Sherwin, the Acting United States Attorney for the District of Columbia (D.C.), told NK News.
The indictment says that the DPRK nationals and their Chinese associates opened covert branches of the North Korean Foreign Trade Bank (FTB) — the country’s main foreign exchange bank — in Austria, Kuwait, Libya, Thailand, and multiple Chinese and Russian cities, and then used those branches as conduits to send money back home.
The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), which oversees sanctions enforcement, blacklisted the FTB from the U.S. financial system in 2013, and has accused the bank of facilitating “transactions on behalf of actors linked to North Korea’s proliferation network” of weapons of mass destruction.
According to the indictment, the goal of the conspiracy was to “enrich the defendants and other co-conspirators,” conduct transactions in U.S. dollars despite a ban from the American financial system, and “facilitate the purchase of products and services for North Korean end users” — all while evading the law.
The FTB wanted its agents to travel overseas and “study fast developing financial technologies and experiences of other countries,” the indictment says.
In Kuwait, for example, the indictment says that two North Korean nationals named Kwon Song Il and Ryu Myong Il allegedly ran a covert branch of the FTB — and in late June 2017, Kwon received “coded instructions from FTB Headquarters” to pay $63,000 to a “state fund for economic development.”
Two months later, FTB headquarters in Pyongyang allegedly sent “coded instructions” to Kuwait: pay $705,000 “to a foreign telecommunications company, with a coded FTB reference number, on behalf of Cheo Technology joint venture.”
Cheo Technology runs North Korea’s cellular service provider Koryolink. The indictment does not name the foreign telecommunications company.
In late May last year, the FTB headquarters in Pyongyang allegedly sent “coded instructions” to a DPRK national in Thailand named Hwang Won Jun, to “pay two Chinese companies, $303,329.83 and $1,000,000.00 respectively, both of which payments included a coded FTB reference number,” the indictment says.
Similar acts allegedly took place as far away as Austria and Thailand, and as close as Vladivostok and the Chinese city of Shenyang.
It also alleges illicit activity in the Chinese cities of Beijing, Dandong, and Zhuhai, and the Russian cities of Moscow and Khabarovsk.
U.S. companies in particular also received payments from North Korean front companies worth hundreds of thousands of dollars, the indictment says.
Overall, the indictment accuses the 33 North Korean and Chinese citizens of violating a slew of American banking, sanctions, and fraud laws intended to stop North Korea from funding its nuclear and missile weapons programs.
The names listed in the indictment include two DPRK citizens who have served as head of the FTB — Ko Chol Man and Kim Song Ui — along with at least one known member of the Reconnaissance General Bureau (RGB), North Korea’s top foreign intelligence-gathering body, named Han Ki Song.
Now that the indictment is unsealed, what happens next is unclear: criminal charges normally lead to trials, but DPRK nationals are unlikely to be tried in American courts unless they happen to travel to a country willing to arrest and extradite them to the United States.
But the Justice Department’s move may still send a signal to banks around the world not to do business with anyone named in the indictment.
And the U.S. has already seized more than $63 million from the laundered funds covered by this case, according to the Justice Department.
Joshua Stanton, an expert in U.S. sanctions policy against the DPRK, wrote in a post online after the indictment was unsealed that the criminal charges do not necessarily rise to the level of “maximum pressure” — a term the Trump administration has used to describe its policy for North Korea — but may still make a difference in Washington’s efforts to enforce sanctions.
“The designation of specific agents can be a game of whack-a-mole, but we’ve whacked a lot of moles today,” he wrote, adding that the number of people named in the indictment seems to represent a sizable portion of the FTB’s workforce.
The Justice Department said in the indictment that the FTB has more than 600 employees in its head office, located in Pyongyang, and approximately 300 employees in its “branches and subsidiaries.”
“As I’ve said all along, it will be maximum pressure when a Chinese bank gets hit with a nine-digit civil penalty or a serious indictment for violating North Korea sanctions,” Stanton added.
“Today’s action (along with other recent OFAC actions) will help sustain our pressure at a moderate level, but will not raise it to maximum.”
Edited by Oliver Hotham
North Korea engaged in a "multi-year scheme" to evade global financial sanctions and funnel $2.5 billion from abroad into the country, the U.S. Department of Justice alleged in a new criminal indictment unsealed on Thursday.
The allegations state that 33 individuals -- five Chinese nationals and 28 North Koreans -- engaged in a sprawling plot across a half-dozen countries to open covert branches of a major North Korean bank, illegally access potentially billions of dollars in hard currency, and siphon the funds back to the DPRK.