Sanctioned DPRK entities used companies in Singapore to move dollars and buy oil products
A civil forfeiture complaint filed by the U.S. Justice Department on Tuesday highlights how North Korea uses front companies in Singapore to launder money and purchase oil products from Russia.
The document – one of two released – sheds light on new designations from the Treasury Department’s Office of Foreign Assets Control (OFAC) also issued on Tuesday.
The filing outlines a four stage process which sees sanctioned North Korean banks using companies in Singapore and Hong Kong, owned by Russian and Chinese nationals, to move U.S. dollars and buy diesel for delivery to the DPRK.
While the OFAC designations name some of the companies and individuals involved, the Justice Department adds there other companies involved in the network, though does not provide their names or addresses.
But the civil complaint filing does show how two front companies in Singapore – Velmur and TransAtlantic – were key nodes in supplying North Korea with fuel products, while also receiving payments from firms associated with the DPRK’s sanctioned Foreign Trade Bank.
Both companies were administered by Russian nationals, who were also among the individuals added to OFAC’s specially designated nationals list on Tuesday.
TransAtlantic, along with several unnamed companies, transferred funds to Velmur which in turn to remitted it to a Moscow based company called Independent Petroleum Company (IPC).
IPC and its subsidiaries also made OFAC’s designated entities list in early June for supplying oil products to North Korea.
Although the OFAC designations said IPC had delivered oil products to the DPRK worth over USD$1 million, the Justice Department filing indicates Velmur paid IPC nearly USD$7 million in less than a two-month period.
The Justice Department also obtained bills of lading indicating IPC sent shipments of diesel from its terminal in Vladivostok.
“As such, it appears that Velmur, while registered as a real estate management company, is in fact a North Korean financial facilitator involved with making illicit payments sourced from front companies, such as Transatlantic, to IPC for the illegal importation of gasoil into North Korea,” the report concludes.
“This network is interesting,” Anthony Ruggiero, a Senior Fellow at the Foundation for the Defense of Democracies, told NK Pro. “It looks like a North Korean bank and/or IPC set it up to process U.S. dollar payments to IPC for products delivered to North Korea.”
“That shows a vulnerability in the Russia-North Korea relationship if IPC insists on getting paid in U.S. dollars. Question is whether IPC and North Korea will set up another network to try again. There are three unnamed front companies linked to Velmur/TransAtlantic and NK, which could be used to attempt the U.S. dollar transactions.”
The filing’s contents also tally with reports from Voice of America in early June. The Washington DC-based outlet interviewed a senior defector who said the DPRK had procured Russian oil products through companies in Singapore.
“We first strike a deal with Singaporean firms, which then enter into another contract with Russian oil companies,” Ri Jong Ho told VOA.
Ri said the DPRK uses this method to procure between 200,000 – 300,000 tonnes of Russian oil products per year, far more than appears in the country’s export statistics.
But the relatively high volumes and figures revealed by the Justice Department are more consistent with North Korean oil tanker traffic first observed by NK News in 2014, which noted regular movement between the Russian Far East and the DPRK.
“Publically available shipping data from May 2017 shows a steady flow of oil tanker traffic from Vladivostok into North Korean east coast ports,” the Justice Department’s filing reads.
“Additional open source reporting reveals that North Korea began relying heavily on Russia for gasoil importation in 2017.”
But OFAC’s designations may have halted the trade for now: no DPRK tankers appear to have visited the Russian Far East since shortly after the sanctions were issued.
Edited by Oliver Hotham
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