US says Chinese helped direct $3.7b to North Korea

Washington | The US government has charged 28 North Korean and five Chinese individuals with facilitating more than $US2.5 billion ($3.7 billion) in illegal payments for Pyongyang's nuclear weapons and missile program in what court papers describe as a clandestine global network operating from countries including China, Russia, Libya and Thailand.

The Justice Department has accused the individuals of acting as agents of North Korea's Foreign Trade Bank in what officials say is the largest North Korean sanctions violations case charged by the US.

Working for the FTB – which is North Korea's primary foreign currency bank and under sanctions for facilitating nuclear proliferation – the agents allegedly set up more than 250 front companies and covert bank branches around the world to mask payments transiting the US financial system, including through several Chinese banks and for equipment from Chinese telecommunications giants Huawei Technologies and ZTE.

The massive enforcement action comes as United Nations experts have detailed North Korea's widespread evasion of sanctions by using agents of state-owned and other banks overseas to facilitate a global web of illicit oil, arms and coal deals to bring in foreign currency. The efforts have been augmented through offshore ship-to-ship transfers, large-scale crypto-currency hacks and ransomware attacks.

The Justice Department move highlights Washington's stalled diplomatic effort to eliminate Pyongyang's nuclear missile and weapons capabilities, analysts said. The actions also reflect an internal US election-year debate over whether President Donald Trump's withholding of tougher sanctions and emphasis on personal diplomacy with North Korean leader Kim Jong-un can succeed if existing American pressure tactics are not effectively enforced, analysts said.

The Trump administration had outpaced predecessors at building a global coalition to pressure Pyongyang before talks started. But the biggest hole in sanctions enforcement remains US reluctance to penalise major Chinese banks through which North Korea's illicit funds flow, for fear of triggering Chinese retaliation and a wider financial war.

The indictment reveals the extent to which the government believes China has facilitated the illicit network. Though UN member states since early 2016 are supposed to have expelled branches of North Korean banks, the indictment said such branches are still operating in Beijing and Shenyang, China.

And it said that five Chinese citizens have been overseeing covert FTB branches, including in Shenyang and Libya.

"This adds to the already overwhelming evidence that China's government is wilfully assisting Kim Jong-un in his violations of North Korea sanctions," said Joshua Stanton, who helped write the 2016 law that strengthened North Korea sanctions.

"I'll believe it's 'maximum pressure' when those banks begin to face nine and 10-digit penalties, like the ones President Obama imposed on European banks that broke Iran sanctions," said Stanton.

Evans Revere, a former State Department official focused on East Asia, lauded the US government for going after Chinese banks and other entities enabling North Korea's illicit activities. "This will complicate US-China relations, but that may be a necessary risk if the US is serious about pressuring Pyongyang," he said.

Washington Post