Jun 19 2009 Brett Wolf
The Financial Crimes Enforcement Network has issued an advisory warning US financial institutions to "take commensurate risk mitigation measures" to avoid serving North Korean government agencies and front companies. FinCEN's advisory cites UN Security Council Resolution 1,874, which was adopted earlier this month to condemn North Korea's May 25 nuclear test. This latest resolution, which bolstered three-year-old obligations included in Resolution 1,718, called upon member states to prevent the provision of financial services to North Korea's nuclear and ballistic missile programs.
"In light of the financial measures in UNSCR 1,718 and UNSCR 1,874, and the use of deceptive financial practices by North Korea and North Korean entities, as well as individuals acting on their behalf, to hide illicit conduct, FinCEN advises all US financial institutions to take commensurate risk mitigation measures," FinCEN's advisory stated.
It added: "FinCEN notes that with respect to correspondent accounts held for North Korean financial institutions, as well as their foreign branches and subsidiaries, there is now an increased likelihood that such vehicles may be used to hide illicit conduct and related financial proceeds in an attempt to circumvent existing sanctions. Financial institutions should apply enhanced scrutiny to any such correspondent accounts they maintain, including with respect to transaction monitoring."
Treasury's long-standing concerns
According to FinCEN, the UN Security Council's action "reinforces long-standing Treasury Department concerns regarding North Korea's involvement, through government agencies and associated front companies, in financial activities in furtherance of a wide range of illicit activities".
"These activities include currency counterfeiting, drug trafficking, and the laundering of related proceeds. The Treasury Department remains especially concerned about the use of deceptive financial practices by North Korea and North Korean entities, as well as individuals acting on their behalf," the advisory stated.
"Such deceptive practices may include North Korean clients' suppression of the identity and location of originators of transactions; their practice of arranging for funds transfers via third parties; repeated bank transfers that appear to have no legitimate purpose; and routine use of cash couriers to move large amounts of currency in the absence of any credible explanation of the origin or purpose for the cash transactions."
FinCEN added that Treasury is concerned that, in an attempt to evade UN Security Council Resolution sanctions, North Korea may increasingly rely on cash transactions.
"All financial institutions should remain vigilant regarding attempts by North Korean customers to make large cash deposits into new or existing accounts, as well as the associated risk of the passing of counterfeit currency," FinCEN stated.
The FinCEN advisory also reminded financial institutions to "continue to ensure that they are not providing financial services for North Korea's procurement of luxury goods".
"This vigilance will help ensure compliance with UNSCR 1718, which prohibits North Korea's procurement of such goods," FinCEN noted.
North Korean banks
FinCEN also took the unusual step of providing a list of North Korean banks. It noted however that the list is "taken from public and commercially available information" and "is not meant to be a comprehensive list and is provided for ease of reference only".
"For the purposes of this advisory, financial institutions should take independent steps as necessary to ensure sufficient awareness of their entire exposure to North Korean financial transactions regardless of the financial institution conducting the transactions," FinCEN stated.
The banks named in the advisory are:
• Amroggang Development Bank
• Bank of East Land
• Central Bank of the Democratic People's Republic of Korea
• Credit Bank of Korea
• Dae-Dong Credit Bank
• First Credit Bank
• Foreign Trade Bank of the Democratic People's Republic of Korea
• Hana Banking Corporation Ltd
• The International Industrial Development Bank
• Korea Joint Bank
• Korea Daesong Bank
• Korea Kwangson Banking Corp
• Korea United Development Bank
• Koryo Commercial Bank Ltd
• Koryo Credit Development Bank
• North East Asia Bank
• Tanchon Commercial Bank
Can Treasury do more?
In the light of this advisory, which in effect obliges US financial institutions to find ways to detect North Korean subterfuge, Complinet wondered if Treasury plans to share data reportedly passed to the US government by South Korea. As reported by Complinet, the South Korean press claims that the country's intelligence officials provided information about some "10 to 20" foreign bank accounts the North allegedly uses for money laundering and other nefarious purposes.
Complinet asked FinCEN if the information contained in the purported list will be shared with US financial institutions. A FinCEN spokesman referred the query to Treasury's main press office, and a Treasury spokeswoman told Complinet she could not comment on the existence of such a list, let alone plans to share it. "At this point we are just encouraging bank to do their due diligence — to ensure they know who they are doing business with," she said.
