US alleges $2.5bn scheme to circumvent North Korean sanctions

The US has charged 33 people with running an alleged $2.5bn money laundering operation designed to circumvent harsh sanctions on North Korea.

In a filing unsealed on Thursday in Washington federal court, the Department of Justice alleged the defendants had operated covert branches of North Korea’s state-owned foreign exchange bank in countries including Kuwait, Thailand and Austria.

The branches were used to open and operate over 250 front companies “to procure commodities and facilitate payments in US dollars on behalf of parties in North Korea”, US prosecutors alleged.

Other countries where defendants operated covert branches of North Korea’s Foreign Trade Bank included Libya, Russia and China, according to the filing, in an alleged scheme that ran from March 2013. The indictment was filed in February but not unsealed until now.

The defendants included North Korean and Chinese citizens, including presidents and vice-presidents of the FTB. None appears to be in custody. Several of the defendants have previously been sanctioned by the US.

Mike Sherwin, the acting US attorney for Washington, said: “Through this indictment, the United States has signified its commitment to hampering North Korea’s ability to illegally access the US financial system and limit its ability to use proceeds from illicit actions to enhance its illegal WMD [weapons of mass destruction] and ballistic missile programs.”

The Trump administration has spent much of its term building up sanctions pressure on North Korea at the UN Security Council and in private bilateral talks, seeking to deprive Pyongyang of revenues sourced from labour and goods across the world.

While the US-led campaign has deprived Pyongyang of billions of dollars, UN experts have said North Korea had continued to develop its nuclear and missile programme thanks to extensive sanctions violations.

The Kim regime is estimated to have spent $600m on nuclear weapons last year, according to a report this month by the Geneva-based International Campaign to Abolish Nuclear Weapons.

An August 2019 report from a panel of UN experts said member states had failed to expel North Korean bank officials who facilitated sanctions violations through the country’s access to the global financial system and its own banks abroad. 

“Ongoing deficiencies in the implementation by member states of financial sanctions, combined with the deceptive practices of the Democratic People’s Republic of Korea, enabled the country to continue to access the international financial system,” said the report.

North Korea maintained more than 30 overseas representatives who controlled bank accounts and relied on “complicit foreign nationals” to facilitate and obfuscate their transactions, including for illicit transfers of coal and petroleum, it added.

US authorities have for years sought to shut down the financial networks that allow the North Korean government secret access to the international banking system. Last year, the US won a court battle with a trio of Chinese banks over access to records that could shed light on North Korea’s activities.

North Korea has also launched cyber attacks aiming to steal funds from financial institutions and cryptocurrency exchanges to generate income, according to the UN report. The US justice department in March charged two Chinese nationals with laundering more than $100m worth of virtual currency connected to a North Korean hacking operation.

President Donald Trump has tried to engineer a thaw with North Korean leader Kim Jong Un, saying the pair fell in love over the exchange of “beautiful letters”. The pair have met three times, and Pyongyang initiated an 18-month hiatus in missile testing. However, the country resumed testing in 2019, and the US is yet to achieve concrete steps towards lasting denuclearisation.

Additional reporting by Edward White

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