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Treasury Department Cuts Off Bank of Dandong

Treasury Department Cuts Off Bank of Dandong

Mathew Ha
8th November 2017 - FDD Policy Brief

The Treasury Department on Thursday issued its final rule barring a Chinese bank from the U.S. financial system because of its role as a North Korean money launderer. Bank of Dandong is a small Chinese bank, but Treasury’s action provides clues on how it plans to restrict North Korea’s continued access to the U.S. and international financial system.

Treasury identified Bank of Dandong as a primary money laundering concern in June and highlighted how the bank was a conduit for North Korea’s access to the U.S. and international financial system in violation of U.S. and UN sanctions. According to the final rule, from May 2012 to May 2015, at least 17 percent of Bank of Dandong’s transactions conducted through U.S. accounts were linked to U.S.- and UN-sanctioned North Korean companies, including North Korean banks and proliferators. Treasury also noted that in early 2016, the bank facilitated “millions of dollars of transactions [for] companies involved in the procurement of ballistic missile technology.” Treasury’s action was based on information provided by U.S. banks who reported Bank of Dandong’s suspicious North Korea-related transactions.

In formulating its rule, Treasury weighed the concerns of harming Bank of Dandong’s possible legitimate business activity against North Korea’s illicit activities. In the end, Treasury cut off the bank because it evaluated North Korea’s sanctions evasion and nuclear weapons financing activities to be a threat to U.S. national security. This action is another sign that Treasury will aggressively implement the Trump administration’s policy requiring banks, companies, and individuals to choose between business with the United States or North Korea; and any attempt to do both could result in being cut off from the U.S. financial system entirely. Furthermore, punitive actions by Treasury may result in Chinese banks losing access to accounts in other key currencies. According to Treasury, Bank of Dandong apparently lost access to all of its euro, Japanese yen, Hong Kong dollar, pound sterling, and Australian dollar accounts following the initial announcement of its status as a money laundering concern.

Treasury was clear that it “retains the ability and capacity to target any financial institution or others that might aid Bank of Dandong in evading the final rule.” This is another warning to Chinese banks that likely were aiding Bank of Dandong and complements Treasury’s Thursday advisory on North Korean sanctions evasion schemes.

Treasury’s action suggests the Trump administration will employ all necessary means to protect the U.S. financial system from North Korean exploitation. This action is also necessary to compel the Chinese banking sector to end its enduring and dangerous facilitation of North Korea’s sanctions evasion.

Mathew Ha is a research associate at the Foundation for the Defense of Democracies, focused on North Korea. Follow him on Twitter @Matjunsuk

Follow the Foundation for Defense of Democracies on Twitter @FDD.