U.S. brings massive N. Korean sanctions case, targeting state-owned bank and former government officials

The U.S. government has charged 28 North Korean and 5 Chinese individuals with facilitating more than $2.5 billion in illegal payments for Pyongyang’s nuclear weapons and missile program as part of a clandestine global network operating from countries including China, Russia, Libya and Thailand.

In a 50-page federal indictment unsealed Thursday in Washington, D.C., the Justice Department 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 U.S.

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 U.S. financial system, according to charging documents.AD

Those charged include two former FTB presidents, Ko Chol Man and Kim Song Ui; two former co-vice presidents, Han Ung and Ri Jong Nam; and Han Ki Song, who allegedly who operated FTB’s covert branch in Thailand and served as a member of North Korea’s primary intelligence agency.

“Through this indictment, the United States has signified its commitment to hampering North Korea’s ability to illegally access the U.S. financial system, and to limiting its ability to use proceeds from these illicit actions to enhance its illegal weapons of mass destruction program,” Acting U.S. Attorney Michael R. Sherwin of Washington, D.C., said in a statement.

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 cryptocurrency hacks and ransomware attacks.AD

The Justice Department moves highlight Washington’s stalled diplomatic effort to eliminate Pyongyang’s nuclear missile and weapons capabilities, analysts said. The actions also reflect an internal U.S. election-year debate over whether President Trump’s withholding of tougher sanctions and emphasis on personal diplomacy with Kim Jong Un can succeed if existing American pressure tactics are not effectively enforced, analysts said.

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

Read the indictment

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

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

“This adds to the already overwhelming evidence that China’s government is willfully assisting Kim Jong Un in his violations of North Korea sanctions,” said Joshua Stanton, a lawyer 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 ten-digit penalties, like the ones President Obama imposed on European banks that broke Iran sanctions,” Stanton said, and has advised House and Senate staffers on North Korea sanctions law.

The charges against dozens of North Korean individuals including former senior financial officials marks a dramatic escalation of U.S. enforcement efforts, analysts said. Although none of the defendants are in custody, the indictment could restrict their movements abroad, and signal greater U.S. willingness to engage diplomatically with third countries to apprehend or extradite suspects to gather more intelligence about Pyongyang’s activities, even if it risks confrontation.AD

The court action was accompanied by forfeiture demands, and the U.S. government has already quietly seized more than $63 million since 2015, the indictment said.

U.S. officials this year have complained that China and Russia have weakened sanctions and aided illegal smuggling, with Secretary of State Mike Pompeo saying in January that a resolution was unlikely without Beijing “making very clear to the North Korean leadership” that it expects denuclearization.

Trump national security adviser Robert C. O’Brien added in remarks to foreign ambassadors in February, “The Chinese have to enforce the sanctions against North Korea … We need the Chinese to assist us as we pressure the North Koreans to come to the table.”

U.S. investigators have increased their scrutiny of the role played by some of China’s largest telecommunications firms and banks even as Washington and Beijing have moved to ease tensions over a trade war championed by Trump.AD

Attorney General William P. Barr has called China’s quest to dominate the emerging 5G telecommunications networks through telecom giants Huawei and ZTE one of America’s top national security and economic threats, while stepping up legal actions against them. U.S. officials say Huawei gear could allow China to access data in telecom networks and potentially disrupt them. Huawei denies such claims, saying it is independent of the Chinese government and military.

The Justice Department last year charged Huawei with bank fraud and Iranian sanctions violations. The U.S. government alleged Huawei and its chief financial officer — Meng Wanzhou, the daughter of Huawei’s founder — used a Hong Kong shell company that operated as its Iranian subsidiary to sell prohibited U.S. goods to Iran and misled Western banks to move millions of dollars worth of payments.

The company has pleaded not guilty, although a Canadian court on Wednesday cleared a hurdle to Meng’s extradition to the U.S. from Vancouver, where she has been detained.AD

Separately, The Post and Reuters have reported in recent months that Huawei allegedly partnered with a Chinese state-owned firm, Panda International Information Technology Co. Ltd, to supply Iran with mobile phone networks and North Korea’s with commercial wireless networks, citing documents and people familiar with the projects.

The U.S. has also cut off the export of technology to Huawei from American suppliers and businesses — including new May 15 restrictions on its purchase of semiconductors made outside the United States with U.S. software and equipment — and levied additional charges of racketeering and conspiracy to steal trade secrets.

U.S. tightens export ban, restricting some overseas semiconductor factories from supplying China’s Huawei

Huawei has denied it is a security risk or helps Beijing spy on companies or governments. The company criticized U.S. actions as “arbitrary and pernicious” and called U.S. allegations a pretext for defending American commercial dominance.AD

In a statement this month, China’s commerce ministry said it will take “all necessary measures” in response to new U.S. restrictions, calling the actions against Huawei an abuse of state power and a violation of market principles.

“The U.S. uses state power, under the so-called excuse of national security, and abuses export control measures to continuously oppress and contain specific enterprises of other countries,” the statement said. China will “take all necessary measures to resolutely safeguard the legitimate rights and interests of Chinese enterprises,” it said.

Thursday’s indictment gathered together the threads of several U.S. prosecutions, forfeiture actions and sanctions imposed in recent years targeting companies and people from China, Russia and other countries that American authorities said conducted business with North Korea in ways that advanced the country’s missile and nuclear weapons program.AD

U.S. hits Chinese and Russian companies, individuals with sanctions for doing business with North Korea

China demands U.S. immediately withdraw N. Korea sanctions, warns they will damage ties

The Treasury Department in September 2017 for example announced sanctions against eight North Korean banks and 26 North Korean nationals operating in China, Russia, Libya and the United Arab Emirates who it said acted as representatives of North Korean banks.

Other companies targeted at the time included a Chinese importer of North Korean coal that allegedly traded illegal shipments of cellphones, luxury items, rubber and sugar. Other firms targeted allegedly engaged in an illicit trade of petroleum, minerals and sand worth $1 billion a year.

The filing of criminal charges unsealed this week could reduce the number of countries where Pyongyang is willing to risk sending its most skilled financial engineers, and restrict their movements, current and former U.S. officials said.

Government filings Thursday also shed new light on the investigation into a Hong Kong firm hit with sanctions in 2017. U.S. prosecutors alleged that Mingzheng International Trading Limited acted as a front company to launder money through the U.S. banking system for a covert branch of another designated entity, North Korea’s state-run Foreign Trade Bank.

The now-defunct Hong Kong company allegedly also had dealings with Chinese telecommunications maker ZTE, which in 2017 pleaded guilty and paid $1.19 billion in U.S. fines for selling sanctioned electronics to North Korea and Iran.

Chinese bank involved in probe on North Korean sanctions and money laundering faces financial ‘death penalty’

A U.S. appeals court last July allowed heavy contempt fines to begin against three large Chinese banks that U.S. investigators were probing to see if they knowingly helped finance North Korea’s nuclear-proliferation network by allegedly using the Hong Kong firm to conduct more than $100 million in illicit financial transactions. The firms had refused to respond to Justice Department subpoenas, citing Chinese banking privacy laws and Beijing’s stance that such requests be made through a legal assistance pact between the two countries.

The indictment also referred to charges the U.S. brought in March against two Chinese men accused of for helping North Korea launder over $100 million in stolen cryptocurrency funds, including through nine named Chinese banks.

U.S. authorities charged the men with assisted an attack by Lazarus Group, a North Korean government cyber group that has allegedly carried out the bulk of North Korea’s malicious hacks against U.S. and foreign banks, corporations and other targets. The alleged hacks included an attempted ransomware attack on hundreds of thousands of WannaCry users in 2017 and the 2014 hack of Sony Pictures after it backed a satirical movie depicting the assassination of North Korean leader Kim Jong Un.

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