U.S. officials over the past two decades have tried to build an airtight financial embargo of North Korea.
But in charges unsealed Thursday, federal prosecutors in Washington, D.C., said that one of the country’s blacklisted lenders, Foreign Trade Bank, or FTB, still managed to route dozens of payments through U.S. correspondent accounts as part of a $2.5 billion sanctions evasion scheme involving more than 30 conspirators, most of them North Korean nationals.
FTB was able to transfer the large sums thanks to its network of 250 shell companies run by 28 North Koreans based in China, Russia, Libya, Kuwait, Thailand, Austria and elsewhere, prosecutors claimed in the indictment.
At least 29 of the payments involved a U.S. correspondent account, and at least one of those cleared as recently as January—years after the Treasury Department began warning banks of North Korea’s propensity for using shell companies and professional intermediaries in global financial hubs to disguise funds and further the regime’s goal of nuclear proliferation.
But Thursday’s indictment outlined those strategies in new, more granular detail, as prosecutors accused FTB’s most senior executives of communicating with overseas employees, each of whom served as a “covert branch” for the lender and ran shell companies to process payments from bank accounts in China, Austria and elsewhere.
The same network of overseas managers also sought to enlist “established third-party financial facilitators” and incorporated new shell companies when foreign banks or governments pinpointed the illicit nature of earlier entities in the scheme to facilitate nuclear-related payments on North Korea’s behalf, according to the indictment.
Most of the 50 pages in the indictment describe payments that largely appeared to bypass compliance controls, including a wire transfer two years ago in which FTB’s president and vice president used an unspecified “FTB front company” to send $90,000 to an unnamed U.S. firm, according to prosecutors.
The same officials also used an FTB front company to pay a U.S. firm $195,000 in March 2019. They used foreign firms to pay other U.S. entities $10,000 in December and at least $40,000 in January, according to the indictment, which did not identify the American beneficiaries by name or indicate whether any of the businesses received multiple payments.
Some of the largest payments thought to have cleared U.S. correspondent accounts allegedly involved Velmur, a Singaporean front company blacklisted by the Treasury Department’s Office of Foreign Assets Control in August 2017 for purchasing oil on North Korea’s behalf.
FTB initiated seven wire transfers with an aggregate value of more than $6 million in payments to Velmur in the months prior to the firm’s designation by OFAC. Though incorporated in Singapore, Velmur was controlled by an FTB employee in Vladivostok, Russia, only a few miles from the North Korean border.
A compliance officer told ACAMS moneylaundering.com on condition of anonymity that financial institutions typically flag the use of shell companies and intermediaries as part of their normal monitoring processes.
“The one risk we could take away from this is that we need to be mindful of Chinese provinces that have business dealing with North Korea,” the compliance officer said. “Certain provinces within China carry a different risk.”
Prosecutors also outlined at least five payments that financial institutions blocked for sanctions compliance purposes and described several others that raised additional due-diligence inquiries.
In June 2014, for example, a U.S. correspondent bank asked a Chinese lender about the nature of a wire transfer between Sumer—an alleged FTB front company controlled from Shenyang, China—and Panda Information, a Chinese firm already under U.S. Commerce Department restrictions.
The client who sent the funds, and whom the indictment identifies as one of FTB’s “covert branch” managers, subsequently explained to the Chinese bank that the payment was for “legitimate telecommunication equipment purchases” and that Sumer “did not have any relationship with North Korea.”
In November 2015, Kim Tong Chol, another China-based employee of FTB, went as far as to formally petition OFAC to unblock a $175,000 payment involving Hong Kong-based Mingzheng International Trading Limited, federal prosecutors claimed in the indictment.
“On or about Jan. 12, 2016, a Swiss businessman told Kim Tong Chol to create falsified documents, including a signed agreement between Mingzheng and the Swiss company, to replace the original contract with a North Korean entity, in an attempt to have OFAC release $41,822.04 in blocked funds Mingzheng had attempted to send the Swiss businessman on or about Nov. 15, 2015,” prosecutors wrote.
An FTB staffer eventually sent OFAC a backdated contract “which falsely stated that the goods originated from Hong Kong, when in fact they were coming from North Korea,” prosecutors wrote without identifying the Swiss businessman, who does not appear to have been charged as part of Thursday’s indictment.
OFAC blacklisted Mingzheng International in August 2017 for acting as a front company for FTB.
The North Korean network also took unspecified steps to avoid scrutiny from institutions. In February 2019, a Beijing-based employee for FTB warned another “about anti-money laundering regulations being implemented by banks.”
Contact Daniel Bethencourt at email@example.com
|Topics :||Anti-money laundering , Counterterrorist Financing , Sanctions|
|Source:||North Korea , U.S.: Courts , U.S.: Department of Justice|
|Document Date:||May 28, 2020|