US Officials Blacklist Russian Bank, North Korean Banker and Front Companies

By Daniel Bethencourt

A Moscow-based commercial bank that has conducted business with North Korea for the better part of a decade maintained those ties as global sanctions against the country and its financial system escalated, according to the U.S. Treasury Department.

U.S. officials accused Agrosoyuz Commercial Bank on Friday of knowingly serving at least three front companies controlled by the U.S.- and U.N.-blacklisted Foreign Trade Bank, or FTB, North Korea’s primary foreign currency exchanger, and processing a “significant transaction” this year for Han Jang Su, the lender’s top official in Moscow.

Han, whom U.S. officials designated in March 2017, allegedly opened several accounts with Agrosoyuz at some point last year for one of the front companies, Dandong Zhongsheng Industry & Trade Co. Ltd., which was also blacklisted Friday.

The measures disclosed Friday require U.S. financial institutions to block any of the blacklisted parties’ assets that transit through the United States or fall under the control of a U.S. person or company.

Successive waves of U.S. and U.N. sanctions have restricted purchases of North Korean exports and crude oil imports.

But at least 20 North Korean financial institutions managed to slip past the embargo and transact through the global financial system last year behind agents and front companies in China, Libya, Russia and other countries, the United Nations reported in March.

Friday’s announcement offers almost no details on the underlying transactions, leaving banks in the dark as to what qualifies as “significant” in the context of U.S. sanctions against North Korea, Michael Casey, a London-based attorney with Kirkland & Ellis, wrote in an email.

According to Jeremy Paner, a former sanctions investigator for the Treasury Department’s Office of Foreign Assets Control, the action should prompt Western banks to re-examine their relationships with smaller Russian lenders.

“North Korea looks at wherever there’s a weakness,” Paner said. “I don’t think geography has much of anything to do with it.”

Agrosoyuz also moved millions of dollars on behalf of North Korean commercial lenders, though U.S. officials cited only one by name, Korea United Development Bank, which the Treasury Department and United Nations targeted with sanctions in 2016.

In 2013, the Russian lender allegedly moved $5.5 million for KUDB and worked in concert with other financial institutions to move an unspecified amount of the North Korean bank’s funds in 2014, transferred another $8 million in 2016 and held the equivalent of $3 million in unspecified currency on its behalf.

The department also claimed that Agrosoyuz onboarded at least two other firms tied to North Korean officials, one of which deposited $2.5 million-worth of Russian rubles.

Another Moscow-based FTB representative blacklisted Friday, Ri Jong Won, held several Russian bank accounts in his own name through 2016, U.S. officials alleged.

The designation of Agrosoyuz, which, according to Russian media outlets, stopped accepting deposits in January, comes a day after Washington, D.C.-based research group C4ADS mapped out some of the financial channels and corporate networks used by an estimated 100,000 North Korean overseas laborers, 80 percent of whom work in China and Russia.

The report identified 691 firms approved by the Russian Ministry of Labor to hire North Koreans at some point in the past three years. Some of the firms shared addresses or operated under Russian transliterations of the names of well-known North Korean companies.

Many appear to have breached U.S. sanctions.

Topics : Anti-money laundering , Sanctions
Source: U.S.: Department of Treasury , U.S.: OFAC
Document Date: August 3, 2018