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FinCEN lists Chinese bank under s311 of the USA PATRIOT Act

BIScom Subsection: 
Editorial Staff

We've been here before, or have we? Just six weeks ago was the tenth anniversary of the USA listing Banco Delta Asia of Macau and Hong Kong as being "of primary money laundering concern." But there was scant evidence of wrongdoing by BCA and what there was turned out to be largely made up. Is the Bank of Dandong, a mainland Chinese bank, any more culpable or is the USA back on the track of weapons of monetary destruction that don't really exist?

The USA really, really does not like North Korea and it's got its teeth into the country in a big way. The reason is simple: North Korea is being, at best, stupid in its confrontational attitude to the rest of the world, including both South Korea and Japan which are its main allies in the South Pacific where it is fighting what amounts to a shadow boxing match with China over territorial waters (another story).

The background to the BCA case was that the US Treasury wanted to name a large Chinese bank as aiding North Korea but found that the bank was prepared to make a fight of it and, moreover, had already hired a team in New York, including former regulators, to make sure that it would not be found wanting in its financial dealings. So the Treasury found that there was a small bank China's autonomous regions of Hong Kong and Macau and decided that China would not stage a major diplomatic row over an attack on a small, privately owned bank with no direct connections to China. The fact is that BCA's dealings with North Korea were well documented to anyone who could use an internet search engine. Those dealings, however, were not the major issues that the USA falsely, or largely falsely alleged.

The action against the Bank of Dandong is different - to a degree. First, the process has been underway for some time and i in September it was known that banks near the border with North Korea had stopped opening accounts with any connection to NoKo. The reason was that a directive had been issued by the People's Bank of China, the central bank and primary banking regulator. Bank of Dandong was at that time named as a major cause for concern.

But there is a significant similarity in the cases: the USA was threatening to list big Chinese banks, so cutting them off from the US Dollar banking system. The Bank of Dandong was a shot across China's bows when it was first named in June this year. While the news became public knowledge in September, in fact the PBoC had issued the instruction not to deal with NoKo in or around June.

The US Treasury says that Bank of Dandong was a major facilitator of international money flows for NoKo. At that point, it was said that the bank had allowed transactions amounting to millions of dollars to pass through accounts for the Korea Kwangson Banking Corp and Korea Mining Development Trading Corp

In June, FinCEN said that it Bank of Dangong had undertaken USD2,500 million in USD transactions over a three year period using its correspondent bank accounts in the US. Earlier still, shareholders and officers in the bank were listed under the USA's WMD sanctions list (published by OFAC).

What is most interesting about this story is that it's been rumbling on for a year but it's only reached significant media attention with yesterday's publication of the notice in the Federal Register. For all legal and compliance purposes, nothing has changed since the making of the earlier orders, except that now it's in the book and it's clearly not going to go away. Any bank dealing in US dollars with any of the persons (legal or natural) named are liable to be subject to sanction by the USA.

So don't do it.


FinCEN has issued a briefing note (it calls them "advisories" about schemes found to have been used by NoKo to circumvent sanctions. You can download the pdf from https://www.fincen.gov/resourc...