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No Time for NoKo as UK implements EU wide ban on financial dealings

Editorial Staff

The UK Treasury has issued a notice bringing into effect additional requirements. Under the notice issued 6 May 2016, by 31 May credit and financial institutions must terminate all financial dealings with the government of North Korea, with the ruling Party - and essentially freeze the whole of North Korea out of the UK banking system by, amongst other things, closing branches and accounts.

The notice says "By 31 May 2016, credit and financial institutions are obliged to:
a. close existing branches, subsidiaries or banking accounts in North Korea if it has been determined by HM Treasury that such branches or accounts could contribute to North Korea's illicit programmes; and
b. terminate existing joint ventures, ownership interests and correspondent banking relationships with North Korea’s banks

There is, therefore, some leeway in relation to accounts which HM Treasury has not determined are linked to "illicit programmes." However, the notice goes on to say that institutions must notify HM Treasury if they consider that any account may contribute to NoKo's "illicit programmes."

This leaves a significant problem for almost everything is North Korea, including smuggling, is government connected and therefore could be regarded as contributing to NoKo's "illicit programmes." NoKo has a motor vehicle industry but it imports tyres for its vehicles. Arguably, as most of the vehicles are in the direct or indirect use of government, selling trading in tyres may be connected.

The notice goes on:
"The current prohibitions on credit and financial institutions to open new banking accounts with North Korea or North Korean owned/controlled entities, open new branches, subsidiaries or representative offices, and enter into new correspondent banking relationships and joint ventures remain. All new acquisitions of ownership interests in North Korea or North Korean owned/controlled entity, joint ventures with designated persons, and financial support for trade with North Korea are now prohibited.

iv. It is now prohibited to make funds or economic resources available to the Government of North Korea, the Worker’s Party of Korea, or any person acting on their direction or behalf, if HM Treasury has determined that to do so would contribute to North Korea’s illicit programmes.

HM Treasury says that the rules are changed by European Council Resolution and are regarded in as in effect until and after the UK amends its statutory instruments. The EC Amending Resolution was passed on 2nd May and Gazetted on 3rd May.