North Korea Evades Sanctions through Sophisticated Money Laundering Scheme

Strategic Insights -

North Korea, under severe economic sanctions imposed by the UN, has found a way to continue its economic activities through a complex money laundering scheme, utilizing big U.S. banks and Chinese businessmen to evade detection.

According to leaked documents and suspicious activity reports (SARs) filed with the Treasury Department's Financial Crimes Enforcement Network (FinCen), North Korea-linked organizations laundered over $175 million between 2008 and 2017 through prominent banks, including JPMorgan Chase and the Bank of New York Mellon. The scheme involved shell companies and Chinese firms, with some transactions dating back to 2011. Despite raising red flags, both banks approved the transactions, admitting to shortcomings in their anti-money laundering measures. The U.S. Treasury Department condemned the leaks but acknowledged that correspondent banking is a significant vulnerability that illicit actors like North Korea exploit.

Key Takeaways:

  • Between 2008 and 2017, North Korea-linked organizations laundered over $175 million through big U.S. banks, including JPMorgan Chase and the Bank of New York Mellon.
  • The scheme involved shell companies, Chinese firms, and Chinese businessmen, with some transactions dating back to 2011.
  • Despite raising red flags, both banks approved the transactions, admitting to shortcomings in their anti-money laundering measures.
  • The U.S. Treasury Department condemned the leaks but acknowledged that correspondent banking is a significant vulnerability that illicit actors like North Korea exploit.
  • Key players in the scheme include Chinese businessmen, Ma Xiaohong, and her company Dandong Hongxiang Industrial Development Corporation, as well as Singaporean companies, SUTL Corp Pte Ltd, and Senat Shipping Ltd.
  • Shortcomings in enforcing anti-money laundering (AML) measures, including inadequate manpower to scrutinize transactions, and the reliance on correspondent banking, were cited as contributing factors to North Korea's ability to launder money.

Statistics:

  • Over $175 million laundered by North Korea-linked organizations through U.S. banks.
  • 80 shipments sent by Dandong Sanjiang Trading Co Ltd to North Korea between 2011 and 2013, worth $89.2 million.
  • China Oil Singapore received $3.76 million from Faith Surplus through wire transfers.
  • Multiple indictments and sanctions imposed on individuals and companies involved in the scheme, but no extraditions have been carried out.

Sources:

  • ABC World News Tonight
  • NBC News
  • The Consortium of Investigative Journalists
  • The Treasury Department's Financial Crimes Enforcement Network (FinCen)
  • Panjiva - international shipping records
  • U.S. Treasury Department 2020 report
  • SyndiGate Media Inc.