AML in North Korea

The Financial Action Task Force (FATF) expresses concerns about the Democratic People’s Republic of Korea (DPRK) due to its failure to address significant deficiencies in its anti-money laundering and counter-terrorism financing (AML/CFT) regime. These deficiencies pose significant risks to the integrity of the international financial system. Consequently, the FATF urges the DPRK to promptly and meaningfully address its AML/CFT shortcomings. Moreover, the FATF is alarmed by the illicit activities conducted by the DPRK related to the proliferation of weapons of mass destruction (WMDs) and their associated funding.

The FATF reiterates its request to member jurisdictions, as stated on February 25, 2011, to advise their financial institutions to exercise heightened scrutiny over commercial contacts and transactions involving the DPRK. This includes dealings with DPRK corporations, financial institutions, and individuals acting on their behalf. In addition to intensified scrutiny, the FATF calls upon member jurisdictions and encourages all countries to implement effective countermeasures, such as targeted financial sanctions, in accordance with relevant United Nations Security Council Resolutions. These measures aim to protect their financial sectors from the risks of money laundering, financing of terrorism, and financing of WMD proliferation (ML/TF/PF) originating from the DPRK. Jurisdictions are urged to take appropriate actions, including the closure of existing DPRK bank branches, subsidiaries, and representative offices within their territories, and the termination of correspondent relationships with DPRK banks, as mandated by applicable UNSC resolutions.

The United Nations, the European Union, and the United States have implemented sanctions against this particular nation. These sanctions encompass a prohibition on the export and import of North Korean weaponry. Additionally, restrictions are in place regarding the provision (either directly or indirectly) of conventional weapons, certain weapons of mass destruction, sensitive commodities, technology, and technical support.

Following the cyber-attack on Sony Pictures Entertainment, the United States imposed additional sanctions on North Korea on January 2, 2015. These measures involved the banning of specific companies and individuals.

On September 20, 2017, the United States further intensified sanctions on North Korea. Notably, a new presidential order granted the US Treasury Department the authority to penalize foreign banks involved in “significant” transactions with North Korea. It also empowered freezing specific bank accounts connected to North Korea. Additionally, additional commercial penalties targeted North Korean corporate operations and international partners, including the ability to impose blocking measures against both North Korean individuals and third-country citizens engaged in or connected to North Korean financial transactions.

North Korea stands as one of the ten countries facing comprehensive sanctions imposed by international governments, including the United Nations, the European Union, and the United States. These sanctions target various aspects, such as restricting oil shipments, textile exports, and natural gas supplies to North Korea. These measures have contributed to the characterization of its leader’s personality as peculiar. Despite the significant constraints, North Korea continues to engage in discussions regarding nuclear negotiations and maintains its nuclear weapons program. Notably, North Korea conducted a nuclear test in 2017.

When examining North Korea’s economy, it is evident that it faces chronic challenges. Years of underinvestment, scarcity of spare components, and insufficient maintenance have left the industrial capital stock virtually beyond repair. Extensive military expenditure further depletes resources that are necessary for investment and civilian consumption. Other persistent issues include limited power production, ongoing food shortages, and a lack of arable land, among others.

The imposition of sanctions stems from North Korea’s nuclear testing and provocative actions. Following North Korea’s initial nuclear weapons test in 2006, the United Nations introduced the first wave of sanctions. During this time, former US President George W. Bush pursued a more stringent approach toward North Korea compared to his predecessor, Bill Clinton, famously referring to the nation as part of the “axis of evil.” North Korea proceeded to conduct a series of nuclear tests shortly after the inauguration of President Barack Obama, seemingly attempting to challenge the new administration.

Following the suspected sinking of a Republic of Korea Navy vessel, which resulted in the death of 46 soldiers, President Obama issued an executive order imposing sanctions on individuals and entities involved in facilitating North Korean arms trafficking, purchasing luxury products, and engaging in illicit economic activities such as money laundering, counterfeiting, bulk cash smuggling, and drug smuggling.