Axis of Evil

Trump Considering Embargoing China Over North Korea
By Gordon G. Chang

Late Sunday morning, President Trump tweeted an extraordinary statement. 

“The United States” he announced, “is considering, in addition to other options, stopping all trade with any country doing business with North Korea.”
And the president’s tweet does not appear to have been an off-the-cuff blast. 

Treasury Secretary Steve Mnuchin continued the theme in his “Fox News Sunday” interview later in the day when he announced he was preparing a sanctions package that will sever “all trade and other business” with North Korea. 

“I will draft a sanctions bill and send it to the president,” Mnuchin said to Chris Wallace. 

“We will work with our allies. We will work with China. But people need to cut off North Korea economically.”
Cutting off North Korea economically sounds like an embargo. 

And North Korea’s No. 1 trading partner—the country that accounts for slightly more than 90% of Pyongyang’s two-way trade when illicit commerce is counted—is China.
An American embargo almost surely will result in friction with Beijing and Moscow, but discord could be the price for denying Kim Jong Un the resources for his weapons programs.
There are many ways an embargo can be put in place. 

The Trump administration could simply declare one and then go about enforcing it on its own.
An alternative route would be for the White House to tell Chinese and Russian leaders that the U.S. intended to submit an embargo resolution to the Security Council and then demand they accept it without delay.
Why would Beijing and Moscow accept an embargo when they have consistently resisted far less strict measures? 

With regard to China, Russia’s senior partner in crime when it comes to North Korea, the Trump administration retains overwhelming leverage.
Chinese banks, for instance, are vulnerable to U.S. criminal prosecution and, more important, sanctions. 

Bank of China, named in a 2016 U.N. report for money laundering for Pyongyang, is especially at risk. 

The U.S. Treasury could fine the bank or even designate it a “primary money laundering concern” pursuant to Section 311 of the Patriot Act.
Such a designation would deny the bank access to dollar accounts. 

In other words, a Bank of China would, as a practical matter, be cut off from the global financial system. 

Call it, in essence, a death sentence.
Up to now, China has not had an incentive to cooperate with the United States with regard to North Korea because American presidents were loath to impose costs on the Chinese state. 

The feeling was that Washington could appeal to the better instincts of China’s leaders, or at least convince them it was in their long-term interest to support American efforts.
This generous approach, unfortunately, has not in fact worked. 

So it is time to make sure that the Chinese, even though they do not see things the same way as Trump officials, have no choice but to be cooperative.
Unplugging a major Chinese bank is one of the few acts that can motivate Beijing to accept and enforce an embargo. 

And so could a severe remedy imposed as a result of the ongoing Section 301 investigation into China’s theft of American intellectual property. 

One “301” remedy would be an across-the-board tariff on Chinese goods. 

Another would be an import ban on any enterprise benefitting from stolen IP.
Chinese officials, of course, can retaliate against the U.S. for a Section 311 designation or a Section 301 remedy, but Beijing might decide not to take on a far-stronger America, which is in a better position to wage an intensified trade war.
In ordinary times, drastic remedies like an embargo would not be necessary. 

Yet Kim Jong Un has not in fact been deterred by the relatively mild penalties now in place. 

China and Russia have signed on to Security Council sanctions, like those contained in Resolution 2371, precisely because they know they would be ineffective.
Kim is making such fast progress in building his arsenal that sanctions that were considered extraordinary just a few months before are now beginning to look politically feasible today.
As Trump and Mnuchin made clear on Sunday, America is about to cut off the flow of funds to the Kim regime.
Washington, I believe, goes a long way to disarming North Korea when it convinces Chinese leaders they finally have to make a choice, that they cannot support the North and do business with the U.S. at the same time.

Sanctions against a big Chinese bank is best way to rein in North Korea

• It's time to pair military power and presence with more serious economic sanctions on rogue China.
• Until China starts feeling real financial pressure, the North Korea threat will continue.

By Jake Novak 

Pyonyang's return to missile-firing activities this week proves more needs to be done to rein in the rogue nation.
President Trump acknowledged that on Tuesday, saying that "all options are on the table" after North Korea fired a ballistic missile that passed over Japan.
He signaled his impatience for continued negotiations with this tweet on Wednesday morning:

Here's what President Trump needs to do now: 

1) Increase the U.S. military presence in the region and 

2) Issue more serious economic sanctions against China.

Remember it was Ronald Reagan's policy of increasing military presence in Europe in the 1980s without firing a shot that worked in getting the U.S.S.R. to first take the U.S. political will more seriously, and then eventually made Moscow realize it could never match American military spending. 

China needs to see more of that same American military resolve.
But the non-military options are harder to find when confronting North Korea directly, because North Korea's economy is so small as it is. 

For economic sanctions to have a better chance of working, the U.S. and its allies must threaten to level serious sanctions on China.
The Trump team has indeed levied sanctions already, but they've been on bit part players and they don't hit hard enough. 

And that means it is time to hit a major Chinese bank and block its access to U.S. business and dollars.
And the Bank of China would be a good first target as it was cited in a U.N. report in 2016 for being used by North Korea to evade sanctions. 

That means that sanctioning that bank could serve the triple purpose of proving to the world that the U.S. is serious about protecting its western coast and its allies, aims to punish all who aid North Korea's missile adventurism, and help enforce the economic sanctions already in place against North Korea itself.
There is support for this tactic from a bipartisan set of figures. 

Many conservatives want to try a shutdown immediately, and former Obama administration Treasury official Anthony Ruggiero, and now a senior fellow at the Foundation for Defense of Democracies said in an email that, "sanctions against the Bank of China are overdue." 

He added that fines should be tried first before assets are frozen or access to the U.S. financial system is totally denied.
Another former Obama administration official at the CIA, David S. Cohen, is also calling for much more stringent sanctions on Chinese banks and downplaying the ramifications of China's response to them. 

In the Washington Post earlier this year, Cohen noted the positive results that came from the Obama administration's actions against Chinese banks that were still doing business with sanctioned banks in Tehran.
Cohen believes China would be similarly willing to cut off financial dealings with North Korea to avoid a war. 

"China is worried about ... military action to destroy North Korea's nuclear and missile programs. Whatever sanctions pain China was willing to endure to avert a military strike by the United States (or Israel) against Iran, its deep-seated fear of a military confrontation on the Korean Peninsula means its pain tolerance for secondary sanctions against North Korea would be even higher."
Still, it's vital for every American to understand the potential downside of that kind of sanction. 

First off, Beijing could still decide to at least temporarily respond angrily and move to block U.S. banking activities in China, such as they are.
Second, U.S. businesses and jobs that rely on Chinese investment would be effected and maybe even lost. 

Many economists have made the honest assessment that the worst case negative effects from shutting down a major Chinese bank would be severe and difficult to fully anticipate. 

That includes a nasty scenario where Russia could use its banks to swoop in to ease the effects of a major sanction like this.
But that's where the Trump administration has to weigh the costs of different general options for proving American resolve. 

A buildup of U.S. naval, infantry, and air power in the region is serious enough for a while, but a war weary American public is going to demand solid evidence that this president has explored as many non-military options as possible before supporting an actual attack. 

And even if the public does become more supportive of an actual strike, President Trump really owes that to the U.S. troops and the millions of civilians on both sides who would be put in harm's way.
The good news is that this kind of sanction could work even before it goes into effect, as long as the Trump team makes an effective and credible threat to shut down a major Chinese bank. 

That means more than just a Trump tweet, but a detailed description of what the U.S. plans to do from someone like Treasury Secretary Steven Mnuchin. 

Another bit of good news is that unlike the destruction and deaths from air strikes and other attacks, a bank shutdown can be temporary and its effects easier to reverse. 

And the final bit of good news is that Russia's latest banking woes look like they'll at least significantly curtail much of Moscow's ability to interfere with this kind of move.
That's about where the good news ends. 

What everyone has to accept is that responding properly to a serious menace like Kim Jong Un is not going to be easy. 

There will be economic hardships to endure right here in the U.S. and for some people and businesses, they could be severe.
President Trump and the U.S. owes it to our troops, our endangered allies, and all the civilians in the region to pursue the most serious non-lethal options before ordering any kind of attack. 

Sanctioning a major Chinese bank is one of those options, and it would be appropriate in this situation. 

This administration must prepare to do so right away.

Rogue Banks

To Disarm North Korea, Cripple A Large China Bank
By Gordon G. Chang 

Tuesday, the U.S. Treasury Department imposed sanctions on 10 entities and six individuals. 

The sanctioned parties are Singaporean, Russian, and Chinese and had, according to Treasury, aided North Korea’s ballistic missile and nuclear weapons efforts.
In addition, the Justice Department sought to forfeit $11 million from three entities—at least one connected to China—for laundering money for Pyongyang.
Beijing howled. 

The foreign ministry called the actions “wrong behavior,” and the Global Times, the tabloid controlled by People’s Daily, went further, stating in an editorial that the U.S. would “pay for unjust ban on Chinese firms” and that “Washington had better restrain itself.”
In reality, the U.S. had already restrained itself. 

Too much, in my view. 

Washington needs, at this time, to move beyond actions against minor bad actors and impose severe penalties on large institutions. 

First among the targets should be one of China’s so-called Big Four banks, perhaps the Bank of China.

While the Democratic People’s Republic of Korea perfects missiles and nukes at an accelerated pace, American administrations have been slow to impose costs on Pyongyang’s primary backer, Beijing, for, among other crimes, money laundering.
Experts, like former State Department sanctions coordinator Dan Fried, believe Washington should warn Beijing before moving against Chinese banks.
Washington, however, has already warned the Chinese—repeatedly. 

The Obama administration began to signal American impatience. 

On September 26 of last year, the Justice Department announced the forfeiture of funds from 25 Chinese bank accounts. 

The actions were announced at the same time Treasury moved against Dandong Hongxiang Industrial Development, its owner, and employees, in large part for handling North Korean cash.
Beijing, however, did not take the hint. 

Therefore, on June 29 President Trump’s Treasury Department, pursuant to Section 311 of the Patriot Act, designated Bank of Dandong a “primary money laundering concern.” 

The designation effectively cut off the institution from the global banking system.
Beijing still did not get the message, hence Tuesday’s forfeiture actions.
Actions against individuals and small-fry institutions are necessary, but they have been ineffective in getting Beijing out of money laundering and other illicit activities on behalf of the North Korean regime.
Therefore, it looks like time for Washington to move against Chinese institutions that matter, like Bank of China. 

Bank of China was, according to the Foreign Policy site, named in a 2016 U.N. report for devising and operating a money-laundering scheme for Pyongyang in Singapore. 

There are also hints the bank has been involved in dirty business in Dandong, the Chinese city on the Yalu River across from North Korea.
Bank of China, as large as it is, may not be the biggest Chinese money launderer. 

Anthony Ruggiero of the Foundation for Defense of Democracies thinks the U.S. could go after the Industrial and Commercial Bank of China, the world’s largest financial institution in S&P Global Market Intelligence’s annual asset rankings.

Bank of China, by the way, comes in at No. 4 on this list.

The U.S., of course, can fine these institutions, but that would be just another signal for Beijing to disregard. 

North Korea is too close to being able to nuke the American homeland for Trump to send signals Beijing may ignore.
What could not be ignored, however, is Washington shutting down the U.S. operations of the largest Chinese banks and, more importantly, denying their access to dollar accounts. 

Without the ability to handle greenback transactions, they would be put out of business everywhere outside China, and they would even lose some business inside that country as well.
Would the U.S. suffer by unplugging one or more Chinese banks? 

Yes, no doubt. 

In comments to Reuters, Joseph DeThomas, another State Department sanctions official, warns of “unpredictable” consequences. 

And as Gary Samore of Harvard’s BelferCenter told Bloomberg, “If we were to impose penalties on really big Chinese financial institutions, it would have major economic consequences on the U.S.”
Yet the willingness to endure “major economic consequences” is not an argument for refraining from crippling a large Chinese bank. 

On the contrary, it is the reason why imposing death sentences on China’s institutions would be so effective.
Chinese leaders need to see that Washington is determined to stop North Korea, and they are not going to take America seriously unless America is willing to accept costs to do so.
In any event, whatever the Trump administration thinks its China or North Korea policy should be, it has an obligation to enforce U.S. law. 

No one gets to use the American financial system to launder cash for Kim Jong Un, at least more than once.
At the moment, Trump officials are turning up the pressure slowly, in the hope that Beijing will come around. 

That sounds responsible, but unfortunately the approach has been completely ineffective. 

Once a Chinese individual, company, or bank has been sanctioned for money laundering, the activity simply moves to another. 

Going after Bank of Dandong, therefore, was a mistake.
Beijing, the master of ignoring signals, has to know what is going on. 

China’s banks are tightly controlled by both the Chinese central government and the Communist Party. 

The government and Party must know about the banks’ sensitive relationships, like those with North Korea. If they do not in fact know about them, it is only because they do not want to.

Beijing cannot run a police state and then disclaim responsibility for what happens inside that state, especially when the largest state institutions are involved.
Therefore, it’s time to go after the biggest Chinese banks in order to cut the head off this particular beast.
In all probability, the Trump administration will have to unplug only one big institution to make a lasting impression. 

Beijing will then, for the first time since 1994, realize that American officials place the safety and security of the American people above all else.
“China is not a small country that you can just squeeze and it will do whatever,”Yuan Zheng of Chinese Academy of Social Sciences told Bloomberg. 

“China won’t accept it and will take measures in response. The whole atmosphere of U.S.-China relations will get worse.”
Who cares? 

I, for one, care far more for the safety of Americans than friendly ties with those determined to launder money for North Koreans.

Failure to sanction China helped North Korea

Three U.S. administrations backed away from punishing Chinese banks and businesses for helping their neighbor's weapons program. 
By JOSH MEYER

Even as Donald Trump and Xi Jinping pledge to stop North Korea’s fast-advancing nuclear weapons and ballistic missile programs, there’s one uncomfortable secret that neither leader has publicly acknowledged: Chinese banks and businesses are playing key roles in providing Pyongyang with access to the global markets they need to acquire critical parts and technologies.
For at least a decade, North Korea has sidestepped U.S. and United Nations sanctions against its own trading and financial institutions by establishing a global network of front companies, shell companies, and third-country agents to seek parts, technology and financing for its weapons programs, according to interviews with current and former counter-proliferation officials and congressional documents.
These front companies rely on assistance provided by Chinese banks to gain access to U.S. and global financial systems, often by conducting transactions in U.S. dollars, and on Chinese businesses to obtain weapons parts, according to those sources.
In a little-noticed letter sent to the Treasury Secretary Steve Mnuchin in February, six senators called on the administration to target Chinese banks and other entities as a way of effectively cutting off North Korea’s access to hard currency it uses to finance its illicit WMD programs.
“With the risks of proliferation and war now at a critical stage,” they wrote, “we have no more time to waste on inaction.”
One of the financial institutions the senators cited as facilitating North Korea’s weapons programs is one of China’s biggest — the Bank of China — raising concerns among U.S. officials that the assistance being giving to Pyongyang is state-sponsored.
The assistance provided by Chinese entities to North Korea goes as far back as the 1960s, and includes some state-run operations, according to current and former national security officials here and overseas, other experts and a POLITICO review of counterproliferation documents.
During that time, Chinese businessmen and financiers also helped spread technology to virtually all of the world’s other illicit WMD programs too, including some assistance on chemical and biological agents, these sources say.
As U.S. intelligence, military and law enforcement agencies watched, Chinese individuals and companies provided significant amounts of specialty components and technology to Iran, Pakistan, Syria and other nations. 
That assistance, and the participation of Chinese banks and financial institutions, has been instrumental in the research and development of nuclear, chemical and biological weapons by these regimes.
Career counterproliferation experts in the U.S. government have been quietly ringing alarm bells about China’s role in the global black market in WMD parts and technology for years, and with increasing urgency as North Korea and Iran made rapid advances in their programs, three senior U.S. national security officials who recently retired told POLITICO.
But instead of taking strong and public action against Beijing, they say, three successive U.S. administrations — under Presidents Clinton, Bush and Obama — opted to quietly nudge it behind the scenes and accept its repeated promises to put an end to the proliferation activity emanating from within its borders.
Officials say that despite comments by both Trump and Xi about working together to thwart North Korea, they are wary that his administration is on the same path, despite mounting tensions over North Korean missile tests. 
The latest apparent provocation came early Sunday, when North Korea tried to test a missile, which exploded almost immediately upon being launched.
Although Trump himself has avoided publicly calling out China for its role in North Korea’s WMD programs, he praised Xi earlier this week, saying he is confident that the Chinese president will do what it takes to pressure Beijing’s neighbor into dropping its nuclear threats, and standing down its illicit research and development programs.
"I have great confidence that China will properly deal with North Korea," Trump tweeted on Thursday.
"If they are unable to do so, the U.S., with its allies, will. U.S.A.!"
In recent weeks, White House officials have begun anonymously floating the idea of sanctioning some Chinese institutions, in part as a way of avoiding military action against Pyongyang.
And Secretary of State Rex Tillerson reportedly raised the issue in his recent visit to Beijing.
Some veteran counterproliferation officials said while they welcome such efforts, previous administrations also considered them but ultimately backed down when China opposed them, in some cases by insisting the sanctions would destabilize its neighbor and hurt the North Korean people.
“Over time, every time we get close to putting in secondary sanctions, the Chinese agree to do a little more” to apply pressure to North Korea, said Dennis Wilder, who served from 2015 to 2016 as the CIA’s deputy assistant director for East Asia and the Pacific.
“They’ve been very good at playing the game of ratcheting up the pressure on North Korea at times when it helps them avoid us imposing sanctions.”
That’s especially the case when the U.S. has threatened to directly sanction Chinese entities, its financial institutions in particular, for their role in assisting North Korea, according to Wilder and others.

Six senators accused Chinese banks — including the Bank of China — of facilitating North Korean proliferation by partly disregarding their obligations to enforce U.N. sanctions on the country. 

“You can imagine that if Treasury designates the Bank of China, the Chinese would have to worry about how once the bank is tainted, all sorts of people would move their money out, and other banks would end or slow their activity with the bank as well," Wilder said.
"Now you would have a stigma attached to these institutions.”
An official in the Bank of China's New York branch said he was unable to respond to charges that the bank facilitated North Korean arms programs.
“We’re not able to make any immediate comment," he said.
"Personally, I don’t have the information, and it is difficult for us to coordinate a response. We will have to find out.”
The bank has in the past also referred calls to Brett Philbin, a Washington-based vice president at the Edelman communications firm.
He did not respond to a request for comment Friday afternoon.
If the United States were to seek sanctions against Chinese entities, it has already has identified dozens of individuals, companies and banks around the world that have been facilitating and financing North Korea’s weapons activities, former officials said.
“Treasury has done their homework on this for many years, and there are files available at Treasury for Trump to review,” said Wilder, who was also special assistant to the president and senior director for East Asian Affairs at the National Security Council from 2005 to 2009.
“There are sanctions packages that are either ready to go, or could be ready in a minute” against the Chinese entities.
Last September, the Justice and Treasury departments indicted and sanctioned one Chinese trading company, Dandong Hongxiang Industrial Development Ltd., and alleged that it was responsible for more than $500 million in trade with North Korea.
The enforcement actions, and related financial freezes, were considered especially sensitive because the massive Chinese conglomerate is headed by a Communist Party member who U.S. officials believe has long aided Pyongyang’s nuclear program, according to former officials.
In its last days, the Obama Treasury Department also quietly took action against Chinese businessman Mingfu Chen as part of a broader sanction package targeting a procurement network for Iran’s ballistic missile program.
And several Chinese individuals and companies have been targeted in crackdowns against Iran’s nuclear program over the years as well.
But other Chinese trading firms, including Chinpo Shipping and 88 Queensway, continue to engage in commerce that facilitates North Korea’s nuclear and missile programs.
And even less has been done to go after the Chinese financial institutions that make most of North Korea’s procurement efforts possible. 
In a Senate hearing several months ago, Obama administration Treasury officials acknowledged that they had not sanctioned a single Chinese bank for its involvement in North Korea’s efforts.
“We cannot be serious about North Korea sanctions until we’re ready to confront the China challenge,” said Anthony Ruggiero, a veteran U.S. intelligence and financial counterproliferation official until December.
“The big question is whether there is political will.”
“I get that you don’t want to sanction the Chinese entities the day before Xi walks into Mar-a-Lago,” Ruggiero said in reference to last week’s summit between the two leaders.
“But what about the week after?”
Historically, the U.S. has had great success in squeezing North Korea via sanctions, especially those imposed on complicit third-party financial institutions.
A 2005 crackdown on Banco Delta of Macau, for instance, prompted banks around the world to freeze and shutter North Korean accounts, making it much more difficult for Pyongyang to finance its WMD programs through criminal conduct.

In a letter sent to the Treasury Secretary Steve Mnuchin in February, six senators called on the administration to target Chinese banks and other entities to effectively cut off North Korea’s access to hard currency it uses to finance its illicit WMD programs.

And while the Justice Department indictment of Dandong Hongxiang is a step in the right direction, the case also underscored how little the U.S. government is doing to root out Chinese support for North Korea’s WMD programs, said Ruggiero, who was working for Sen. Marco Rubio at the time.
U.S. authorities knew about Dandong Hongxiang’s activities for six years before taking action against it, Ruggiero said. 
China also has been reluctant to provide U.S. authorities with financial documents that the Treasury Department needs in order to investigate the conglomerate and related proliferation network, and freeze assets.
But when it disclosed the indictment, the Justice Department said there were “no allegations of wrongdoing” by the U.S. correspondent banks or foreign banks that did business with the conglomerate.
To Ruggiero and other critics, that suggests that U.S. authorities either didn’t pursue the obvious financial leads, or didn’t act on them.
“It’s pretty shocking that we let them violate U.S. law for so long. We would have never allowed that occur if it was Iran,” Ruggiero said.
“Why did we let the Dandong Hongxiang network sit there for six years? What was that network involved in and why didn’t we go after Chinese banks?”
Dandong Hongxiang has declined to comment on the case.
In their letter to Mnuchin, the six senators, all Republicans, called on the Trump administration to do more to crack down on China, and to determine its role in aiding and abetting North Korea.
The letter was written by Ted Cruz of Texas and Cory Gardner of Colorado, and co-signed by Pat Toomey of Pennsylvania, David Perdue of Georgia, Thom Tillis of North Carolina and Marco Rubio of Florida.
“Although the Treasury Department sanctioned Dandong Hongxiang and its corporate officers, freezing the assets of a handful of entities is a far cry from what is necessary: a determined, sustained, and well-resourced campaign to investigate, uncover, and sanction the complex web of similar Chinese, Middle Eastern, and other third-country companies and banks that fund Kim Jong-un’s regime, facilitate proliferation, and break sanctions,” the senators wrote.
“All necessary legal tools are in place to begin conducting such a campaign in earnest, today,” the senators said, especially to go after the Chinese banks — including the Bank of China — that they accused of facilitating North Korean proliferation by flouting U.S. “Know-Your-Customer” obligations and disregarding their obligations to enforce U.N. sanctions on North Korea.
Citing the lack of any banks targeted along with Dandong Hongxiang, they said, “It is difficult to construe this inaction as anything less than a lack of political will” on the part of the U.S. government.
Over the years, some career counterproliferation officials have pushed for deeper investigations into the procurement networks to determine whether Beijing is actively involved or just aggressively looking the other way.
Vann Van Diepen, a top U.S. counterproliferation official for the past 25 years, said that while China engaged in the state-sponsored spread of WMD technology in earlier decades, it has been much more cagey in recent years, to the point where the U.S. doesn’t know the extent of its official support.
Publicly, China has supported some United Nations crackdowns on WMD proliferation, but it has quietly been allowing that activity to occur within its own borders, not stopping operators that it knows are aggressively helping Pyongyang and at times willfully looking the other way.
"China hasn't devoted the priority, effort, or resources to thwart this," Van Diepen said.
"And when that continues to be the case over 20 years, even when they have been criticized, over time it becomes a choice, and you have to wonder what's going on. At a minimum they can certainly find out if they want to."

Chinese Banking Lawlessness

AgBank fine shows China banks still flunking compliance test

* AgBank fined $215 mln for violating money-laundering rules
* Bank silenced objections raised by its compliance officer
* All Chinese banks fall foul of overseas regulations
* China top source of illicit outflows 2004-2013 -- watchdog
By Matthew Miller

BEIJING -- Last week's $215 million fine for Agricultural Bank of China Ltd (AgBank), the third big Chinese bank disciplined by U.S. regulators in 16 months, shows Chinese lenders still falling short in their compliance duties.
As Chinese companies have expanded overseas, the country's lenders, led by its big state-owned banks, have followed their customers, pushing their offshore loans to nearly $1 trillion at the end of 2015, up from more than $600 billion in 2010, according to the International Monetary Fund.
That has exposed them to increasing scrutiny by overseas regulators trying to root out weaknesses that allow organised criminals and terrorist organisations to launder money.
In a consent order published on Friday, New York's Department of Financial Services (DFS) said AgBank, China's third-biggest lender, violated anti-money-laundering (AML) laws by deliberately obscuring potentially suspicious transactions and silencing its compliance officer.
It is not the first Chinese financial institution to find itself in the crosshairs of U.S. regulators.
Bank of China Ltd agreed with the U.S. Treasury Department in December to improve its AML procedures, and a few months earlier the U.S. Federal Reserve issued an enforcement action against China Construction Bank Corp for similar issues.
"Chinese banks don't understand that by having a footprint in the United States they have to comply with U.S. regulations," said Philippa Allen, CEO of Hong Kong compliance consultancy ComplianceAsia.
"Even though they are often operating globally, these banks still tend to think of themselves as being Chinese, subject to Chinese rules."
They have also been keeping prosecutors busy in Europe.
Six Industrial and Commercial Bank of China bankers were arrested in Spain in February, suspected of facilitating money laundering and fraud.
The bank has said it implemented AML regulations and operated within the law.
In Italy, prosecutors are preparing to bring Bank of China and its officials to preliminary hearings after a money-laundering investigation involving billions of euros allegedly smuggled back into China.
BoC has denied any wrongdoing.
Global Financial Integrity, a Washington-based watchdog, estimated that from 2004 to 2013 China was the world's biggest source of illicit outflows, accounting for about 28 percent of the $4.885 trillion in illicit funds moving from the 10 biggest source economies.
"Anti-money laundering and know-your-customer oversight at Chinese banks is not taken as seriously as it should be," said Fraser Howie, an independent China market analyst and co-author of the book "Red Capitalism".
"The nature of Chinese business is often opaque in the best of times, so you have opaque businesses dealing with poorly supervised banks," Howie said.
Earlier this year China's own banking regulator warned its commercial banks to strengthen risk controls in their overseas branches, including making adequate checks of borrowers.

AGBANK FAILINGS
In Friday's consent order, AgBank has agreed to install an independent monitor to review compliance for at least two years, signalling it is unlikely to open more branches or undertake new business in the United States during that time.
The DFS "found credible evidence of wrongdoing" and "serious and persistent compliance failures" during its examinations in 2014, 2015 and 2016, the order said.
AgBank declined to comment.
In September, the U.S. Federal Reserve also ordered AgBank's New York branch to improve its AML safeguards, giving the lender 60 days to draw up a comprehensive plan.
AgBank, which also operates branches in Frankfurt, Sydney, Tokyo and Seoul, obtained its New York licence in 2012 and holds about $9.5 billion in assets at the branch, according to the consent order. 

It is AgBank's only U.S. branch.
The branch's core business remained helping mainland clients that are "going global", Zhang Jian, head of the branch's business department, told China Business News in August.
Among the findings in the consent order, AgBank failed to investigate unusually large round-number dollar transfers between Chinese trading companies and Russian lumber companies, payments from Yemen to Chinese firms in Zhejiang province, and from companies in the United Arab Emirates.
AgBank also failed to adequately monitor transactions remitted by a Turkish Bank customer for its Afghan Bank client, which was known by the U.S. Treasury Department for its links to a network associated with narcotics traffickers and illicit cash flows.
Invoices obtained by compliance personnel to investigate potentially suspicious transactions involving China and Russia appeared to be counterfeit or falsified, the order said.
Other documents suggested U.S. dollar trade with Iranian counterparties, including a sanctioned Iranian party.
Many dollar-denominated transactions using the SWIFT wire messaging system contained numeric codes that prevented AgBank compliance officials and regulators from properly screening the transactions or parties involved.
When the chief compliance officer (CCO) shared those concerns with bank officials and the Fed, the bank moved "to improperly curtail the CCO's independence", the consent order said.
The branch CCO at the time, Natasha Taft, filed an $8 million whistleblower and gender discrimination suit that was settled in September. 

Taft did not return requests for comment.