China bank barred from US financial system over North Korea ties

Move comes ahead of Trump-Xi talks in which Kim regime will top agenda 
By Don Weinland in Hong Kong

The US Treasury department has severed a small Chinese bank’s ties with the US financial system over its support for North Korea’s nuclear weapons programme.
The measures against Bank of Dandong come days before Donald Trump’s first official visit to China and indicate that questions over China’s relationship with North Korea will continue to dog the relationship between the US president and Xi Jinping.
In the run-up to Mr Trump’s tour of Asia, US bombers flew near North Korea on Thursday, provoking the latest threats of nuclear war from the Kim Jong Un regime and highlighting the tensions between Washington and Pyongyang that have rippled through the region.
The Treasury’s financial crimes unit said in a statement late on Thursday that the bank in Dandong, on China’s border with North Korea, had acted “as a conduit for illicit North Korean financial activity”.
It accused the bank of performing millions of dollars of transactions for companies connected to North Korea’s ballistic missile and nuclear weapons programmes, as well as other companies that have been sanctioned by the UN.
While the White House proposed the measures in June, the implementation comes as Mr Trump prepares for his first visit to China as head of state.
The new sanctions will bar any bank doing business in the US from conducting transactions with Bank of Dandong.
“Today’s actions will better protect the US financial system from illicit schemes used by North Korea to evade sanctions and finance its weapons programmes,” Steven Mnuchin, Treasury secretary, said in a statement.
“Banks and businesses worldwide should take note that they must be vigilant against attempts by North Korea to conduct illicit financing and trade.”
Documents provided by the Treasury claim that Bank of Dandong facilitated $786m in transactions through correspondent banks in the US between May 2012 and May 2015.
About 17 per cent of those transactions, it says, were with companies linked to North Korean entities under sanctions from the US and UN.
The move against the Chinese bank comes as the US increases its focus on the companies and individuals that have supported Kim and his weapons programme.
Swift, the Brussels-based system that supports most of the world’s financial transactions, said in March it was cutting all ties to North Korea’s banking system amid criticism of international entities that continued to facilitate payments for banks in the country.
Swift said at the time that the North Korean banks that remained on its system were “no longer compliant with Swift’s membership criteria” and would be dropped.
Hong Kong’s role as a hub for shipping companies that do business with North Korea has also recently come into focus, with numerous ships used to trade with the country registered in the semi-autonomous Chinese territory.

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.

With 'F**k China Month,' Trump Transformed America’s Foreign Policy in Just Four Days

The new American president ended decades of Washington’s sucking up to China and in the process saved America’s 63-year-old alliance with South Korea and boxed in North Korea.

By GORDON G. CHANG

HONG KONG —“I am,” said Moon Jae-in on Thursday, “in complete sympathy with President Trump’s diplomacy of strong power.”
Strong power indeed. 

So strong that Moon, the newly elected South Korean president who disagrees with Trump on most everything, unexpectedly fell into line with the American leader.
The Thursday and Friday meetings between Trump and Moon cap one of the most consequential—and successful—weeks for U.S. foreign policy in recent memory. 

All it took was four days for Trump to discard two—and maybe four—decades of Washington’s settled China policy. 

By doing so, it looks like he saved his country’s six-decade-old alliance with South Korea, which was in danger of coming under China’s—and North Korea’s—sway.
And by preserving unity with Seoul, Trump, at least for the moment, narrowed the options of North Korean supremo Kim Jong Un, limiting the possibility of his nuclear adventurism.
The momentous week began with the visit of Indian Prime Minister Narendra Modi to the White House, marked by three bear hugs between the pair and the warmest of welcomes. 

Washington observers had been concerned that current trade and immigration irritants would derail the approach set by the Bush and Obama administrations to fortify links between the world’s most populous democracy and its most powerful one, but Trump kept ties on track. 

“The relationship between India and the United States has never been stronger, has never been better,” the American leader said, accurately characterizing matters.
The word “China” did not pass the lips of either the American president or the Indian prime minister in their post-meeting remarks Monday, but it was clear both saw in the other the means to contain an increasingly aggressive Chinese state.
Doubts about the significance of Monday’s meeting were dispelled the following three days. 

Tuesday, the State Department dropped China to the worst ranking—Tier 3—in its annual Trafficking in Persons report after not giving the country another waiver. 

Among other things, State cited China’s use of forced labor from North Korea.
And then came two blasts Thursday. 

First, the Treasury Department designated Bank of Dandong, a Chinese bank, a “primary money laundering concern” pursuant to the Patriot Act. 

The U.S. charged that the bank has been handling, in violation of American law, money for North Korea’s ballistic missile and weapons of mass destruction programs.
This was not the first time Treasury severed a Chinese financial institution from the global financial system—it cut off Bank of Kunlun in July 2012 for evading Iran-related rules—but it was, as sanctions expert Joshua Stanton told The Daily Beast, “an important first step, one that will send a clear message to the Chinese banks that have long laundered North Korea’s money and aided its proliferation.”
Moreover, Treasury on Thursday sanctioned a Chinese company, Dalian Global Unity Shipping Co., and two Chinese individuals, freezing their assets and prohibiting U.S. persons from dealing with them.
Second, the Trump administration on Thursday notified Congress of a proposed $1.42 billion sale of arms to Taiwan, the self-governing island Beijing’s claims as its 34th province. 

The White House, not wanting to upset Chinese officials, had sat on the package, which the Obama administration had prepared in its final months.
Beijing was “outraged” over the arms sale and angered over the Patriot Act designation, but the administration, according to various reports, did not care. 

As one observer told the Washington insider Nelson Report at the end of last week, “word on the street” is that the White House “has called this ‘F--- China Month.’ ”
The new attitude toward China is bound to last more than a month as the president has, in the course of four days, clearly thrown out two decades of American policy that had placed a higher priority on integrating China into the international system than disarming North Korea. 

Moreover, it looks like he has also started a dynamic that will lead to the reversal of four decades of attempts to place the promotion of friendly relations with Beijing over the stout defense of immediate American interests.
Yet whether Trump abandoned four or just two decades of China policy last week, he most certainly rescued the 63-year-old mutual defense treaty with the Republic of Korea. 

There was great concern that President Moon, a leftist, was going to walk away from the U.S. during his meetings with Trump.
The South Korean had spent the first days of his presidency trying to reorient Seoul away from Washington and toward the other Korea. 

Moreover, Moon and his aides have been saying things inconsistent with the maintenance of the alliance, and many in the Seoul and Washington policy circles were concerned he was heading to the American capital to have it out with Trump.
After all, his policy toward the Democratic People’s Republic of Korea was inconsistent with that of the American administration. 

While Trump is seeking to deny the Kim regime of the resources to build nukes and missiles, Moon wants to win Pyongyang’s trust by providing essentially unconditional aid and assistance and resuming investment.
Moon did not have a road-to-Damascus conversion while in Washington last week—his “progressive” views on North Korea have been baked-in for decades—but he appears to have been impressed by Trump’s determination, hence his surprising comment on the American “diplomacy of strong power” and his unexpected criticism of prior U.S. presidents for not acting resolutely.
No recent U.S. president has appeared willing to oppose the Chinese, so leaders in Asia have generally decided to “bandwagon” with Beijing. 

Trump showed last week he was not particularly fearful of crossing China.
So it looks like Trump’s moves against China last week, immediately preceding Moon’s two days of meetings with the American leader, convinced the South Korean that it was not in his interest to stand in opposition to the current occupant of the White House. 

In short, Trump, by acting decisively against Beijing, boxed in Moon.
The preservation of U.S.-South Korean unity should have two good effects. 

First, it should take some of the heat off Seoul, which has been the subject of unrelenting pressure from Beijing. 

Chinese leaders for months have been upset that Moon’s predecessor, Park Geun-hye, agreed to the deployment of Lockheed Martin’s Terminal High Altitude Area Defense system on South Korean soil.
Chinese leaders, as a result, imposed unofficial sanctions on the South’s economy to get rid of THAAD, as the missile-defense system is called, and Beijing in recent weeks evidently thought that a rift between Moon and Trump presented a new opportunity to bully the South Korean political establishment.
Second, Kim Jong Un this week surely sees less of an opening to exploit differences between the two historic allies. 

And this means, as a practical matter, that he will be far more cautious with moves to destabilize his neighbor to the south and the broader region. 

The Kim family has always tried to drive wedges between Seoul and Washington, and Pyongyang has been restrained when it has viewed the alliance as strong.
For now, the alliance does look strong, and that is no small achievement for President Donald John Trump.
The impulsive Trump is fully capable of undoing his great week in Korean diplomacy, but if he stays the course he will reorient American foreign policy in ways history will remember—and perhaps he will create lasting peace on the long-troubled peninsula.

Axis of Evil

U.S. targets Chinese bank, company, individuals over North Korea
By Joel Schectman and David Brunnstrom | WASHINGTON

U.S.Treasury Secretary Steve Mnuchin announces measures taken to maximize pressure on North Korea to abandon its weapons programs during a press briefing at the White House in Washington, U.S., June 29, 2017. 

The United States imposed sanctions on two Chinese citizens and a shipping company on Thursday for helping North Korea's nuclear and missile programs and accused a Chinese bank of laundering money for Pyongyang.
U.S. Treasury Secretary Steve Mnuchin said the actions were designed to cut off funds that North Korea uses to build its weapons programs in defiance of U.N. Security Council and unilateral sanctions.
"We will follow the money and cut off the money," he told a news conference.
A Treasury statement identified the bank as the Bank of Dandong and the firm as Dalian Global Unity Shipping Co Ltd. 

It identified the two individuals as Sun Wei and Li Hong Ri.
The sanctions imposed on the two Chinese citizens and the shipping company blacklists them from doing business with U.S.-tied companies and people.
Bank of Dandong did not respond immediately to a request for comment. 

A staff member at Dalian Global Unity would not comment on the sanctions and subsequent calls to the firm's office in Dalian went unanswered.
Mnuchin said U.S. officials were continuing to look at other companies that may be helping North Korea and may roll out additional sanctions.
Chinese companies have long had a key role in financing Pyongyang. 

However, Mnuchin said the action was not being taken to send China a message. 

"This wasn't aimed at China. We continue to work with them," he said.
Asked about the U.S. sanctions on Friday, Chinese Foreign Ministry Spokesman Lu Kang said that China consistently opposes unilateral sanctions imposed outside the U.N. framework.
"We strongly urge the United States to immediately correct its relevant wrong moves to avoid affecting bilateral cooperation on the relevant issue," he said, without elaborating.
China's ambassador to the United States, Cui Tiankai, said China opposed the United States using domestic laws to impose "long-arm jurisdiction" on Chinese companies or individuals, the official Xinhua news agency reported on Friday.
"If a Chinese company or individual has acted in a way that violates United Nations Security Council resolutions, then China will investigate and handle the issue in accordance with Chinese law," he told an event in Washington on Thursday evening.

GROWING FRUSTRATION
U.S. officials told Reuters this week that President Donald Trump was growing increasingly frustrated with China over its inaction on North Korea and bilateral trade issues, and was now considering possible trade actions against Beijing.
A senior White House official told reporters on Wednesday China was "falling far short of what it could bring to bear on North Korea in terms of pressure."
The U.S. move came as Trump was due to meet South Korean President Moon Jae-in at the White House on Thursday to discuss steps to push North Korea to abandon its weapons programs, which have become an increasing threat to the United States.
It also came after the United States sanctioned a Chinese industrial machinery wholesaler, Dandong Hongxiang Industrial Development Co, in September for its ties to North Korea's nuclear program, the first time Washington had taken such a step against a Chinese firm.
China's Foreign Ministry said in the same month Hongxiang was under investigation for "illegal behavior" and "economic crimes" following the provisions of U.N. resolution 2270, which imposed tighter sanctions on North Korea in March.
Mnuchin said the United States would discuss efforts to choke off funding for North Korea's nuclear and missile programs with China and other countries at next week's Group of 20 summit in Germany.
The U.S. Treasury Department said in an online notice published on Thursday the Bank of Dandong had served as a gateway for North Korea to access the U.S. financial system. 

Authorities said 17 percent of Dandong's customer transactions in the bank's U.S. accounts had ties to North Korea.
Anthony Ruggiero, a former senior Treasury official in the Office of Terrorist Financing and Financial Crimes, said the action against Bank of Dandong was the first time U.S. authorities had sought to punish a Chinese bank accused of helping North Korea.
It would immediately cause Western firms to cut off any transactions with Bank of Dandong, he said. It may also cause financial institutions in Western Europe and the United States to further scrutinize whether their Chinese business could have links to North Korea.
"The designation will make reputable Western banks ask questions about larger financial institutions in China," said Ruggiero, who is now a senior fellow at the non-profit Foundation for Defense of Democracies.