North Korean Accounts Banned By China’s Biggest Banks

In an unprecedented move to clamp down on financial flows with the country’s unruly neighbor, China’s biggest banks have banned North Koreans from opening new accounts.

They had imposed a freeze on new accounts for North Korean people and companies, reported the Financial Times quoting multiple bank branches, including those of the country’s top four lenders. Saying they are “cleaning out” — existing accounts held by North Koreans by forbidding new deposits, some are going even further.

The theory that policy hawks in Beijing have gained the upper hand in an internal debate over whether to toughen sanctions against the Kim Jong Un regime since Pyongyang’s sixth and most powerful nuclear test this month is given weight by the moves.

And even compared to what has been agreed internationally, the measures go further. a blanket ban on North Korean bank accounts is not included in the UN sanctions, which were tightened once again last month.

“The move [against North Korean accounts] benefits China as a country,” said Zhang Liangui, professor of North Korean studies at the Central Party School of the Communist Party of China. “China takes sanctions very seriously.”

Bank of China, China Construction Bank, Agricultural Bank of China, and Industrial and Commercial Bank of China and Bank of Communications are among the banks implementing a ban on new accounts – the country’s big five.

They had been instructed to stop opening new bank accounts for North Korean individuals or companies said branches of each of these banks in China’s north-eastern border towns, where trade with North Korea is concentrated.

While some bank branches said they had been told as early as January, others said they had received notice of the freeze on North Korean accounts last month.

“Branches didn’t implement the rule all at the same time but it started recently,” said one branch of ABC in Dandong, the border city through which roughly 70 per cent of China’s trade with North Korea flows.

“Current bank accounts held by North Koreans should be cleared out,” said a representative of a branch of ICBC in Yanji, the trading hub closest to the nuclear blast site at Punggye-ri. “We implemented the restrictions long before last month’s sanctions.”

However, to continue doing legal business with North Korea, there were ways to get around the account ban, traders pointed out.

“We always use Chinese citizens living in North Korea as intermediaries when doing business,” said one groceries trader in Dandong who wished to remain anonymous because of the political sensitivity around North Korean trade.

“There’d be no reason to freeze Chinese nationals’ accounts, unless they’re sanctioning individuals,” he added.

Avoiding the need to have dealings between North Korean and Chinese banks, all their transactions, such as payments to North Korean staff, were made in cash in Chinese renminbi, said two Chinese businesspeople who run companies in North Korea — one of whom is based in the Chinese border town of Hunchun and one in Pyongyang, reported the Financial Times.

Concern over the use of bulk cash to evade its financial sanctions have previously been expressed by the UN Security Council.

(Adapted from Financial Times)

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Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy

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