Chinese Bank Risks ‘Death Penalty’ in North Korea Money Laundering Case: Report
26 Jun 2019

A recently unsealed contempt ruling against three Chinese financial institutions that have missed subpoena deadlines could open the way for US officials to cut off dollar-clearing services for Shanghai Pudong Development Bank, The Washington Post reported Monday.

The ruling, which does not name the institutions, is believed to target three of China’s large banks: state-owned Bank of Communications, China Merchants Bank and Shanghai Pudong Development Bank (SPDB), according to The Post, which identified the institutions by comparing details in the court ruling with a 2017 civil forfeiture action by the US Justice Department.

The 2017 court filing accuses the banks of working with a Hong Kong front company to launder over $100 million on behalf of North Korea’s state-owned Foreign Trade Bank, which has been the subject of US sanctions since 2013. The Treasury Department accused the bank of facilitating North Korean efforts to develop its nuclear weapons program.

Because one of the three banks, believed to be SPDB, violated an administrative subpoena issued under the Patriot Act, Attorney General William Barr and Treasury Secretary Steven Mnuchin have the authority under the law to terminate an account used by the Chinese institution to process US-dollar transactions, according to the newspaper.

The contempt ruling marks the first time a US court has upheld subpoenas to a Chinese bank involved in a criminal sanctions probe, The Post said. What’s more, it raises the possibility that the Trump administration could impose a dollar-less “death sentence” on SPDB, which does not operate a US branch, at a time when American and Chinese officials continue to publicly squabble over bilateral trade.

The Hong Kong front company implicated in the 2017 Justice Department action is separately linked to Chinese telecommunications company ZTE, which in 2017 pleaded guilty and paid $1.9 billion to US authorities for violating sanctions against North Korea and Iran, according to the report.

Earlier this month, Trump administration officials imposed trade restrictions on Chinese telecommunications giant Huawei, which has been accused by the United States of violating sanctions against Iran.

The contempt ruling reflects the fact that US officials “have really taken the gloves off” with Chinese businesses, Julian Ku, a Hofstra University law professor, told The Post.

“The US government is no longer afraid or reluctant to bring its most aggressive legal authorities against Chinese banks and companies,” Ku told the news outlet. “I doubt this kind of action would have been brought even two years ago, but it is a sign of the new US-China relationship that this kind of law enforcement action may become the norm.”

US Justice Department officials declined to provide a comment to the newspaper on the matter while SPDB representatives either did not respond to The Post’s queries or offered no comment. The three Chinese banks are set to appeal the subpoena requests, which they claim they cannot comply with under Chinese law, in a federal court next month.

Photo: Fredrik Rubensson [CC BY-SA 2.0], via Wikimedia Commons

Read more:

U.S. judge orders Chinese banks to hand over North Korea records

US and 25 nations accuse North Korea of violating sanctions

Huawei says US sanctions will cost it billions in revenue

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