Wednesday, October 28, 2020

US indicts North Koreans over $2.5 billion laundering scheme


North Korean and Chinese nationals are operating a multibillion-dollar money laundering scheme to help fund the North’s nuclear weapons program, the Justice Department said in an indictment unsealed on Thursday. The case underscores the Trump administration’s inability to halt Pyongyang’s nuclear weapons program through diplomacy.

The department charged 28 North Koreans and five Chinese nationals of using a web of more than 250 shell companies to launder over $2.5 billion in assets through the international banking system, according to court documents filed in February by the U.S. attorney’s office in Washington.

The government alleged that the money flowed back to North Korea’s primary, state-operated foreign exchange bank, the Foreign Trade Bank of the Democratic People’s Republic of Korea. The North used the funds to support its weapons of mass destruction program.

“Through this indictment, the United States has signaled its commitment to hampering North Korea’s ability to illegally access the U.S. financial system and limit its ability to use proceeds from illicit actions to enhance its illegal W.M.D. and ballistic missile programs,” Michael Sherwin, the acting U.S. attorney in Washington, said in a statement.

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The charges are also a tacit acknowledgement that the United States has been unable to stop North Korea from building nuclear weapons by imposing economic sanctions or through President Trump’s attempts to broker an agreement with the North’s leader, Kim Jong-un.

After Mr. Trump’s latest talks with Mr. Kim failed last year, North Korea accused the United States of maintaining a hostile stance and hinted that it could resume missile or nuclear weapons testing this year.

Mr. Trump said early this year that he did not want to meet with Mr. Kim before the presidential election in November, and the Trump administration has been reluctant to provide any reminders of its failed attempts to rein in Pyongyang.


But North Korea’s ambitions have not waned. Last month, the administration accused the North of employing cyberattacks to steal and launder money and use digital currencies “to generate revenue for its weapons of mass destruction and ballistic missile programs.”

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North Korea has conducted no significant tests this year. But Mr. Kim met this week with his nation’s top military-governing bodyand discussed “new policies for further increasing” the North’s nuclear capabilities.

Mr. Kim had recently gone three weeks without making any public appearances, prompting speculation that he had been ill.

The West has placed strict economic sanctions on North Korea in a bid to cut off funding for its nuclear weapons program, and the United States has gone after companies that it believes illegally sent money to the North.

In the indictment unsealed on Thursday, the Justice Department identified the defendants as employees and four executives of the Foreign Trade Bank, including two of its former presidents, Ko Chol Man and Kim Song Ui. Another co-conspirator was identified as a member of North Korea’s primary intelligence agency. They were charged with conspiracy, bank fraud, money laundering and operating a criminal enterprise.

While the United States has little chance of apprehending the defendants, the Justice Department sometimes brings charges against foreigners in an effort to deter adversarial governments.


The defendants are accused of illegally laundering money back to the Foreign Trade Bank dating to 2013, when the bank was placed on the Treasury Department’s sanctions list for helping to fund North Korea’s weapons programs. The department designated the entire North Korean financial system a money laundering risk in 2016.

Some of the bank’s employees were North Korean and Chinese nationals who worked for front companies that hid a covert branch of the bank in Shenyang, China, the indictment said. Federal prosecutors had accused one of the companies, Mingzheng International, in 2017 of serving as a front for the North Korean bank.

Other defendants were accused of moving overseas to set up hundreds of shell companies in China, Austria, Libya, Kuwait, Thailand and Russia. They closed companies when governments or banks detected their ties to North Korea and created more, according to court papers.


The companies funneled American dollars back to North Korea and purchased hundreds of thousands of dollars in goods from companies prohibited under sanctions from doing business with the North, according to the charges.


The suspects allegedly routed their transactions through banks in China, the United States and Europe, and falsely denied any illicit purchases or ties to North Korea when banks flagged some of those transactions. The government has over the past five years recovered $63.5 million in assets that banks froze.

The North has found new ways to use cybercrime to blunt some of the effects of U.S. sanctions since Mr. Trump threatened “fire and fury like the world has never seen” against the country in 2017, a recent study found.

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While the indictment did not mention digital currencies, it said that several defendants had been sent abroad “to study fast-developing financial technologies.” The West’s understanding of its ability to bring North Korea to heel through international pressure could fast become obsolete, national security analysts have said.

Mr. Trump has said that he would use his warm relationship with Mr. Kim to deter the country from building more weapons, and the two met in Singapore in June 2018 and in Hanoi, Vietnam, in February 2019. But those meetings failed to produce any agreement ​on ​how to end North Korea’s nuclear weapons programs ​or how to ease sanctions against North Korea that had been imposed by the United Nations.

The United States and North Korea agreed that the talks had failed, with the meeting in Hanoi ending abruptly with no resolution. But they disagreed about why they came to no agreement.

“Sometimes you have to walk,” Mr. Trump said in Hanoi after the talks had broken down. He said that Mr. Kim’s offer to dismantle a nuclear complex in exchange for sanctions relief was “a deal breaker.”


This spring, Mr. Trump expressed in a letter to Mr. Kim a desire to improve relations between the two countries, underscoring the unusually friendly relationship that the president has forged with one of the world’s most isolated dictators.

Mr. Kim has overseen four underground nuclear tests and has pushed for North Korea to build more nuclear weapons and missile programs. The country under his rule also flight-tested three intercontinental ballistic missiles in 2017 and recently tested two short-range ballistic missiles.

The indictment was filed under Timothy Shea, who led the U.S. attorney’s office in Washington until he stepped down last week to run the Drug Enforcement Administration. It was one of the last large indictments that the office secured before the coronavirus pandemic closed courts and halted most grand jury proceedings.


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