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North Korea beats sanctions on money transfers by placing remittance agent in Dandong, China

Industrial and commercial bank of china (Public Domain/WikiCommons)
October 05, 2019

A North Korean remittance agent has been dispatched to the Chinese border city of Dandong to oversee money transfers across the Sino-Korean border, sources familiar with the practice told RFA’s Korean Service.

By using borrowed Chinese names, she is able to provide North Korean trade workers and Chinese businesses that are involved in smuggling with money remittance services, which have been unavailable to them due to U.S. and U.N. sanctions.

The sanctions, aimed at depriving Pyongyang of foreign currency and other resources that could be funneled into its nuclear program, make international banks wary of remitting money to North Korea, but in practice it is being done through private brokers.

Sources told RFA that they believe the Chinese banks in Dandong are aware of the North Korean agent and are even working alongside her to avoid being caught running afoul of sanctions while still reaping the benefits of transferring money across the Yalu River, the border between the two countries.

“[The North Korean bank agent], who is in her early 40s, says she is affiliated with the North Korean Changshin Bank,” said an official at a trading company in Dandong in an interview with RFA Saturday.

“She runs and manages several borrowed-name accounts at Chinese banks,” the source said.

“She mainly works in Dandong and she is a well-mannered friendly person so she makes a good impression with everyone around her,” added the source.

The cost of doing business

There is money to be made in sending money between banks, and although the North Korean agent sends the money quickly, she takes a cut, according to the source.

“If money is transferred to her borrowed-name bank account from any part of China, she is reportedly able to get that money transferred to North Korea within two to three days at the latest, but she collects 0.5% of the remittances of less than $10,000 and 0.3% of those more than $10,000,” said the source.

“The transfer fee she charges is similar to what Chinese banks charge when transferring money to [domestic] banks. Given the fact that she can send cash to North Korea for such low fees, it is clear that the woman was sent directly by North Korean authorities,” the source said.

Another trade official from a Chinese border city said that that the woman’s customers are not only North Korean workers sending small-scale remittances. Large Chinese companies hoping to mask their involvement with North Korea also route their cash through her to avoid detection.

“If the Chinese trading companies, which would be fined if caught smuggling, send money in the normal way, it would be a sanctions violation. So it is highly likely [they] would just send the money through her,” said the second source.

The second source said that in days past, a low-key remittance agent using borrowed names would have been hardly necessary. Prior to sanctions, Korea Kwangson Banking Corp. had set up an office in a fixed location and customers could send money reliably into North Korea. But under sanctions such a banking office cannot exist.

“This woman from Changshin Bank is like a moving Korea Kwangson Bank,” the second source said.

Is China in on it?

The second source says he suspects that not only are Chinese banks complicit in the arrangement, Chinese authorities are also facilitating transfers through this agent.

“She is in charge of holding a number of borrowed-name accounts and sending a large amount of cash to North Korea. Since all of these processes are violations of U.N. sanctions and against Chinese law, it is impossible without the cooperation of Chinese authorities,” said the second source.

Lim Sooho, a senior researcher at the Seoul-based Institute for National Security Strategy, told RFA that the process of sending money to North Korea as described by the sources is plausible, but only if the Chinese bank failed to detect that the woman was sending money into North Korea under Chinese names.

Lim added that even if true, the scheme would be difficult on a larger scale. He said that sanctions cannot be avoided because China’s central bank would be aware of suspicious activity at Chinese regional banks, so it would be hard to say concretely that the Chinese authorities are involved.

As of Monday afternoon, the UN Security Council’s North Korea sanctions committee did not respond to RFA’s request for comment.