Anti-Money Laundering (AML) in North Korea

AML Country Guide / Anti-Money Laundering (AML) in North Korea

The Democratic People's Republic of Korea (DPRK or North Korea) has a background in currency counterfeiting, terrorist financing, drug trafficking, and money laundering, as well as the employment of deceptive financial methods in the global banking markets. The DPRK regime continues to provide the international community with a number of difficulties, including its development of nuclear weapons, arms trafficking, and proliferation, and human rights violations.

North Korea's FATF Status

The FATF is concerned about the DPRK's inability to resolve substantial weaknesses in its anti-money laundering and counter-terrorism financing (AML/CFT) regime, as well as the considerable dangers they represent to the international financial system's integrity. Accordingly, the FATF recommends the DPRK fix its AML/CFT inadequacies as soon as possible and in a meaningful way. Furthermore, the FATF is concerned about the danger presented by the DPRK's unlawful actions relating to the proliferation of weapons of mass destruction (WMDs) and their funding.

The FATF reconfirms its request to its participants on February 25, 2011, and asks all jurisdictions to advise their financial institutions to pay particular attention to commercial contacts and transactions with the DPRK, including DPRK corporations, financial institutions, and anyone working on their account. In addition to increased criticism, the FATF calls on its participants and encourages all states to implement effective counter-measures, including specific target financial sanctions, in accordance with applicable United Nations Security Council Resolutions, to safeguard their financial industries from money laundering, financing of terrorism, and financing of WMD proliferation (ML/TF/PF) risks emanating from the DPRK. Jurisdictions should take the appropriate steps to shut existing DPRK bank branches, subsidiaries, and representative offices inside their borders, as well as terminate correspondent connections with DPRK banks, as mandated by relevant UNSC resolutions.

Sanctions Against North Korea

Sanctions are now in place against this nation from the United Nations, the European Union, and the United States. These include a ban on North Korean weaponry exports and imports. There are additional prohibitions on the supply (direct or indirect) of conventional weapons and some weapons of mass destruction, as well as sensitive commodities and technology and technical support.

In reaction to the cyber-attack on Sony Pictures Entertainment, the United States implemented further sanctions against North Korea on January 2, 2015, banning specific companies and individuals.

The United States increased sanctions on North Korea on September 20, 2017. For the first time, the new presidential order empowers the US Treasury Department to punish foreign banks that conduct "substantial" transactions with North Korea, as well as to freeze particular bank accounts related to North Korea. Furthermore, additional commercial penalties target North Korea's corporate operations and overseas partners, including allowing new blocking measures against both North Korean people and third-country citizens who engage in or involve North Korean financial transactions.

What are the Underlying Reasons for the Sanctions?

North Korea is one of the ten countries sanctioned by all world governments, including the United Nations, the European Union, and the United States. Yes, this is the fact, that North Korea accepts. Sanctions are imposed on oil shipments to, textile exports, and natural gas supplies to North Korea. So this is why its leader is described as having a strange personality. Even after such severe restrictions have been placed, North Korea continues to discuss nuclear negotiations and nuclear weapons. North Korea also conducted a nuclear test in 2017.

When it comes to the economy of North Korea, it is one of the chronic economies. As a consequence of years of underinvestment, spare component shortages, and inadequate maintenance, the industrial capital stock is practically beyond repair. Military expenditure on a large scale depletes resources required for investment and civilian consumption. Many additional issues include stagnant power production, persistent food shortages, a lack of arable land, and so on.

The sanctions are a result of North Korea's nuclear testing and other provocative behavior. In reaction to North Korea's first nuclear weapons test in 2006, the United Nations imposed the first wave of sanctions.

At the time, US President George W. Bush was tougher on North Korea than his predecessor, Bill Clinton, notoriously referring to the nation as part of the "axis of evil." North Korea launched a series of nuclear tests shortly after the inauguration of Bush's successor, Barack Obama, in an apparent effort to put the new president to trial.

After North Korea was suspected of sinking a Republic of Korea Navy vessel, killing 46 soldiers, Obama issued an executive order sanctioning people and entities that facilitate North Korean trafficking in arms and related military hardware, the purchasing of luxury products, and participation in certain illicit economic activities such as money laundering, counterfeiting of goods and currency, bulk cash smuggling, and drug smuggling.

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