Signage stands outside JP Morgan Chase & Co. headquarters in New York, U.S. (Photographer: Peter Foley/Bloomberg)

North Korea Using Global Banks in Illegal Deals, UN Report Says

(Bloomberg) -- Global banks are being used to facilitate payments of vast sums in illegal deals that are undermining United Nations Security Council sanctions, a UN report found.

The report, made public on Tuesday by the world body, says that banks and insurance companies continue to unwittingly allow payments and provide coverage for vessels involved in “ever-larger, multimillion-dollar” deals.

“Global banks are involved in two main problems,” Hugh Griffiths, the head of the UN panel overseeing sanctions on North Korea, said in an interview Tuesday. “They are facilitating the transfer of funds for prohibited ship-to-ship transfers of petroleum products. And they’re also facilitating prohibited coal exports involving deals organized by North Korean diplomats.”

In one case, the report alleged that a series of North Korean-directed payments totaling more than $500,000 were made through transactions linked to a JPMorgan Chase & Co. account in New York. The transactions were used for a coal shipment aboard the vessel Wise Honest. The 25,500 metric tons of coal aboard the Wise Honest was sold for almost $3 million, the report said.

The report said the shipment was one example of how North Korea continues to profit from coal exports and how commodity traders make hefty commissions from such deals.

A JPMorgan spokesman wasn’t immediately available to comment.

The enforcement of sanctions is a crucial aspect of President Donald Trump’s effort to get Pyongyang to eliminate its nuclear program. In talks in Vietnam last month, Kim offered to shut down North Korea’s Yongbyon nuclear complex in return for relief from most sanctions. Trump and Secretary of State Michael Pompeo said they couldn’t accept the proposal because the regime still had hidden production facilities and missiles elsewhere that could threaten the U.S.

After a series of missile launches and nuclear weapons tests by North Korea in 2017, the UN Security Council imposed three rounds of sanctions on Pyongyang, including bans on exports of iron, coal, lead, seafood and textiles as well as some oil-import restrictions.

After the sanctions, North Korea started using vessel identity fraud in order to deliver coal to Chinese ports as well “as numerous, large-scale transfers of coal in international waters to small, unidentified vessels,” according to the UN report. North Korean diplomats travel under false identities and conduct illegal exports that disguise the origin, it found.

Officials at North Korea’s UN mission didn’t respond to a request for comment on the report.

Despite the sanctions, North Korea’s nuclear and ballistic missile programs remain intact, the UN report said. Financial sanctions remain some of the most poorly implemented and actively evaded measures in the sanctions regime, with individuals operating as extensions of North Korea’s financial institutions in at least five countries “with seeming impunity,” it added.

North Korea “enjoys ongoing access to the international financial system, as its financial networks have quickly adapted to the latest sanctions, using evasive methods in ways that make it difficult to detect illicit activity,” according to the report.

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