Trucks wait to load coal from North Korea at the port of Dandong.
U.S. court documents show that federal prosecutors have so far filed at least four asset forfeiture lawsuits against North Korea for illegal money laundering activities, with most of the foreign companies involved being Chinese companies. In addition, experts on North Korea sanctions note that while other countries have violated the U.N. ban on North Korea, China has more accused entities and individuals than any other country.
Assistant U.S. Attorney Michael P. Grady filed a document in the District of Columbia federal court in Washington, D.C., last month on July 31, noting that the federal government had filed a funds forfeiture lawsuit last July 23, and the court also issued an in rem pledge on July 24, declaring that a total of about $2.37 million of the companies’ funds would forfeited. Since then, the federal government has contacted all known claimants, and the deadline has passed without any party contesting the U.S. allegations, so the court should enter a default judgment forfeiting the funds held at the U.S. financial institutions to the assets of the U.S. government.
The U.S. has filed at least four lawsuits in recent years seeking forfeiture of funds in violation of sanctions against North Korea, involving foreign companies and individuals mostly linked to China in addition to North Korea.
A July 23 indictment by the U.S. Department of Justice identified three companies as allegedly laundering money for North Korea in violation of U.N. sanctions against the country, including two Chinese companies, Dandong Zhicheng Metal Materials Co. The indictment details North Korea’s use of these “titular companies” to evade U.N. sanctions, alleging that Dandong Zhicheng’s owner, Chi Yupeng, ran a criminal network that included five Chinese companies involved in the case and laundered as much as $600 million.
According to Google‘s local cache, “Tianwei”, a Chinese corporate credit agency, Dandong Zhicheng was registered with the Dandong Border Economic Cooperation Zone’s Market Supervision Administration in July 2005, and Chi Yupeng has six companies that hold 85 percent of Dandong Zhicheng’s shares.
The U.S. had announced sanctions against Dandong Zhicheng and Chi Yupeng back in 2017. The U.S. Justice Department’s indictment said Dandong Zhicheng is one of the largest companies importing North Korean coal into China and is a major player in supporting the North Korean economy.
The U.S. passed the North Korea Sanctions and Policy Enhancement Act in 2016, giving the federal government the authority to seize illegal financial assets in violation of sanctions orders, and federal prosecutors began filing forfeiture lawsuits in court in 2017.
In a complaint filed in federal court in the District of Columbia in November 2018, U.S. federal prosecutors said three companies laundered money for North Korean banks, allowing North Korea to purchase materials as well as illegally enter the U.S. financial system. The complaint asks the court to forfeit $3,167,783 related to the three companies. The three companies include two Chinese companies and one Singaporean company. The two Chinese companies are Apex Choice Ltd, a Hong Kong-registered wax products company, and Yuanye Wood Ltd, a Wenzhou-based wood company.
In one of the largest crackdowns against North Korea for sanctions violations last May, the U.S. Department of Justice indicted 28 North Korean and five Chinese nationals for allegedly acting as agents of the North Korean Foreign Trade Bank. The DOJ indictment said the federal government will ask the court to seize the assets of the entities and individuals involved.
In addition, U.S. federal prosecutors had asked a federal judge last September to order the seizure of funds related to a former North Korea-based employee of Chinese communications equipment giant ZTE Corp. and related front companies in two cases of alleged sanctions violations by the North.
Joshua Stanton, a lawyer who was involved in drafting the North Korea Sanctions and Policy Enhancement Act, told the Voice of America that companies from other countries, including North Korean companies, give the U.S. government jurisdiction over financial dealings in which instructions for intercompany money orders often go through U.S. financial institutions based in New York or New Jersey because of the dollar’s international dominance.
The law expands the Department of Justice’s civil forfeiture authority, allowing it to stop, seize and confiscate property controlled by persons transacting through the United States,” he said. Generally, that means bank-to-bank transactions.”
The purpose of this law, he said, is that money cannot be sent through the U.S. system to violate U.S. law.
Chinese companies most involved
Joshua Stanton, an expert on North Korea sanctions and an attorney in Washington, said almost all of the forfeiture lawsuits filed by the federal government so far have been more or less related to China.
Either the money was wired through a Chinese bank or one party or the other party in the transaction was in China,” he said in an interview with the Voice of America. Only in very rare cases are there not strong ties to China between these illegal activities.”
Alex Wong, deputy assistant secretary of state in the State Department’s Bureau of East Asian and Pacific Affairs, said last month that the Chinese government is increasingly allowing Chinese companies to trade with North Korea on a range of embargoed goods. He said North Korea still retains secret channels for procuring raw materials for its weapons programs. North Korea can’t do that without middlemen, illegal bank accounts and money-laundering networks. “And the vast majority of middlemen, bank accounts and money launderers are operating inside China.”
In an effort to force North Korea to abandon its nuclear program, the U.N. Security Council has adopted a series of resolutions aimed at preventing North Korea from raising funds through the sale of resources, among other things. Hugh Griffiths, a former coordinator of the U.N. Security Council’s North Korea panel, told VOA that while there are people in many countries, including the U.K., who are motivated by profit and “money above all else” to help North Korea launder money, there are more such cases in China.
He said, “The main reason people do business with the North Koreans is to make more money, they see an opportunity to make money quickly. You know this applies to the British, the Chinese, the Russians and the South Koreans, but more so the Chinese, because China has a long border with North Korea, especially with a lot of history of interaction and a lot of trade.”
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