WASHINGTON – The Treasury Department and Justice Department took a series of actions Monday against four Chinese individuals and one Chinese company for conspiring to aid North Korea’s nuclear weapons program in violation of U.S. economic sanctions.
The unsealing of criminal charges and the imposition of new sanctions are aimed at shutting down a major Chinese node supporting North Korea’s weapons proliferation, officials said.
The Justice Department charged the individuals and the trading company with money laundering and evading sanctions. The four individuals and the company are all located in China.
The Treasury Department also imposed sanctions against the firm, Dandong Hongxiang Industrial Development Co. Ltd. (DHID), and the individuals, including Ma Xiaohong, DHID’s majority owner. Ma, who lives in Dandong, China, on the border with North Korea and has conducted business with that country since 1996, stood to benefit the most financially by the transactions, the government alleged.
The actions come almost seven months after the U.N. Security Council, which includes China, unanimously adopted harsh sanctions against Pyongyang to pressure it to abandon its nuclear weapons program.
DHID, Ma and three colleagues operated through front companies in the British Virgin Islands and elsewhere to conduct U.S.-dollar financial transactions through the U.S. banking system to facilitate sales of goods to North Korea and purchases of coal for North Korea, the government alleges.
The Justice Department on Monday also filed a civil complaint in federal court in New Jersey seeking forfeiture of all funds held in 25 Chinese bank accounts associated with DHID. Through those accounts, the government alleges, DHID and its front companies laundered hundreds of millions of dollars through U.S. banks.
“Today’s action exposes a key illicit network supporting North Korea’s weapons proliferation,” said Adam Szubin, acting undersecretary for terrorism and financial intelligence at the Treasury Department. “Treasury will take forceful action to pressure North Korea’s proliferation network and to protect the U.S. financial system from abuse.”
The charges result from a long-running investigation into illicit financing of North Korea’s nuclear program. In 2009, the Treasury Department sanctioned Pyongyang-based Korea Kwangson Banking Corp. (KKBC) for its ties to the country’s weapons program. KKBC has a branch in Dangdong.
According to the criminal and civil complaints, DHID allegedly worked openly with KKBC prior to the 2009 Treasury sanctions designation. Between 2009 and 2015, Ma allegedly conspired with three other individuals – Zhou Jianshu, Hong Jinhua and Luo Chuanxu – to create or buy a total of 22 front companies to conduct U.S.-dollar transactions designed to evade U.S. sanctions.
The companies were in the British Virgin Islands, the Seychelles, Hong Kong, Wales, and Anguilla. The front companies facilitated transactions funded or guaranteed by KKBC in violation of sanctions, the government alleged. At times, DHID and its shell firms managed the full logistical chain of commodity contracts conducted illicitly on KKBC’s behalf, it alleged. At other times, they served as financial intermediaries for U.S.-dollar transactions between North Korean-based firms and suppliers in other countries in a bid to evade sanctions, the government said.
As part of the scheme, the front companies were involved in money laundering through U.S. correspondent bank accounts. DHID’s transactions at Standard Chartered Bank in Newark alone increased from $1.3 million prior to KKBC’s designation to $110 million from 2009 to 2015, the government alleged.
The U.S. government actions came as China this month announced its own criminal inquiry into DHID after two visits by Justice Department officials to Beijing. As a result of the visits, the two governments entered into a mutual legal-assistance agreement. “We expect China will assist us with requests submitted in accordance with that bilateral agreement,” Justice Department spokesman Marc Raimondi said.
China has always been the linchpin to disrupting North Korea proliferation, said Zachary Goldman, a former senior official at the Treasury Department’s Office of Terrorism and Financial Intelligence. “So anything the United States can do to goad the Chinese into greater action is going to be important,” said Goldman, who is executive director of New York University’s Center on Law and Security.
After the U.N. Security Council imposed new sanctions in March, China severely curbed cross-border trade, reducing it to almost a trickle. But in recent months, trade between the two countries is believed to have shot back up, according to analysts.
(c) 2016, The Washington Post ยท Ellen Nakashima
