Analysis & Opinions - Bulletin of the Atomic Scientists

Can Chinese banks identify North Korean sanctions evaders?

| Oct. 04, 2017

Last week, President Trump signed a new executive order that paves the way to impose sanctions against any foreign bank that conducts business with North Korea, going well beyond current UN financial sanctions. These so-called secondary sanctions, which are penalties applied to third-party foreign banks (i.e., not directly against North Korean entities), are particularly focused on Chinese banks.

The reasoning is straightforward: Several recent reports show that China provides a lifeline for North Korea’s economy, and the recent midterm report of the UN Panel of Experts, for example, has concluded that North Korea continues to violate financial sanctions by exploiting what are known as correspondent banking services. (Correspondent banking can be thought of as a network of banks that provide financial services, such as transaction settlements, to other banks. In this way, local or regional banks can send and receive transactions around the world without the need for a direct relationship with all other banks. And as it happens, the United States controls some of the largest correspondent banking networks in the world.)

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For Academic Citation: Arnold, Aaron.“Can Chinese banks identify North Korean sanctions evaders?.” Bulletin of the Atomic Scientists, October 4, 2017.

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