The United States excluded China’s Bank of Dandong from its financial system today, alleging that it has helped North Korea evade financial sanctions to launder funds. Washington had alerted other businesses in June that it planned to take the action, but it finally went into effect just as US President Donald Trump was to set off on an Asian tour. The US leader has demanded that Beijing do more to push its neighbour North Korea to stop efforts to build a nuclear- armed missile capable of reaching American cities.
Trump will bring this message to President Xi Jinping in Beijing next week, but China is reluctant to push sanctions so far as to destabilise Kim Jong-Un’s North Korean regime. Officials in Washington warn that, while they would prefer Kim to come to the table, Trump has not ruled out a pre-emptive strike to prevent him from crossing the missile threshold. But, alongside this saber rattling, Washington is also slowly stepping up secondary sanctions on foreign institutions like the Bank of Dandong it accuses of funnelling illicit funds. This risks angering China, but hawkish commentators argue that it remains the only way short of war to force Pyongyang, and perhaps more importantly Beijing, to reconsider their strategy.
“Banks and businesses worldwide should take note that they must be vigilant against attempts by North Korea to conduct illicit financing and trade,” Treasury Secretary Steven Mnuchin said. Along with the ban on Bank of Dandong, the Treasury also issued new guidance to international banks’ risk and compliance officers to help them spot North Korean attempts to infiltrate world finance. Banks from China and around the world find it hard to operate if they are barred from the US financial system, which is a clearing house for most dollar-denominated transactions. As well as the financial sanctions Washington may also decide to re-designate North Korea as a “state sponsor of terrorism” — a formal blacklist that would add to sanctions pressure.
Here, however, the Trump administration does not seem to be in a hurry, despite his anger over the death of US student Otto Warmbier after he was imprisoned and apparently brutalised in the North. On August 2, Trump reluctantly enacted a law that was forced on him by the US Congress pressing for new economic and political sanctions against Iran, Russia and North Korea. One clause of that act required the US State Department to say within 90 days whether North Korea should be named a terror sponsor — a deadline lawmakers say expired on Tuesday.