NK military satellite; PRC citizen charged with trying to send ICBM tech to Iran; VTB Bank opens office in Tehran.
Prohibited Transactions for the week of 15 May 2023 (#4)
North Korea
North Korean leader Kim Jong-un inspected the country’s first military reconnaissance satellite and approved its “future action plan.” A launch could occur in the next month or two.
The US stated that any North Korean activity involving ballistic missiles or satellite launch vehicles would violate UN Security Council resolutions, and that Washington has “a number of tools at our disposal to hold the DPRK accountable.”
The trade and tourism industries in the northeastern Chinese provinces of Liaoning, Jilin and Heilongjiang have been “devastated” by North Korea’s continued border closure. Heightened surveillance — including facial recognition and ID checks when traveling — make it more challenging for North Korean defectors trying to hide amongst ethnic-Korean Chinese citizens in the northeast. //Beijing’s increasing use of surveillance technology since the start of the COVID-19 pandemic makes it difficult to accept the government’s continued claims of ignorance regarding North Korean sanctions evasion activities occurring within its borders.
A North Korean trading company affiliated with the nation’s ministry of defense is recruiting 100 soldiers to be sent to two different locations abroad to earn money for the regime. The trading company previously deployed soldiers in 2019 to Mongolia and Russia for fundraising activities. //If this is accurate, it would appear Pyongyang is getting closer to opening the border.
Iran
A Chinese national faces charges of sanctions evasion, money laundering and bank fraud, for conspiring to send materials used in the production of intercontinental ballistic missiles to Iran. The individual — accused of sending approximately USD15,000 via two wire transactions to a front company to facilitate the illicit transfer — works for a Chinese company sanctioned by the US in 2014 for weapons of mass destruction (WMD) proliferation. //The case highlights the difficulties when trying to understand what differentiates proliferation finance (PF) from other types of illicit finance. Even knowing that a company was sanctioned for WMD proliferation, a financial institution or payment processor may not consider transactions with the company (or its fronts) to be PF because they cannot determine what the funds are specifically being used for. However, they must still address the heightened PF risk that comes with transactions that have a WMD touchpoint, and not just view it “only” as a potential sanctions violation issue.
Iran and Russia signed a USD1.6 billion agreement to build the 102 mile (164 km) Rasht-Astara rail line within the next three years, thereby completing the International North-South Transport Corridor (INSTC), a multimodal network of rail, ship and road routes connecting Iran with India, Azerbaijan, Russia and Europe. //Last week’s issue of Prohibited Transactions had a comment about the financial crime implications of the INSTC.
Russia’s state-owned United Shipbuilding Corporation (USC) is constructing new containerships at the Lotos Shipyard which will be used to move goods via the Russian portion of the INSTC. Both USC and its subsidiary, the Lotos Shipyard, were sanctioned by the US government in April 2022.
Russia’s VTB Bank – sanctioned by the US in February 2022 – opened a representative office in Iran, and has already initiated correspondent banking relationships with Iranian banks. An Iranian official stated that VTB’s presence in Iran’s export destinations — including Commonwealth of Independent States countries, India, Vietnam and China — will help Iran attract export earnings.
In September 2022, VTB started processing money transfers between Russia and China in Chinese RMB, allowing transactions to be completed without using SWIFT. //Will VTB set up a similar function for rial’s?
Iranian and Russian officials have discussed economic cooperation in oil, gas, industrial and agricultural fields, and signed an agreement to facilitate trade and transit between the two countries. //Hard to keep up with it all, but Iranian English-language media is really highlighting all the different areas of cooperation between Tehran and Moscow.