NK munitions to Russia; IT workers raise funds for NK WMD; Qatar’s changing stance on USD6 billion; New review of FATF bills by Expediency Council?
Prohibited Transactions for the week of 16 Oct 2023 (#24)
North Korea
New satellite imagery indicates that North Korea has likely begun exporting munitions to Russia at scale, via two cargo ships sailing between the North Korean port at Rajin and the Russian port of Dunai. The North Korean cargo is then moved by semi-trailers and railway wagons to a munitions depo in a Russian town approximately 200 km from the Ukrainian border. The two cargo ships are owned and operated by companies tied to Russia’s military logistics networks. There are also indications that a third, yet to be identified cargo ship is also sailing between the two ports. The US government asserts that Russia has been provided with more than 1,000 containers of military equipment and munitions by North Korea in “recent weeks.” //Now we wait to see what North Korea receives in return for all of this equipment.
Analysis by experts on North Korean arms concluded it is likely that HAMAS used North Korean weapons — specifically the F-7 rocket-propelled grenade — in their 7 October terrorist attack against Israel. They were likely sourced from Iran. North Korean media has called the claims “groundless.”
There has been an increase of vehicle activity at the New Yalu River Bridge, which connects the DPRK and PRC. Dubbed the “bridge to nowhere” because following its completion in 2014, it was unused by the two sides. This may be a prelude to a full opening of the bridge. //And provide another route for the smuggling of goods.
The US Justice Department announced the seizure of USD1.5 million and a number of domain names as part of an investigation into North Korean information technology workers primarily based in the PRC and Russia. They are accused of using “pseudonymous email, social media, payment platform and online job site accounts, as well as false websites, proxy computers located in the United States and elsewhere, and witting and unwitting third parties” to raise millions of dollars used to fund North Korean weapons of mass destruction (WMD) programs. //The Justice Department’s press release included four seizure applications, which I would like to read closely and will plan to highlight any interesting tidbits in next week’s issue (or if you’ve found anything of note, I’d love to hear from you about it.)
Iran
According to Iranian media, the governor of Qatar’s central bank stated there are no obstacles on Iran’s use of the USD6 billion currently being held in six Iranian accounts at Qatari banks. The head of Iran’s central bank said that funds could be moved either via SWIFT or letters of credit. //As discussed in last week’s issue, US media reported that Washington and Doha had come to a “quiet understanding” that the USD6 billion would not be accessible to Iran. If these comments by Qatar’s central bank governor are accurate — they don’t appear to have been reported or refuted in any other English language media in the US or Qatar — it could be Doha’s attempt to walk the line between the US and Iran. It may take an Iranian attempt to pay for goods with the funds before it is clear where Qatar stands on this issue.
OFAC sanctioned 11 people, eight entities and one vessel — based in Iran, Hong Kong, the PRC, and Venezuela — for supporting the Islamic Revolutionary Guard Corps (IRGC), Ministry of Defense and Armed Forces Logistics (MODAFL), and their subordinate organizations in the production and proliferation of ballistic missiles and unmanned aerial vehicles (UAV).
A number of US government agencies jointly released an “Iran Ballistic Missile Procurement Advisory” geared toward private businesses, which describes deceptive techniques used by Iranian illicit procurement networks, the goods they seek, and what companies should do to reduce risks. //The advisory is perhaps a useful summary for any persons or business unfamiliar with the threat of these procurement networks. However, banks may only find the advisory to be a general reminder to remain vigilant about these types of activities. The techniques mentioned — “Obscuring the End User Through Transaction Layering,” “Falsifying Documentation,” “Use of Third Countries for Transshipment,” and “Financing schemes” — are very broad and could easily apply to North Korean illicit networks, or other types of illicit activities not specifically related to proliferation. The list of goods provided does not include any Harmonized System (HS) codes or Export Control Classification Numbers (ECCNs). The advisory also lists a number of Iranian companies and their subsidiaries which have been known to engage in procurement activity, and are likely already being screened for by banks, since they are OFAC designated.
The European Union is maintaining nonproliferation sanctions on Iran, as it has found Tehran is not fulfilling its commitments to the JCPOA. Iran’s foreign ministry has called the move illegal.
Russia stated that it considers the restrictions against Iran lifted, though Moscow has not said if they will actively support Tehran’s missile development.
Iranian President Ebrahim Raisi may be attempting to seek a new review by the Expediency Council — which serves as an advisory body to the Supreme Leader and makes decisions in disputes between the Parliament and Council of Guardians — of two bills that would allow Iran to sign onto Financial Action Task Force (FATF) conventions (two others bills were passed in 2018 and 2019). The two bills under dispute would allow Iran to sign onto the Palermo and Terrorist Financing Conventions. Hardliners are against the bills since it would restrict the nation from sending money to designated terrorist groups such as HAMAS, Islamic Jihad, and Hezbollah. //This is another one of those issues that has dragging on for years, and highlights policy struggles within the Iranian leadership. As has been pointed out, even if sanctions are lifted on Iran (which seems extremely unlikely at this point in time) removal from FATF’s “black list” would be a necessary step for Iran to really be able to do business with the rest of the world.
Iran and Belarus signed a cooperation document which involves Tehran exporting technical and engineering services, oil equipment and petrochemical products to Minsk, and the two sides will cooperate in technology-related fields and use a barter system for trade. The Iranian representative expressed hopes that trade between the two nations could reach USD1 billion a year.