North Korean Money-Laundering Probe Focuses on U.S. Bank Transactions
July 06 2017 - 9:07PM
Dow Jones News
By Jacob Gershman, Ian Talley and Aruna Viswanantha
A federal court in Washington, D.C., has granted the Justice
Department sweeping authority to investigate alleged North Korean
money laundering involving a Chinese coal-trading network.
A search warrant approved in May and revealed in documents
unsealed Thursday allowed federal prosecutors to secretly monitor
transactions at eight major banks in the U.S. with accounts owned
by a web of entities suspected of evading trade sanctions against
North Korea.
In court papers, the government said hundreds of millions of
dollars of illegal transactions flowed through the banks, most of
which are based in the U.S. and haven't been accused of unlawful
activity.
Prosecutors alleged in court papers that U.S. currency routed
through the banks showed "patterns of North Korean money laundering
identified by" two North Korean defectors and supported North
Korea's weapons programs.
The warrants are part of a broader effort by Washington to choke
financing for Pyongyang's weapons program and turn up pressure on
China as North Korea's prime trade and finance partner.
Last week, the Treasury Department imposed sanctions against
China's Bank of Dandong, operating near the North Korean border.
The Trump administration accused it of facilitating financing for
companies involved in Pyongyang's weapons program.
That move intensified already frosty relations between the
world's two largest economies. U.S. Treasury Secretary Steven
Mnuchin also said Washington planned to roll out further
penalties.
The search warrants approved in May gave prosecutors a two-week
window to spy on bank accounts tied to Dandong Zhicheng Metallic
Material Co., a Chinese coal exporter, and "four related front
companies" -- together referred to as the "Chi Yupeng Network,"
referring to a Chinese national who owns 90% of Dandong Zhicheng.
The Chi Yupeng network isn't itself under U.S. sanctions.
The Justice Department sought a special kind of warrant called a
"damming seizure," a tactic most often deployed against drug
smugglers. Unlike a conventional warrant, it was based on probable
cause of crime occurring at some future time.
The damming seizure functioned like a wiretap, secretly
monitoring bank transactions rather than conversations, "catch[ing]
all incoming funds...while preventing any funds from exiting the
financial institution," prosecutors stated in an affidavit cited in
court papers.
It is unclear whether the searches were fruitful.
Initially, prosecutors were denied permission to intercept
transactions. A magistrate judge in April blocked the warrants
because the targeted funds weren't currently located in the U.S.,
according to court papers.
On May 22, U.S. District Judge Beryl Howell of Washington
overruled the magistrate, stating that such "anticipatory warrants"
were constitutional under the Fourth Amendment, citing a 2006 U.S.
Supreme Court ruling.
David Thompson, a senior analyst at the Washington-based
nonprofit that studies transnational illicit threats, C4ADS, said
Dandong Zhicheng was the biggest importer of North Korean goods
into China, most of which is coal.
In an affidavit in support of the warrants, the Justice
Department cited a "reliable" North Korean defector as saying North
Korean leader Kim Jong Un channels 95% of North Korea's
foreign-currency earnings generated from coal exports toward the
country's military, nuclear missiles and weapons programs.
The warrants are latest evidence of the Trump administration
attempting to curb the flow of money in and around North Korea.
The Justice Department late last year indicted a prominent
Chinese businesswoman, three other Chinese nationals and a trading
company based in Dandong for helping blacklisted North Korean
companies the U.S. said was evading sanctions. That effort
coincided with Treasury adding those entities to its sanctions
list.
Write to Jacob Gershman at jacob.gershman@wsj.com and Ian Talley
at ian.talley@wsj.com
(END) Dow Jones Newswires
July 06, 2017 20:52 ET (00:52 GMT)
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