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(Yonhap Interview) U.S. blacklisting of N.K. unlikely to be as powerful as BDA sanctions: expert

All News 08:05 June 13, 2016

By Chang Jae-soon and Roh Hyo-dong

WASHINGTON, June 12 (Yonhap) -- The U.S. blacklisting of North Korea as a "primary money laundering concern" is not expected to be as powerful as a similar 2005 financial sanction, as Pyongyang is now using Chinese intermediaries to mask its transactions and it's very difficult to detect them, a sanctions expert said.

John Park, an adjunct lecturer at the Harvard Kennedy School with expertise in North Korea sanctions, raised the concern in a recent interview with Yonhap News Agency, stressing the importance of cooperation between the U.S. and China in carrying out the restrictions.

In last week's annual strategic talks with China, U.S. Secretary of State John Kerry proposed -- and China agreed -- to establish a panel of experts to facilitate implementation of the sanctions, and the proposal attests to the difficulty of detecting North Korean transactions hidden under Chinese names, Park said.

"If you look at the BDA period ... North Korea was caught off guard. It was a big shock to them. But what comes out of that shock is that they moved a lot of their banking activities inside of China and then they started using private Chinese companies to do their activities in between them and smaller banks," Park said.

BDA refers to Banco Delta Asia, a bank in the Chinese territory of Macau. In 2005, the U.S. designated the bank as a money laundering concern for doing business with North Korea. The measure scared away other financial institutions from dealing with Pyongyang for fear they would also be blacklisted.

The measure hit the North hard, but was later lifted in exchange for the North's agreement to return to six-party talks aimed at ending its nuclear program. The sanction has been considered the most effective U.S. sanction on the North yet.

Some experts have said the Treasury Department's designation of the North as a primary money laundering concern earlier this month could have far greater effects than the BDA sanctions as it not only blacklisted one financial institution, but the entire North.

Park, who researched how Pyongyang evades sanctions and held interviews with dozens of North Korean defectors who had worked for state trading firms said that the latest U.S. sanctions are not expected to be as effective as the BDA measure.

"The reason is, my view is that because BDA was such a shock, the North Korean regime had to find a way to never let that kind of shock happen again. So, the movement to China and doing a lot of transactions inside of China and then using private Chinese companies to do anything as intermediaries, that's a very well-developed practice now," he said.

Park said larger banks may shut down North Korean accounts, but the problem lies with smaller regional banks.

"They're the ones that are very difficult to detect. Once it's operating inside of China, when the transaction starts with a Chinese company and a Chinese name, and then it moves throughout the Chinese system, it presents enormous challenges," Park said.

"It's not to say that the current measures are not effective, but I think it's important to wait and see how there's cooperation and further discussion between the US government and the Chinese government," he said, adding that Kerry's suggestion of an expert group shows how difficult it is to implement.

Park said that there are always Chinese middlemen and private firms who are willing to do financial transactions on behalf of North Korea for money, and commission fees go up as sanctions on the regime in Pyongyang become tighter.

"It's a fact of life. If you shrink supply, the price is higher. There will be interested middlemen who have connections who see a business opportunity. So for them, they're not scared off by the punishment. Rather, they would say pay me more," Park said.

He said that China is not as serious about implementing sanctions as the U.S. and South Korea, noting that Chinese President Xi Jinping wrote a congratulatory letter to the North right after Pyongyang's Workers' Party Congress and recently received a high-level delegation from Pyongyang.

"That is not the behavior of a country that is as focused in terms of prioritizing implementation of sanctions," he said. "China is serious about implementing sanctions, but it's not at the same high level as the U.S. or South Korea."

Park stressed his point is not to say sanctions aren't working, but various elements should be factored in pursuing sanctions.

"Just like a patient getting medication, sometimes there are setbacks, you have to figure out what other combination or what other treatments can help isolate the positive and minimize the negative," he said. "Rather than this narrow focus of just sanctions and sanctions, I think it is a widened perspective and then look at other types of cooperation and capacity-building that is required."


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