Title: FinCEN Advisory: North Korean Schemes to Evade Sanctions and Launder Funds

Date: November 2, 2017

The Financial Crimes Enforcement Network (FinCEN) issues a crucial advisory to alert financial institutions about North Korean schemes aimed at evading U.S. and UN sanctions, laundering funds, and financing nuclear and ballistic missile programs through the international financial system.

Key Points:

• FinCEN’s final rule under Section 311 of the USA PATRIOT Act prohibits U.S. financial institutions from maintaining correspondent accounts for or on behalf of the Bank of Dandong.
• The North Korean government uses front and trade companies to disguise, move, and launder funds.
• Recent actions by the U.S. Department of the Treasury, including OFAC designations and sanctions, have expanded authorities to target North Korean economic activity.

North Korean Schemes and Red Flags

North Korean schemes often involve intricate trade-based payment schemes using front companies, shell companies, and shipping or trade businesses. As a result, financial institutions must maintain a high level of vigilance to identify and report potential illicit activity by the North Korean government and its financial institutions.

Red Flags

• North Korean state-owned enterprises use elaborate trade-based payment schemes with front companies, shell companies, or shipping and trade businesses.
• China-based front or shell companies, trading companies, and financial institutions near the DPRK border may be involved in North Korean illicit activity.

Special Due Diligence Measures

FinCEN advises financial institutions to apply special due diligence measures as outlined in 31 CFR § 1010.659 and 1010.660 to prevent and report any transactions involving North Korean financial institutions or the Bank of Dandong.

Contact FinCEN for Assistance

For further information or questions related to the contents of this advisory, financial institutions should contact the FinCEN Resource Center at FRC@fincen.gov.