Financial Crime Reporting and Investigation Best Practices in Korea, Democratic People’s Republic of

The Democratic People’s Republic of Korea (DPRK) has been at the center of recent attention for its use of front companies and correspondent bank accounts to channel US dollars through the global financial system.

Recent Examples of DPRK Sanctions Evasion

• In 2016, China-based company Dandong Hongxiang Industrial Development Co. Ltd. (DHID) was criminally charged with conspiring to evade US economic sanctions against the DPRK and violating the Weapons of Mass Destruction Proliferators Sanctions Regulations (WMDPSR).
• In 2017, the US filed a civil complaint to forfeit approximately $1.9 million from China-based company Mingzheng International Trading Limited (MITL), alleged to be a front company created for the purpose of laundering US funds on behalf of sanctioned DPRK entities.

US Government Response

The US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has taken action to prohibit the opening or maintenance of correspondent accounts in the US for, or on behalf of, China’s Bank of Dandong, which FinCEN finds to be a Financial Institution of Primary Money Laundering Concern.

AML/OFAC Compliance Risk Mitigation

As the global threat environment evolves, financial institutions must continually evaluate and strengthen their AML and OFAC programs and policies to mitigate risks associated with existing global events and threats. This includes:

• Revisiting Customer Risk Rating (CRR) Methodology and Country Risk Rating Methodology
• Providing detailed training to AML and OFAC personnel on current sanctions screening processes
• Integrating KYC program into AML/OFAC program with clearly defined policies and procedures

By staying informed of the global threat landscape and adapting their compliance programs accordingly, financial institutions can effectively mitigate risks associated with DPRK sanctions evasion.