Trending: U.S. Sanctions on N. Korea Taken Lightly Abroad

 In Compliance, Global RADAR, Political Corruption, Risk, Sanctions, Terror Financing, Trending

The latest episode in the ongoing saga between the United States and North Korea saw the East Asian country recently become designated as a state sponsor of terrorism once again, following the country’s removal from the list by President George W. Bush nearly a decade ago. With this designation also came the announcement of new sanctions by the U.S. Treasury Department against North Korea, a common trend seen on seemingly a monthly basis over the course of the past year. As the Trump train continues to steam ahead with its no-holds barred approach to relations with North Korea, it seems that a significant portion of the international community has grown tired of keeping up with the continuously updating list of “do’s” and “don’ts” for their cross-border diplomacy with the embattled country. While it is no secret that U.S. President Donald Trump has aimed to isolate North Korea from the global trading system in an attempt to force the country to drop its potentially catastrophic nuclear weapons initiatives, the measures imposed during his term as Commander in Chief have been unsuccessful to date from multiple standpoints. A report published by CNN on December 6th, 2017 highlights a dilemma facing both the United States and United Nations (UN) as new sanctions continue to be imposed against North Korea: the follow-through rate by which U.S. allies maintain accordance with these restrictions continues its decline.
According to the Institute for Science and International Security, a renowned source of public knowledge on international legislation and regulations, a total of “49 countries violated United Nations sanctions on North Korea to varying degrees between March 2014 and September 2017” (Iyengar, 2017). While this figure is shocking in and of itself, perhaps more startling is the fact that several of the world’s most prominent and/or wealthy countries – including Brazil, China, France, and Germany – were found to be part of this group, perhaps setting the tone for the comparable offenses seen in smaller countries across the globe. It has also been discovered that of the 49, 13 have reported connections to North Korea’s military – either through training or through the receipt or export of military equipment – including infamous, corrupt names such as Cuba, Iran, and Syria. It is the belief of officials from the UN that North Korea has targeted and ultimately exploited “countries with weak or nonexistent export and proliferation financing controls”, as well as those with high levels of corruption (Iyengar, 2017). The exploits of the countries found on the list include, but are not limited to, processing banned financial transactions on behalf of North Korea, the facilitation of front companies for the country’s government, aiding in the successful delivery of shipments to and from the country, occasionally through deceitful means such as changing the national registration of freight carriers to disguise their origin, and in the imports of sanctioned goods and valuable assets altogether.
While international pressure applied to individual country’s via sanctions has been a successful venture for government’s dealing with situation’s of this variety in the past, experts have differing viewpoints on whether or not the efforts being made by the U.S. and U.N., respectively, can rein in North Korea’s nuclear program. Getting sanctions passed against Pyongyang, the capital of Korea, is already a rather difficult process due to the opposing attitudes of countries such as China and Russia who have previously vetoed Security Council sanctions in order to prevent North Korea from becoming overly unstable or collapsing. Additionally, due to the widespread restrictions that are currently in place, there is virtually nothing more that can be cut off that will have any sort of significant impact on the country’s economy, military, or its inhabitants. The U.S.’s main hope had been that the international community would rally around them, heeding to the sanctions already in place and cutting ties with North Korea in order to further constrict the country of valuable resources. India and Singapore are two countries that have recently conceded in the manner that the American government had proposed, with both vowing to end their dealings with North Korea and ban all trade for the foreseeable future. Outside of these infrequent cases however the U.S. government’s ideal scenario has not unfolded. This leaves the United States back at square one, with their most effective option being one that is likely to be accompanied by severe ramifications. As suggested in the report, this option is to “press every country engaged in military or sanctioned trade with North Korea to stop any such activities, and deploy their own sanctions against those that fail to do so” – a move that even an individual as bold as President Trump has yet to pull the trigger on (Iyengar, 2017). What awaits both the U.S. and North Korea in the final chapter of 2017 however remains to be seen.

Weekly Roundup

 

UK: Turning Up the Heat on Bitcoin Regulation

 

One of the largest areas of concern in regards to the booming digital currency market is the potential for these “coins” to be used with criminal intent. The UK government has shared this sentiment, but rather than sitting back and waiting for a potentially large-scale fiasco to form, they have decided to launch a “clampdown” on cybercurrency, Bitcoin in particular. In a well-received move, the UK’s Treasury Department announced early last week “it will be looking into tighter regulation of Bitcoin in order to bring the platform into line with legislation that deals with money laundering and other financial crimes” (Moore, 2017). This legislation will reportedly look to ensure that online currency exchange platforms where Bitcoin is traded will carry out appropriate due diligence on customers and their activity.
While the main concern for the government remains that this new form of financial technology could, like many other currencies, fall victim to abuse by criminals and be used to launder money, especially given the relative anonymity that cryptocurrencies provide to traders, many believe that these coins have the potential to transform the financial industry in the years to come. This is evident in the exponential rise in trading price of a single Bitcoin since its inception just a few years ago, a phenomenon that has been much heralded in the United States and abroad of late. There are already clear tax rules in place that users of cryptocurrencies must comply with, and updated regulation to bring “virtual currency exchange platforms into anti-money laundering and counter-terrorist financing regulation” appear to be on the horizon in the UK and other regions of the world that have also embraced the tidal wave that is cybercurrency.

 

South Korea Turning to Artificial Intelligence for AML

 

 

An encouraging sign for the evolution of the global money services industry emerged from East Asia this week, as South Korea’s top financial regulator announced that the republic would begin to utilize artificial intelligence (AI) to assist in anti-money laundering (AML) enforcement efforts. Struggling with the manual processing of copious amounts of financial transaction reports, the proclamation is great news for financial service providers throughout South Korea, who will be granted almost immediate relief beginning in early-2018. Kim Yong-beom, one of the country’s leading figures in regards to financial services, stated that the move to embrace financial technology (FinTech) has been a long time coming. Kim is confident that the new reliance on FinTech will help many aspects of every day business to flow more fluidly, while also increasing efficiency and sophistication. Kim also will reportedly incorporate blockchain technologies to aid in more effective customer due diligence (CDD) processes.
Kim does however fear that “although a booming financial technology industry is expected to help banks, insurers and brokerages cut costs, it could make it more difficult for financial authorities to battle against money laundering” (Korea Bizwire, 2017). The anonymity provided by financial technologies is something that will be a challenge that those operating in regulatory compliance in the country will be forced to handle for the first time, as well as the inherent risks posed by cyberattacks and financial breaches. However in most cases, as new threats emerge, they are soon countered by new, more effective regulatory technologies, neutralizing potentially harmful effects. Overall, there is a good chance that the move to AI incorporation will make the prevention and tracking of illicit financial activity much more simple for financial institutions across the country.

Canada ‘Just Beginning’ AML Crackdown in Casinos

Earlier this week, the Canadian government began the implementation of new measures to combat suspicious transactions that have become commonplace in the country’s casinos, specifically in regards to the province of British Columbia. Following a general, independent probe into casino activity north of the United States border, federal investigators were made aware of a troubling trend that saw multiple large-scale casinos accepting millions of dollars in cash over a period of just over one month. The aspect of the influx of cash that has startled investigators and Canadian citizens alike is the lack of action taken by the casinos involved to verify the sources of the incoming funds, nor collect any viable information pertaining to the individuals attempting to wash their money. While the scale of the problem and the extent to which it affects other sectors (i.e. real estate, drug trafficking and tax evasion) are still being investigated, the larger questions remain where is this potentially dirty money coming from, and what kind of crime/activity is generating this amount of money to begin with?
While the government has responded by requiring gambling sites to “be able to identify customers playing with more than 10-thousand dollars and have customers provide the source of the money”, many have been hesitant to buy into the potency of this legislation, albeit in its earliest stage (Canadian Press, 2017). This is due in large part to less-than-stellar enforcement and oversight seen in the past, and the fact that this type of activity went undetected for a potentially profound period of time. Changes are on the way however, as government officials have “promised to boost the presence of government regulators in the eight largest casinos in the lower mainland, and to impose requirements for high rollers to disclose the source of their money” (Hunter, 2017).

Citations

The Canadian Press. “Government Promises More Crackdowns on Money Laundering.” CFJC Today, 6 Dec. 2017.

Hunter, Justine. “B.C. Crackdown on Casino Money Laundering Is Just a First Step: Attorney-General.” The Globe and Mail, Inc., 6 Dec. 2017.

Iyengar, Rishi. “North Korea: Sanctions Violated by 49 Countries, Claims New Report.” CNNMoney, Cable News Network, 6 Dec. 2017.

Moore, Michael. “UK Treasury Plans Tighter Regulation of Bitcoin.” IT Pro Portal, ITProPortal, 5 Dec. 2017.

“S. Korea to Use AI to Better Combat Money Laundering.” Be Korea-Savvy, 5 Dec. 2017, koreabizwire.com/s-korea-to-use-ai-to-better-combat-money-laundering.

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