North Korea

Sanctions

UN, EU and US Financial and Arms

FATF AML Deficient List

Yes

Higher Risk

Compliance with FATF 40 + 9 Recommendations
Weakness in Government Legislation to combat Money Laundering
Not on EU White list equivalent jurisdictions
Corruption Index (Transparency International & W.G.I.))
World Governance Indicators (Average Score)
Failed States Index (Political Issues)(Average Score)

Medium Risk

US Dept of State Money Laundering assessment

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ANTI-MONEY LAUNDERING

FATF Status

North Korea is subject to a FATF call on its members and other jurisdictions to apply counter-measures to protect the international financial system from the on-going and substantial money laundering and terrorist financing (ML/FT) risks emanating from the jurisdictions.

FATF Statement re AML Strategic Deficiencies:  18 October 2019

The FATF remains concerned by the DPRK’s failure to address the significant deficiencies in its anti-money laundering and combating the financing of terrorism (AML/CFT) regime and the serious threats they pose to the integrity of the international financial system. The FATF urges the DPRK to immediately and meaningfully address its AML/CFT deficiencies. Further, the FATF has serious concerns with the threat posed by the DPRK’s illicit activities related to the proliferation of weapons of mass destruction (WMDs) and its financing

 

The FATF reaffirms its 25 February 2011 call on its members and urges all jurisdictions to advise their financial institutions to give special attention to business relationships and transactions with the DPRK, including DPRK companies, financial institutions, and those acting on their behalf. In addition to enhanced scrutiny, the FATF further calls on its members and urges all jurisdictions to apply effective counter-measures, and targeted financial sanctions in accordance with applicable United Nations Security Council Resolutions, to protect their financial sectors from money laundering, financing of terrorism and WMD proliferation financing (ML/FT/PF) risks emanating from the DPRK. Jurisdictions should take necessary measures to close existing branches, subsidiaries and representative offices of DPRK banks within their territories and terminate correspondent relationships with DPRK banks, where required by relevant UNSC resolutions.

Compliance with FATF Recommendations

North Korea has not yet undertaken a Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards.

US Department of State Money Laundering assessment (INCSR)

North Korea was deemed a Jurisdiction of Primary Concern by the US Department of State 2017 International Narcotics Control Strategy Report (INCSR) but has not been included since. Key Findings from the last report are as follows: -

OVERVIEW

 

The Democratic People’s Republic of Korea (DPRK or North Korea) has a history of involvement in currency counterfeiting, drug trafficking, terrorist financing, and the laundering of related proceeds, as well as the use of deceptive financial practices in the international financial system. The DPRK regime continues to present a range of challenges for the international community through its pursuit of nuclear weapons, weapons trafficking and proliferation, and human rights abuses.

 

On June 1, 2016, the U.S. Department of the Treasury identified the DPRK as a jurisdiction of “primary money laundering concern,” pursuant to Section 311 of the USA PATRIOT Act, and issued a proposed rulemaking generally prohibiting U.S. financial institutions from establishing or maintaining correspondent accounts with DPRK financial institutions and prohibiting the use of U.S. correspondent accounts to process transactions for North Korean financial institutions. This proposed rule was finalized on November 4, 2016.

 

Furthermore, in October 2016, the FATF again expressed its serious concerns with the threats posed by DPRK’s illicit activities related to the proliferation of weapons of mass destruction (WMDs) and its financing, and urged the DPRK to immediately and meaningfully address its AML/CFT deficiencies. The FATF strengthened the public statement by aligning it with the key financial operative paragraphs of UNSCR 2270 in urging all jurisdictions to terminate correspondent accounts and close existing branches and subsidiaries of DPRK banks. The FATF reaffirmed its earlier calls on its members to advise their financial institutions to give special attention to business relationships and transactions with the DPRK, including DPRK companies, financial institutions, and those acting on their behalf.  In addition to enhanced scrutiny, the FATF further called on its members and urged all jurisdictions to apply effective countermeasures and targeted financial sanctions in accordance with applicable UNSCRs in order to protect their financial sectors from money laundering and proliferation financing risks emanating from the DPRK.

 

 

SANCTIONS

There are UN, EU and US sanctions currently in force against this country. These include an embargo on arms exports to and imports from North Korea. There are also restrictions against the supply (directly or indirectly) of conventional weapons and certain weapons of mass destruction, sensitive goods and technology, and technical assistance.

On 2 January 2015, the US imposed further sanctions against North Korea, blocking certain entities and persons in response to the cyber-attack against Sony Pictures Entertainment.

On 20th September 2017, the US expanded sanctions against North Korea. The new executive order, for the first time, authorizes the U.S. Treasury Department to sanction foreign banks that engage in “significant” transactions with North Korea, and to block specific bank accounts linked to North Korea. Also, new commercial sanctions target North Korea’s business operations and international partners, including by authorizing new blocking sanctions against both North Korean persons and third-country nationals that undertake certain business activities in or involving North Korea. To access FAQs, Click here.

24 July 2018  -  US State Department:  Risks for Businesses with Supply Chain Links to North Korea

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BRIBERY & CORRUPTION

 

Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                           17

World Governance Indicator – Control of Corruption              5

 

ECONOMY

North Korea, one of the world's most centrally directed and least open economies, faces chronic economic problems. Industrial capital stock is nearly beyond repair as a result of years of underinvestment, shortages of spare parts, and poor maintenance. Large-scale military spending draws off resources needed for investment and civilian consumption. Industrial and power outputs have stagnated for years at a fraction of pre-1990 levels. Frequent weather-related crop failures aggravated chronic food shortages caused by on-going systemic problems, including a lack of arable land, collective farming practices, poor soil quality, insufficient fertilization, and persistent shortages of tractors and fuel.

The mid 1990s were marked by severe famine and widespread starvation. Significant food aid was provided by the international community through 2009. Since that time, food assistance has declined significantly. In the last few years, domestic corn and rice production has been somewhat better, although domestic production does not fully satisfy demand. A large portion of the population continues to suffer from prolonged malnutrition and poor living conditions. Since 2002, the government has allowed informal markets to begin selling a wider range of goods. It also implemented changes in the management process of communal farms in an effort to boost agricultural output.

In December 2009, North Korea carried out a redenomination of its currency, capping the amount of North Korean won that could be exchanged for the new notes, and limiting the exchange to a one-week window. A concurrent crackdown on markets and foreign currency use yielded severe shortages and inflation, forcing Pyongyang to ease the restrictions by February 2010. In response to the sinking of the South Korean warship Cheonan and the shelling of Yeonpyeong Island in 2010, South Korea’s government cut off most aid, trade, and bilateral cooperation activities, with the exception of operations at the Kaesong Industrial Complex. North Korea continued efforts to develop special economic zones and expressed willingness to permit construction of a trilateral gas pipeline that would carry Russian natural gas to South Korea. North Korea is also working with Russia to refurbish North Korea’s dilapidated rail network and jointly rebuilt a link between a North Korean port in the Rason Special Economic Zone and the Russian rail network.

The North Korean government continues to stress its goal of improving the overall standard of living, but has taken few steps to make that goal a reality for its populace. In 2013-14, the regime rolled out 20 new economic development zones - now totalling 25 - set up for foreign investors, although the initiative remains in its infancy. Firm political control remains the government’s overriding concern, which likely will inhibit changes to North Korea’s current economic system.

 

Agriculture - products:

rice, corn, potatoes, soybeans, pulses, beef, pork, eggs

 

Industries:

military products; machine building, electric power, chemicals; mining (coal, iron ore, limestone, magnesite, graphite, copper, zinc, lead, and precious metals), metallurgy; textiles, food processing; tourism

 

Exports - commodities:

minerals, metallurgical products, manufactures (including armaments), textiles, agricultural and fishery products

 

Exports - partners:

China 75.8% (2015)

 

Imports - commodities:

petroleum, coking coal, machinery and equipment, textiles, grain

 

Imports - partners:

China 76.4%, Republic of the Congo 5.5% (2015)

 

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