U.S. sanctions on a Chinese bank aiding nuclear-armed North Korea are "extremely long overdue" and the Trump administration should also consider action against even larger banks, according to a former U.S. intelligence official.
"This is a significant step but really a first step in what should be a much more extensive program against the Chinese entities that are violating U.S. law," said Bruce Klingner, former chief of the CIA's Korea branch and now senior research fellow for Northeast Asia at the Heritage Foundation's Asian Studies Center.
On Thursday, the Treasury Department designated China's Bank of Dandong to be a "primary money laundering concern." It said the small bank "acts as a conduit for illicit North Korean financial activity." Two Chinese individuals were also targeted in the government's action.
The U.S. Treasury Department said its FinCEN (or Financial Crimes Enforcement Network) is taking steps that will prevent the bank from continuing to be an avenue for North Korea to have access to U.S. and international financial systems. It said the bank's activities include "facilitating millions of dollars of transactions for companies" or front entities known to have ties to the hermit regime's nuclear weapons and ballistic missile programs.
"For whatever reason, the U.S. has not taken action against China the way we had against other nations for their involvement with Iran," said Klingner.
Klingner said it was time to step up the sanctions and consider "imposing significant fines against China's big-four banks if they are found to be complicit" in illicit dealings with North Korea. In the past, he noted that the U.S. had imposed billions of dollars in fines on major European banks for money laundering, including violating sanctions with Iran.
That said, the former U.S. intelligence official added that the large Chinese banks maybe "too big to designate as money laundering concerns because it would have an impact on the U.S. and world economy."
"The medium to small banks," Klingner said, "could be designated depending on the available evidence."
President Donald Trump appears to have waited to impose sanctions against Chinese banks because he believed Chinese President Xi Jinping would be able to help persuade North Korea's leader Kim Jong Un to abandon the regime's nuclear and missile programs. A frustrated Trump, though, tweeted June 20 that "it has not worked" and many took it to mean the China outreach on North Korea had failed.
Treasury Secretary Steve Mnuchin sought to blunt any criticism from Beijing that the sanctions were meant as payback for not helping more on North Korea.
"We are in no way targeting China with these actions," Mnuchin told reporters in a prepared statement. "We are committed to targeting North Korea's external enablers and maximizing economic pressure on the regime until it ceases its nuclear and ballistic missile programs."
Mnuchin said top U.S. officials will be meeting with China and other countries at the G-20 summit next week in Hamburg, Germany "to further our efforts to cut off North Korea's illicit activities."
"Trump had, I believe a naive view of what President Xi Jinping had agreed to at the Mar-a-Lago summit," said Klingner.
Back in September, the Obama administration charged a Chinese trading company linked to the Bank of Dandong with a criminal complaint of conspiring to evade U.S. economic sanctions and using front companies to evade U.S. sanctions targeting North Korea's nuclear weapons and missile programs. At the time, four Chinese national executives of the trading company, Dandong Hongxiang Industrial Development Co. (DHID), also were charged.
The Obama administration never charged the Bank of Dandong but the U.S. Justice Department complaint against DHID, which specializes in trade with North Korea, revealed the trading firm had funds in the Chinese bank.
The Trump administration's action against Bank of Dandong is similar to steps the U.S. government took more than a decade ago against a Chinese bank over North Korea.
Back in 2005, the U.S. took action against China's Banco Delta Asia, a Macau-based bank, as a "primary money-laundering concern" under the USA Patriot Act. At the time, the U.S. had called the bank "a willing pawn for the North Korean government to engage in corrupt financial activities through Macau."
One of the steps the U.S. took at the time was to freeze North Korean assets in banks, including the Macau financial institution. Klingner, who served two decades with the Central Intelligence Agency and Defense Intelligence Agency, said "North Korean officials…told a U.S. official at the time 'you finally found a way to hurt us.' "
Even so, the action was essentially reversed a few years later by then-President George W. Bush as one of the steps to restart the six-party talks with negotiators from North Korea, China, Japan, Russia, South Korea and the U.S. The release of the funds was a precondition made in April 2006 by Pyongyang, which later that year would conduct a nuclear test in a sign of defiance to the world.