NORTH KOREA
Summary

Sanctions

UN, EU and US Financial and Arms

FAFT AML Deficient

Yes

Higher Risk Areas

 

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 Areas

US Dept of State Money Laundering assessment

 

 

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: 24 February 2017

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 threat this poses to the integrity of the international financial system. The FATF urges the DPRK to immediately and meaningfully address its AML/CFT deficiencies. Further, FATF has serious concerns with the threat posed by 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 Concern by the US Department of State 2016 International Narcotics Control Strategy Report (INCSR).

Key Findings from the report are as follows: -

 

The Democratic People’s Republic of Korea (DPRK or North Korea) has a history of involvement in currency counterfeiting, drug trafficking, 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.

Access to current information on the financial and other dealings of the DPRK is hampered by the extremely closed nature of its society. The economic practice of juche, a constitutionally enshrined ideology in North Korea characterized by the goals of independence and self-reliance, has contributed to minimizing transparency and international trade relations and discouraging foreign investment.

In 2015, the FATF continued to include the DPRK on its Public Statement, stating its concerns about the DPRK’s failure to address the significant deficiencies in its AML/CFT regime and reiterating the serious threat this poses to the integrity of the international financial system. The FATF reaffirmed its earlier call upon its members to advise their financial institutions to give special attention to business relationships and transactions with the DPRK, including DPRK companies and financial institutions. In addition to enhanced scrutiny, the FATF called upon its members and urged all jurisdictions to apply effective countermeasures to protect their financial sectors from money laundering and financing of terrorism (ML/FT) risks emanating from the DPRK. The FATF likewise called on jurisdictions to protect against correspondent relationships used to bypass or evade countermeasures and risk mitigation practices, and to take into account ML/FT risks when considering requests from DPRK financial institutions to open branches and subsidiaries in their jurisdictions. The FATF also urges jurisdictions to undertake additional measures and safeguards to ensure effective implementation of the sanctions and other measures contained in the UN Security Council resolutions on the DPRK.

China is by far North Korea’s largest trading partner. Chinese banks and intermediaries are integral in sustaining North Korea’s economic and financial pipeline.

 

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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

 

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BRIBERY & CORRUPTION

 

Index

Rating (100-Good / 0-Bad)

Transparency International Corruption Index

12

World Governance Indicator – Control of Corruption

8

 

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INVESTMENT CLIMATE - Executive Summary (US State Department)

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 output 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. Large-scale international food aid deliveries have allowed the people of North Korea to escape widespread starvation since famine threatened in 1995, but the population continues to suffer from prolonged malnutrition and poor living conditions.

Since 2002, the government has allowed private "farmers' markets" to begin selling a wider range of goods. It also permitted some private farming - on an experimental basis - 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, South Korea's government cut off most aid, trade, and bilateral cooperation activities, with the exception of operations at the Kaesong Industrial Complex. In preparation for the 100th anniversary of KIM Il-sung's birthday in 2012, North Korea continued efforts to develop special economic zones with China and expressed willingness to permit construction of a trilateral gas pipeline that would carry Russian natural gas to South Korea. The North Korean government often highlights its goal of becoming a "strong and prosperous" nation and attracting foreign investment, a key factor for improving the overall standard of living. In this regard, in 2013 the regime rolled out 14 new Special Economic Zones set up for foreign investors, though the initiative remains in its infancy. Nevertheless, firm political control remains the government's overriding concern, which likely will inhibit changes to North Korea's current economic system.

 

 

 

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