Stuart Levey’s visit to Asia last month is paying off. Yet another nation is cutting off Kim Jong Il’s finances.
Vietnamese banks have already closed down North Korean accounts over the past few weeks, most likely forcing Pyongyang to move its money to its last remaining haven, Russia, said Peter Beck, head of the International Crisis Group’s Seoul office, on Tuesday.
Beck said Nigel Cowie, general manager of North Korea’s Daedong Credit Bank in Pyongyang, e-mailed him last week and said Vietnamese banks have shut down Daedong’s and other North Korea-held accounts.
“The only financial window they (North Koreans) have left now is Russia, I am told,” Beck said at a roundtable on North Korea hosted by the Mansfield Foundation.
Somewhere, the world’s smallest violin is playing an adagio for Nigel Cowie, although I still count Switzerland and Luxemburg as two countries that may yet harbor North Korean accounts. I also recommend Andy Jackson’s post here, which discusses North Korea’s most “legitimate” banker. Cowie and his constituency of defenders in the comments probably set a record for most uses of the word “legitimate” per column inch, which I suppose depends on how you define the term. Whether Cowie is laundering money, wittingly or otherwise, is a matter I’ll leave to the Treasury Department, since there’s really little point in speculating in a factual vacuum about an investigation I can only assume to be ongoing, based on the media reports. You may also choose to accept Cowie’s explanation of why his bank’s “legitimate” transactions are conducted with large bundles of cash.
Third, there are good reasons why much of the international trade of the DPRK for these sorts of goods is cash-based. This relates mainly to the fact that the local currency is not convertible (and indeed we do not handle local currency), so imported goods are bought and sold for hard currency. The absence of the normal system of reciprocal correspondent bank accounts that exists in other countries which enables transactions to be settled by electronic book entry; the shortage of liquidity in the local market, which means that people are reluctant to deposit money in banks because they don’t know when they’ll be able to get the money out, so they would rather carry cash – and so on. This is quite a big subject in itself, and I have done a separate paper on this issue, but the bottom line is that people do tend to transact largely in cash, which in itself is not illegal – in this market, it is in fact often the only way.
Most of this could just as well apply to the Taliban in 2000. What all those conditions have in common is that they’re self-inflicted by the North Korean regime itself, out of a combination of economic dysfunction, repressive statism, recalcitrant lawlessness, and no small measure of concealment. But let’s make Nigel Cowie the only man in North Korea entitled to a presumption of innocence and assume that his bank’s transactions are all lawful. He has chosen to set up shop among stacks of dope money, suspicious dual-use imports, and counterfeit Benjamins. Then, Cowie complains when he winds up in Treasury’s impact zone as a result. In a regime as intentionally opaque as North Korea’s, some “collateral damage” to a relative sliver (veneer? perish the very thought!) of “legitimate” activities is inevitable. Things seems particularly murky in the wake of U.N. Security Council Resolution 1695, which demands that North Korea’s financiers exercise “vigilance” in assuring that their funds don’t go to the missile fund.
What we do know about Mr. Cowie’s business is that he aspires to profit by financing this regime, and that he knows damned well how Kim Jong Il will spend those finances. And won’t. If this is legitimate, then the world owes Walther Funk a historical absolution. Or, as Stuart Levey puts it:
“You don’t want to be the one ten years from now who’s got (Korean leader) Kim Jong Il’s money,” Treasury Undersecretary for Terrorism and Financial Intelligence Stuart Levey said in an interview with Reuters.
“(It’s) just like we saw during the (former U.S. President Bill) Clinton administration when they exposed the Nazi banks,” Levey said. Swiss banks were embarrassed in 1997 by revelations that the German government had passed funds through the Swiss National Bank and other Swiss banks during World War II to finance the Nazi war effort.
“You don’t want to be on the wrong side of that. I think banks understand that. I just don’t know whether they are taking all the steps that they can and we would encourage them to do it,” he said.
There’s no laundering the culpability that goes with enabling some things.