The Asia/Pacific Group on Money Laundering describes itself as “an autonomous and collaborative international organisation … consisting of 41 members and a number of international and regional observers [who] are committed to the effective implementation and enforcement of internationally accepted standards against money laundering and the financing of terrorism, in particular the Forty Recommendations of the Financial Action Task Force on Money Laundering (FATF).”
APG has an Associate Membership in FATF, the world’s primary international organization dedicated to fighting money laundering and terrorist financing, and one of the few international organizations in this world that actually works. Although membership in APG does not confer membership in FATF, it does allow the member (or observer) a degree of secondary influence over FATF’s decision-making. And since 2010, FATF has issued statement after statement cautioning banks and finance ministries about North Korea’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.”
No doubt, Kim Jong Un’s financiers in Pyongyang understand the potential consequence of being severed from the global financial system, which is why, since February, Pyongyang has “engaged” with FATF to “discuss” its deficiencies. Presumably, those discussions are nothing more than discussions; otherwise, FATF wouldn’t still be urging Pyongyang to “immediately and meaningfully address” the deficiencies. It also explains why North Korea wants into APG.
As always, the flaw in this engagement is the absence of evidence that Pyongyang has made a decision to abide by the rules and common values of the association engaged with. As U.N. Security Council Resolution 2094 points out, FATF also supports “targeted financial sanctions related to proliferation.” North Korea not only remains constitutionally dedicated to developing nuclear weapons in violation of that resolution (and others), it is also dedicated to financing its WMD programs by any means necessary. We saw this most recently when North Korea lost a World Cup match of sorts — no, not that internet hoax, but the one it played against the Cambodian police.
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Earlier this month, Yonhap reported that Cambodian authorities had arrested 15 North Koreans in Phnom Penh for running illegal gambling websites that were booking bets on the World Cup, which North Korea did not win, and for conducting cyber warfare against South Korea. The report was sourced to “a South Korean government source,” who also said the Cambodians “seized computers and other related equipment.”
It’s a far better thing to seize computers, which talk, than to seize North Koreans, who don’t. The computers could provide valuable information about North Korean bank accounts, financial relationships, co-conspirators, and the currencies and media of exchange used. It might even provide proof to support longstanding suspicions that North Korea’s overseas restaurants, including those in Cambodia, are fronts to launder money from the proceeds of activities like illegal gambling.
If the Treasury Department were at all serious about targeting North Korea’s financial enablers — a purely theoretical discussion, because it isn’t — an effective computer forensic analysis could give Treasury the basis to sanction North Korea’s third-country enablers.
North Korea has a long history of using illegal online gambling to finance itself. In 2011, the rheumy-eyed, snaggle-toothed old Trotskyists at The Guardian reported that “an elaborate hacking network” run by 30 North Koreas based in China “broke into online sites hosted in South Korea and stole prize points worth almost £3.7m ($6m)” using malicious code. Authorities also arrested five South Koreans for distributing the malware. Just four months before that report, the Russian Foreign Ministry “reprimanded the North Korean and Belarusian ambassadors for running illegal gambling on their premises in Moscow;” specifically, “a large network of underground casinos.” Even Dennis Rodman’s recent visit to Pyongyang was sponsored by Paddy Power, a (legal) Irish online gambling site. More here, here, here, and here.
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Given North Korea’s long, promiscuous history of counterfeiting, proliferation, arms sales to terrorists, and money laundering – and the fact that this history leads right up to the present day – I can’t help wondering whose bright idea it was to offer North Korea “observer” status in APG, whose “members and … observers” are supposed to be “committed to the effective implementation and enforcement of internationally accepted standards against money laundering and the financing of terrorism.”
The arguments against this are as obvious as the reasons why those Craigslist ads say “disease-free.” North Korea will use its usual Jedi mind tricks to make contacts, schmooze, and persuade APG members (and indirectly, FATF) that it’s this close to some endlessly receding horizon that may or may not be a real step toward financial transparency. If, like me, you spent the last ten years watching how well those tricks worked on South Korea and our State Department, you can imagine how they’ll work against APG. The consequence will be the relaxation, rather than the strengthening, of anti-money laundering enforcement standards.
It’s clear enough how accepting this invitation serves North Korea’s interest in perpetuating its money laundering and proliferation.
The APG will decide later whether to elevate North Korea from observer status to a member country once it evaluates Pyongyang based on its annual reports to the organization and visits by the representatives of the group over the next three years.
South Korea and many other members are trying to figure out the motive behind the unexpected move by Pyongyang, because North Korea was previously opposed to joining the APG.
“[North Korea’s motive] is a mystery to us,” said a high ranking government official, who requested anonymity. “We suspect that North Korea, while looking for ways to ease the international financial restrictions imposed on them, decided to show their efforts in improving their global image [by joining the APG].
“But since the lists that they need to follow are long, we will probably have wait and see how sincere and determined they are with their decision.”
In other words, it could be a facade as a way for North Korea to ease the sanctions imposed on it, since the possibility that Pyongyang will give up its nuclear ambitions is low.
The action is particularly suspicious because up until last year’s APG meeting held in Shanghai, North Korea refused to join the organization because of the rule requiring members and observers to follow global standards. North Korea at the time argued that it would join the APG only after the agreement to follow UN resolutions was taken out. [Joongang Ilbo]
It’s hard to see what good this invitation does for APG, FATF, or the financial system. North Korea clearly hasn’t made the fundamental decision to abide by the shared values of any of those associations. And that fundamental decision is what gives “engagement” the potential for those associations to change North Korea, as opposed to the very opposite outcome.
It’s easier to see the dangers this move creates — again, absent evidence that North Korea has seen the evil of its ways and decided to change them. The most obvious is that it gives North Korea undeserved legitimacy in area where it has been the world’s most flagrant recidivist.
Then, there is the example of the U.N. Human Rights Commission to draw from. I suppose that once, long ago, some addlebrained diplomat hypothesized that if only the leaders of China, Cuba, and Libya could be exposed to the principles by which the rest of civilized humanity lives, their leaders would feel compelled to conform themselves to those principles. What happened instead was that China, Cuba, and Libya took over the Human Rights Council, eviscerated its founding values, and destroyed it. So it goes whenever international institutions welcome members who don’t share the common principles of the institutions.