U.S. Court Enforces Grand Jury Subpoena for N. Korean Sanctions Violations against Chinese Banks

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Saturday, May 11, 2019
Bruce Zagaris

On April 30, 2019, the U.S. District Court for the District of Columbia unsealed an opinion issued on March 18, 2019, by Chief Judge Beryl A. Howell enforcing grand jury subpoenas and an administrative subpoena against three Chinese banks for records of transactions for a now-defunct Hong Kong based front company for North Koreas state-run company.  In doing so, Judge Howell found jurisdiction and, notwithstanding a conflict of law with China, that comity required the Chinese banks to comply with the subpoenas. Between October 2012 and January 2015, the Chinese banks were allegedly responsible for helping move $105,339,483.59 through U.S. correspond accounts.  Banks One and Two are Chinese banks with U.S. branches while Bank Three is a Chinese bank without any U.S. branch, but which maintains correspondent account. Many of the transactions occurred after Treasury’s Office of Foreign Assets Control (OFAC) designated an entity as a Special Designated National.  The details in the Howell opinion appear to align with OFAC’s allegations in 2017 that the Hong Kong firm Mingzheng International Trading Limited acted as a front company to facilitate U.S. dollar transactions that helped North Korea’s proliferation program network, on behalf of a covert foreign branch of North Korea’s state-operated Foreign Trade Bank.