US judge holds three Chinese banks in contempt for refusing to comply with probes into violations of North Korea sanction
- According to court rulings in a 2017 civil forfeiture action, the banks were Bank of Communications, China Merchants Bank and Shanghai Pudong Development Bank
- Pudong Bank stands at risk of losing access to US dollars, the lifeblood of global finance
A US judge has found three large Chinese banks in contempt for refusing to comply with subpoenas in an investigation into North Korean sanctions violations. The order triggers for the first time a provision that could cut off one of China’s largest banks from the US financial system at the demand of the US attorney general or treasury secretary.
The three banks are not identified, but details in court rulings align with a 2017 civil forfeiture action in which the Justice Department alleged that China’s state-owned Bank of Communications, China Merchants Bank and Shanghai Pudong Development Bank (SPDB) worked with a Hong Kong front company accused of laundering more than US$100 million for North Korea’s sanctioned, state-run Foreign Trade Bank.
SPDB has no US branch but maintains accounts here to handle US dollar transactions. The ruling means that Attorney General William Barr or Treasury Secretary Steven Mnuchin can terminate the bank’s US account and ability to process US dollar transactions – a potentially crippling, if not lethal, punishment in global trade.
The threat from US investigators probing whether the banks knowingly helped finance North Korea’s nuclear proliferation network comes at a time of spiralling US-China economic relations, when the collapse of trade talks this spring triggered retaliatory tariffs and other measures.