By Tatsuya Kato
President Donald Trump’s statement via Twitter complaining that China is “providing considerable aid to North Korea, including money, fuel, and various other commodities” has created a stir in various sectors in Japan.
One of them is banking institutions. A friend of mine, a former police officer involved in foreign affairs who moved to a job in the compliance section of a bank, voiced concern that “Japan cannot afford to remain indifferent to this.” He cited the following reasons:
- Trump views the lifting of sanctions on North Korea as one of his bargaining chips in the denuclearization negotiations
- Japan has played a concrete and active role in DPRK sanctions, calling on the U.S. and the international community to impose sanctions and monitoring ship-to-ship transfers
- If Trump comes to think that funds and goods are being transferred to North Korea from Japan, its efforts might be viewed as pro forma or even as a betrayal that renders sanctions ineffective
- As a result, Japan’s vulnerability in the negative aspects of the Japan-U.S. relationship, such as the trade imbalance, may be taken advantage of, and this may lead to a rift in bilateral cooperation in dealing with North Korea.
However, could number 3 really be possible? My banker friend pointed out, “It’s not a question of whether something has actually been done; it’s a question of being suspected of doing so. The Financial Services Agency (FSA) is actually worried and is extremely nervous.”
The Financial Action Task Force on Money Laundering (FATF) is the inter-governmental body overseeing measures against transnational movement of terrorist funds and money laundering by criminals. Over 30 countries, including the G7, are members of FATF, which issues recommendations and instructions to various countries. This organization has a very negative opinion of the efforts Japan is making in this area. In the past, Japan used to be called a “money laundering paradise.”
The FATF is expected to conduct an inspection of Japan next year. Naturally, the U.S. will also be closely watching the resulting assessment. If Japan is suspected of allowing funds to flow to North Korea, its efforts on the North Korea issues, including the abduction issue, might be called into question.
Last June, the experts’ panel of the UN Security Council (UNSC) Sanctions Committee on North Korea asked the Japanese government to investigate and report on 10 Japanese companies for possible involvement in transfer of assets and funds through joint ventures with North Korean companies. The United Nations already has doubts about Japan.
The UNSC’s sanctions resolution of September 2017 prohibits involvement in operations with joint ventures with North Korean organizations and individuals. The experts’ panel conducted an investigation in light of this resolution. The FSA will have to comply with the request of the panel before the FATF inspection next year.
The General Association of Korean Residents in Japan (Chongryon) is known to play a major role in providing funds for North Korea’s development of nuclear arms and missiles.
In the past, North Korean residents in Japan used to send astronomical amounts of money raised through their business activities to North Korea. Over 1 trillion yen of taxpayer money was also spent to dispose of the bad loans of the bankrupt Chogin credit unions.
A hospital in Tokyo donated a clinic, complete with the necessary equipment, to North Korea. There have also been many cases of donations of bridges and roads, as well as transfer of assets.
Recently, the police authorities have been dealing with many cases of transfer of goods and money between Japan and the DPRK. The homes and premises connected with a senior official of a sports organization under Chongryon were raided in connection with a case of illegal exports.
A Foreign Ministry source reveals, “The UNSC panel thinks that Japan has failed to take steps to prevent joint ventures with North Korea despite the fact that it is an easy environment to operate such ventures. As a matter of fact, it was very easy indeed for Chongryon-affiliated individuals and organizations to invest in North Korea before surveillance was upgraded to the current level.
He also points out that the UNSC panel sees Japan to be reluctant to investigate the joint ventures with the DPRK.
If banks are found to be making illegal remittances, the FSA will lose face because of its lax supervision. I hate to believe that this is what the FSA is thinking.