10 firms suspected of illicitly diverting funds to North Korea

TOKYO -- Ten joint venture companies formed by Japanese and North Korean firms and organizations may be involvement in illicit diversion of funds to North Korea, a United Nations Security Council investigation has found.

Not only does the diversion of such funds violate sanctions against North Korea, it is possible the companies are being used for money laundering.

Japan's Financial Services Agency (FSA) has ordered regular banks, Shinkin banks and credit unions to provide details of all accounts used by the 10 companies, and submit a record of all transactions since March 2016.

The FSA judged North Korea could be using the 10 companies to violate sanctions and to repeatedly launder money. The National Police Agency also appears to have embarked on an investigation of related firms.

A U.N. Security Council resolution issued in September 2017 prohibits the maintenance and operation of all joint ventures or cooperative entities with North Korean entities or individuals. Japan has also imposed its own sanctions on North Korea, barring, in principle, payment to North Korea under the Foreign Exchange and Foreign Trade Act.

According to sources familiar with the probe, an expert panel of the U.N. Security Council Sanctions Committee on North Korea examined the implementation of sanctions against North Korea, and found evidence of activities accompanied by the receipt and disbursement of funds at 10 companies located in the North Korean cities of Pyongyang, Wonsan, and Hamhung.

These 10 companies include those handling stainless steel tubes used in the manufacturing of semiconductors and sound equipment, a piano manufacturer and a company promoting the energy policy of the Workers' Party of Korea. Those from the Japanese side included trade firms and food businesses based in the Kanto and Kansai regions, a building materials firm, and a company operating under the General Association of Korean Residents in Japan (Chongryon).

The expert panel asked the Japanese mission to the U.N. to confirm the existence of the 10 firms, and provide lists of the related North Korean individuals and entities, their assets and employees by the end of this month. In response, Japan's Ministry of Foreign Affairs asked related government ministries and agencies to conduct an investigation.

(Japanese original by Takashi Narumi, Business News Department)