NEW YORK/BEIJING -- The U.S. and China are cracking down harder on financial dealings involving North Korea, seeking to turn up pressure on the country by freezing it out of the dollar- and yuan-based financial systems.
U.S. President Donald Trump signed an executive order Thursday imposing tough new sanctions on the North. "It is unacceptable that others financially support this criminal, rogue regime," he said.
Previous American sanctions targeted only companies and individuals suspected of ties to North Korea's development of weapons of mass destruction. The new measures cast a much wider net, including any enterprises doing business with the country in a broad range of fields. The financial sanctions are similarly sweeping, applying to any foreign institution that has conducted or facilitated any significant North Korea-related transactions.
So-called secondary sanctions -- those applying to entities in third countries -- have proven effective in the past. The U.S. in 2005 threatened to bar American financial institutions from doing business with Macau-based Banco Delta Asia, accusing it of laundering North Korean money. The bank was eventually forced to freeze North Korea-linked accounts. The affair gave financial institutions in major countries second thoughts about dealing with the North.
The measure hit Pyongyang hard. The country had a tougher time receiving payment for exports, leaving it starved of dollars to pay for imports.
Trump also asserted Thursday that the People's Bank of China "has told their other banks -- that's a massive banking system -- to immediately stop doing business with North Korea." Though Beijing denied this, it has effectively tightened financial sanctions on its neighbor -- an unusual step given its aversion to sanctions outside the U.N. Security Council framework.
The Chinese central bank told commercial banks this month to stop dealing with new North Korean customers and to wind down existing loans, Reuters reported. Major banks also began restricting transactions by North Korean accounts more tightly last year, halting deposits and transfers entirely by August, The Nikkei found.
For Chinese banks looking to expand abroad, being blacklisted in the U.S. would be a massive blow. When Washington slapped sanctions on the regional Bank of Dandong in June, it aimed to send a message that bigger institutions could be next, a diplomatic insider said.
But the volume of money flows that banks can actually track is shrinking rapidly. China until recently allowed anyone to open a bank account with just a form of identification and a cell phone number. Customers often have multiple accounts with the same bank, leaving the door open for anyone to simply borrow a dormant account. And widespread adoption of electronic money has cut banks out of the equation altogether for many transfers between individuals.