In a recent piece for Forbes, contributor Scott Snyder wrote about the difficulty of conducting business with organizations in North Korea since the country has violated the sanctions imposed by the United Nations. His piece analyzes a report issued from the UN regarding the lack of compliance with these standards as seen in North Korean businesses.
The report looks at the particular infrastructure that affects business relations in this region. Because of the way that the shipping companies in this country are interconnected, policing illicit activity can be more difficult. One case presented is that of the vessel known as the "Bu Yon 1."
The report outlines the complex interactions between the company that managed this ship before May 2006, Korea Buyon Shipping Company, and an unknown entity from North Korea. Later, the flag of the ship was changed twice, once for Belize and another time for Sierra Leone, with the ship being renamed as well in the process.
Another vessel mentioned in this report is the Chong Chan Gang, which was found to have transported hidden pieces of missile systems onboard in disguise, although in some cases the attempts to repaint or hide the equipment could be easily discovered. The report also demonstrated the far-reaching nature of this operation, as the company managing the Chong Chan Gang had an office in Vladivostok that was suspect.
The report notes that North Korea has used multiple means of evading imposed sanctions, including hiding contraband, spreading misinformation and issuing false declarations for cargo.
This kind of sophisticated deception regarding true ownership and affiliation is an attempt to circumvent sanctions and laws, and it makes effective CDD solutions all the more important for financial institutions and their effforts at effective customer due diligence.
