Treasury nukes bank with possible North Korea links (updated)

The Treasury Department has gone full Banco Delta on Cyprus-based, Tanzanian-chartered FBME Bank for money laundering, terrorist financing, and possibly even Syrian WMD proliferation — proliferation that is closely linked to North Korea.

According to Treasury’s press release, FBME promoted itself as a provider of no-questions-asked banking services with loose anti-money laundering controls, although I saw no evidence of this at FBME’s Web site. But according to Treasury’s more detailed Notice of Finding, FBME was laundering money for Hezbollah, illegal online gamblers, phishing hucksters, drug lords, African kleptocrats, and various swindlers who ripped off victims in California, Ohio, and Michigan.

Treasury invoked Section 311 of the USA PATRIOT Act against FBME, applying the dreaded Fifth Special Measure, which closes the target’s correspondent accounts and effectively cuts it off from the global financial system. You can read Treasury’s Notice of Proposed Rule-Making here. Or, for those of you who aren’t banking lawyers, I’ll simplify:

Well, almost. A bank can survive that sort of thing and continue to do business, but only on a small, local scale. Banco Delta Asia itself continues to do business for a local customers in Chinese Yuan and Macanese Petacas. In the case of FBME, however, its business model depends on international transactions. It isn’t offering commercial banking services in Cyprus, and it only has four branches in Tanzania.

So far, Treasury has invoked Section 311 against four jurisdictions – the Ukraine and Nauru (since rescinded), Burma, and Iran. It has also listed 13 financial institutions, including Banco Delta Asia, which remains listed to this day.

North Korea, the only existing state known to sponsor currency counterfeiting and drug trafficking, and to encourage illicit activity by its diplomats abroad, has never been listed. Discuss among yourselves.

Treasury’s case against FBME makes no direct reference to North Korea, but according to the Notice of Finding, one of FBME’s customers was a front for a sanctioned Syrian entity, the Scientific Studies and Research Center (SSRC), and used FBME to process transactions through the U.S. financial system. (This is the part that people never get – the bad guys love them some dollars. They just don’t think they’ll get caught, probably because they usually aren’t.)

Treasury did not name the front company.

According to the Nuclear Threat institute, SSRC “collaborates heavily with Iranian and North Korean entities” on missile technology. In February 2013, the Israeli Air Force bombed a convoy loaded with anti-aircraft missiles at SSRC’s complex north of Damascus, damaging what The New York Times described as “the country’s main research center for work on biological and chemical weapons.” Further on, the Times article says, “Intelligence officials also believe that the center has links to North Korea, a source of much of Syria’s missile technology.”

Oh, and those anti-aircraft missiles were SA-17s, the same kind suspected of shooting down that Malaysian airliner today. [Update: Subsequent press reports have said that the missile used to shoot down the airliner was an SA-11.]

Earlier this year, the Times of Israel, citing Jane’s Defence Weekly, alleged that SSRC has gone into the business of manufacturing its own ballistic missiles domestically to bypass international sanctions against Syria, and that it has done so “with the assistance of countries including Iran, North Korea, and Belarus.”

The SSRC is also working on a project with North Korea to help improve its Scud D missile capabilities. North Korean officials at the Tangun corporation have already begun researching and producing components for Scud D missiles which would make it difficult for enemy targets to calculate the missiles’ flight trajectory upon atmospheric entry, Jane’s reported, thus preventing or delaying interception by anti-missile systems, including those in Israel’s possession.

Korea Tangun Trading Corporation appears on the SDN List. For more about the links between SSRC and North Korea, NK News has done some superb investigative reporting on this topic.

According to the Notice of Finding, the SSRC front company shared the same address in Tortola, British Virgin Islands with 111 other shell companies that are also subject to international sanctions. There are only 74 targets on the SDN list with Tortola addresses. Most are fronts for Cuba; a few are sanctioned for links to Hezbollah, Iran, or Zimbabwe. One, DCB Finance, is North Korean, and is a front for Daedong Credit Bank. DCB Finance and Daedong Credit Bank were sanctioned last June for proliferation-related activities.

By itself, the coincidence of address adds little to Treasury’s case, which presumably relies on financial evidence of the SSRC front company’s transactions. It does suggest that in financial terms, you will never find a more wretched hive of scum and villainy than Road Town, Tortola.

FBME had did not immediately respond to a Wall Street Journal reporter who contacted it for comment. Perhaps when he called, the reporter heard a Board of Directors cry out in terror before it was suddenly silenced.

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[Update: Greetings to my visitors arriving from FBME Bank and FBME Card Services on the lovely island of Cyprus. If you want to get your side of the story out there, do feel free to send an email or drop a comment. I have to say this for FBME — after a lot of searching, I never did find the evidence that it marketed its lax AML compliance, although the pre-paid card services it offered did not have a particularly good compliance reputation.]