The US administration has called for global action in response to North Korea’s first ICBM launched July 3. The call comes less than a week after the US Treasury Department targeted two Chinese citizens and a shipping company for helping North Korea’s nuclear and missile programs and accused China’s Bank of Dangong of laundering money for Pyongyang. Under a proposed rulemaking subject to public comment, US financial institutions would be barred from opening or maintaining correspondent accounts with Dangong.
China has reportedly reiterated its opposition to bilateral sanctions falling outside of the United Nations framework, but practically, the US action is but an effective slap on the wrist for the country’s financial system.
Although US officials cite Dangong as a key conduit for millions of dollars worth of military financing, it is a small bank, with five branches, 1,570 staff, and assets of 72.3 billion yuan ($10.66 billion). For the US to really get China’s attention, an effective anti-money laundering scheme would presumably have to be exerted more intrusively, and with a broader scope (think China’s big four banks).
The problem, of course, is that as with most sanctions in today’s interconnected age, the bigger sanctions, the more not only the target of sanctions suffers, but the country imposing them as well. I suspect that as the Chinese financial system continues to grow offshore, and entrench itself in global capital markets, exerting foreign policy through banking sanctions will be increasingly attractive to US policymakers–and fraught with difficulty.