Expanding Investigation by The Sentry Uncovers Close Connections to North Korean Government, Access by North Korean Businesses to US Dollars, and Wider Scope of North Korean Activity in DR Congo and Region
January 14, 2021 (Washington, DC) – An expanding investigation by The Sentry reveals a North Korean government-controlled company’s activities in West and Central Africa, including winning government contracts and gaining access to US dollars after these activities were prohibited by the international community.
In its latest investigative report, “Artful Dodgers: New Findings on North Korean Sanctions-Busting in the Democratic Republic of Congo,” The Sentry details an array of business activities in apparent violation of the US, EU, and UN sanctions designed to impede nuclear proliferation and raises significant questions about the enforcement of sanctions on North Korea.
John Dell’Osso, Senior Investigator at The Sentry, said: “Our investigation clearly illustrates how the North Korean government exploits the soft underbelly of international sanctions enforcement. We discovered that a company run by two businessmen from Pyongyang won a range of government contracts in the Democratic Republic of Congo in violation of international sanctions. Furthermore, we found that the company’s little-known parent organization in North Korea—a government-controlled design firm—has had a substantial footprint in West and Central Africa, representing yet more apparent sanctions violations. Governments, multilateral bodies, and global banks must provide relevant assistance to those on the frontlines of sanctions enforcement while also acting against this sort of opportunism.”
The report spotlights the activities of Congo Aconde, a company run by two North Korean nationals in the DRC, and reveals that affiliates of the North Korean government design firm Korea Paekho Trading Corporation have operated in Equatorial Guinea, Ghana, Ivory Coast, and Mali.
Michelle Kendler-Kretsch, Investigator at The Sentry, said: “International sanctions programs on North Korea focus heavily on restricting access to the international financial system because of the danger that revenue generated overseas could ultimately be used to fund the country’s nuclear weapons program. Those sanctions will remain ineffective unless banks and governments fulfill their enforcement obligations. Our investigation shows that compliance failures and weak internal controls in places like the Democratic Republic of Congo are fertile grounds for sanctions busting. The United States, the Financial Action Task Force (FATF), and global banks should push the Congolese government and local banks to improve their ability to tackle illicit finance.”
John Prendergast, Co-Founder of The Sentry, said: “Illicit financiers around the world—from drug cartels and weapons traffickers to ivory smugglers and pariah regimes—thrive in places where governance is fragile and corruption is endemic. North Korean sanctions-busting in the Democratic Republic of Congo is yet another example of how these kinds of actors exploit lax controls in government institutions and banks. Terrorist financiers, corrupt officials, and predatory businesses repeatedly follow the same playbook as these North Koreans. Left unaddressed, these due diligence shortfalls create systemic risk and result in potential economic catastrophe for a country that relies heavily on access to US dollars through relationships with international banks.”
The activities detailed in the report demonstrate how North Korean actors exploit weak institutional controls and jurisdictions with high levels of corruption, a model other sanctions-busters have followed. The report urges an array of actions by governments, multilateral institutions, and banks to address sanctions-busting and reinforce the integrity of the financial sector.
Selected report highlights:
- Two North Korean businessmen who evaded international sanctions in the Democratic Republic of Congo won more government contracts than previously understood, according to new information reviewed by The Sentry.
- Their company, Congo Aconde, had wider access to US dollars through a local bank as they undertook public works projects in at least three provinces in the DRC.
- The two businessmen likely worked in the DRC on behalf of a little-known North Korean government design firm, Korea Paekho Trading Corporation.
- In the case of the DRC, due diligence shortfalls across private and public institutions may create systemic risk for an economy that relies heavily on access to US dollars through relationships with international banks.
- Congo Aconde appears to have cultivated relationships with city and provincial government executives, even if its expertise may have played a determining role in securing contracts.
- The report spotlights Congo Aconde’s apparent relationships with powerful individuals in the DRC and the opacity surrounding the tenders, raising possible corruption concerns.
- Statements by officials in the DRC city of Kolwezi suggest that their urban improvement campaign—of which Congo Aconde’s works were clearly a part—aimed to boost the prestige and stature of the city as a “provincial metropolis.” The city government dedicated scarce resources to these projects for nearly two years.
The Sentry’s report provides the following key recommendations:
To the US, EU, UN, and international organizations:
- Amend the risk advisory. The US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) should amend the existing advisory on the illicit finance threat emanating from North Korea to include the risks of doing business with certain parts of the DRC’s banking sector. FinCEN advisories play a critical role in anti-corruption and sanctions enforcement efforts. Both US and international banks should be alerted to pay closer attention to collecting information on entities under sanctions and suspicious accounts relating to the DRC.
- Address anti-money laundering and countering the financing of terrorism (AML/CFT) implementation and shortfalls. The US Treasury Department and the International Monetary Fund (IMF) should help banks in the DRC implement AML/CFT standards and urge the DRC’s central bank to improve AML policy implementation and address legislative gaps.
- Enhance EU monitoring. The EU should consider adding the DRC to its list of high-risk third countries in order to facilitate enhanced monitoring. European countries and the United Kingdom should consider issuing advisories on the risks of doing business with certain parts of the DRC’s banking sector, highlighting the possibility that some actors exploit the sector to evade sanctions.
- Urge transparency in government contracting. The US Department of State and the IMF should urge the DRC to ensure a transparent public tender process and to make all government contracts, including provincial contracts, publicly available.
- Provide sanctions enforcement assistance. Countries able to provide technical assistance should help others enforce UN sanctions. The US, EU, FATF, and other organizations should provide this type of assistance to governments and banks in need of guidance and training on effective sanctions implementation.
- Issue targeted network sanctions. The EU, US, and UN Security Council should investigate and under the North Korean sanctions programs, if appropriate, place under sanctions persons and possible networks connected to the transactions described in this report, including any government officials who facilitated contracts for the North Korean companies.
To global banks and the financial community:
- Conduct enhanced due diligence on transactions. Global multinational banks should carry out enhanced due diligence on the transactions of certain banks operating in the DRC. Banks operating in the DRC should improve screening, training, and awareness of these offenses and add proliferation financing red flags to their filters. Afriland First Bank and its banking correspondents should comply with UN and US sanctions and freeze all accounts controlled by Congo Aconde and its North Korean owners. The banks should cooperate with investigators and provide all documentation related to the accounts and any transactions. While taking a risk-based approach, banks should avoid mass de-risking and raise compliance to international AML/CFT standards.
- Develop best practices. The Congolese banking association should work to develop best practices to help local banks enhance customer due diligence related to North Korea, including in relation to the proliferation and financing of weapons of mass destruction, and help restore confidence in the Congolese banking sector.
To the Congolese government:
- Improve the AML/CFT regime. The Congolese government should enhance AML/CFT compliance by local financial institutions, including by supporting the development of a national risk assessment, a national strategy to address existing shortfalls in the AML/CFT regime, capacity building with regulators, and enhanced banking supervision. The central bank should also issue guidance to all banks operating in the DRC on implementing UN Security Council resolutions that concern proliferation financing.
- Empower the DRC financial intelligence unit. The Congolese government should empower CENAREF to conduct independent and thorough investigations of suspicious financial activities in support of Congolese law enforcement and the national courts. In particular, the government should staff the unit with experienced professionals, provide necessary training to existing staff, and fully fund the unit. The government should also ensure that CENAREF staff members have the other necessary resources to conduct investigations. In addition, the Congolese government should join the Egmont Group, the international consortium of financial intelligence units that promotes information sharing.
- Review problematic contracts. Governing authorities at the national, provincial, and city levels should annul any current contracts with Congo Aconde and review any contracts with companies controlled by North Korean nationals.
- Ensure that the public corporate registry is comprehensive, accurate, and updated. Public registries that include shareholder and beneficial ownership information can help improve corporate transparency, public oversight, and accountability. The Congolese government should ensure that its searchable online public registry of corporate entities includes all such corporations and that it is accurate, updated, and available to financial institutions, law enforcement, and the general public.
- Cooperate with the UN Panel of Experts and Security Council Committee. The Congolese government should submit implementation reports in accordance with its obligations to the UN Security Council and assist the Panel of Experts on North Korea’s information gathering efforts. The Congolese delegation to the UN should report details of the events described in this report to the Panel of Experts and the Security Council Committee for further investigation and consideration. Where necessary, the Congolese government should request assistance from the North Korea and 1540 committees to better implement Security Council resolutions, develop enforcement mechanisms, and share intelligence.
Read the report: https://thesentry.org/reports/