The UN reports on North Korea’s sanctions evasion
A report published on Friday by the UN reveals how North Korea is bypassing sanctions to obtain luxury goods purchased with the profits from a network of global businesses. Despite sanctions being in place on a range of products since 2006, including luxury goods, the country’s ruling elite have apparently not felt the effects. According to the report, Kim Jong-un imported over USD$355,000 worth of diamonds in the first half of 2017 and hundreds of thousands of dollars worth of wines and spirits from across the world. If you’re wondering how North Korea has managed to evade sanctions, the report lists a number of companies, some based in Singapore, who sold these products to them.
But how, after so many years of sanctions, can North Korea pay for these items? It would appear from the report that North Korea has been profiting from the sale of coal and other commodities to other nations. It also goes into detail of the military services and weapons it sells to the Syrian regime and ruling groups in states such as Eritrea and Mozambique, which also raise money for the state. These are just two of North Korea’s sophisticated and diversified methods to raise funds and evade sanctions. To learn more read the report in full here.
Dethroning cash? Israel imposes a cash threshold
$80 billion worth of illicit finance flows through Israel each year. To try and tackle this the Knesset passed a law last week which will ban the use of cash for transactions over 11,000 shekels (USD$3,197). Cash thresholds, which are designed to tackle cash-based money laundering and tax evasion, have become more popular in policy-making circles recently. Last year in a similar vein, the EU stopped producing the €500 bank note and 18 months ago India pursued a highly controversial demonetisation policy.
Cash thresholds, although a relatively simple idea, raise a number of questions. Firstly, any move towards a limit on cash causes privacy campaigners to worry about losing the only true form of anonymous transaction. Secondly, deciding where the threshold should be is difficult. Too low and the threshold becomes a burden for innocent people and legitimate businesses, and too high it becomes avoidable through structured transactions. Additionally, there are concerns that pushing money launderers away from cash only encourages criminals to use other methods which are equally as difficult to trace, failing to solve the problem. Lastly, the question remains as to whether cash thresholds are even effective. Although it is too early to tell in Israel, its prominence in the world’s shadow economy makes it a good testing ground.
HODL – The G20 meets to discuss cryptocurrencies
The G20 met in Buenos Aires earlier this week to discuss the future of work, the infrastructure of development and the technology behind cryptocurrencies. Crypto-watchers paid close attention. A letter released the day before the conference by Mark Carney caused the price of Bitcoin to increase by $1,000 as he stated that he saw no risk to financial stability from the technology. Another leaked document caused commotion when it was revealed that Bloomberg views cryptocurrencies more as assets than as currencies – making them subject to capital gains tax.
Amid these swings in opinion one view was maintained – cryptocurrencies still pose a money laundering and terrorist financing risk. However, other than agreement on this point no clear plan of action appears to have come out of the meeting. Even though delegates were armed with a FATF progress report on their efforts to understand the threat emanating from virtual currencies. For now it appears that global regulators and watchdogs will continue their current position of waiting and watching to see how these technologies and their associated risks develop before providing guidance.