China’s Central Bank Tells Banks to Stop Doing Business with North Korea: Sources

September 21, 2017 1:12 pm Last Updated: September 23, 2017 12:20 pm

BEIJING/HONG KONG — China‘s central bank has told banks to strictly implement United Nations sanctions against North Korea, four sources told Reuters, amid U.S. concerns that Beijing has not been tough enough over Pyongyang’s repeated nuclear tests.

Tensions between the United States and North Korea have ratcheted up after the sixth and most powerful nuclear test conducted by Pyongyang on Sept. 3 prompted the United Nations Security Council to impose further sanctions last week.

Chinese banks have come under scrutiny for their role as a conduit for funds flowing to and from China‘s increasingly isolated neighbor.

The sources said banks were told to stop providing financial services to new North Korean customers and to wind down loans with existing customers, following tighter sanctions against Pyongyang by the United Nations.

US Ambassador to the United Nations Nikki Haley (R) speaks with China’s Ambassador to the United Nations Liu Jieyi before voting on a US-drafted resolution toughening sanctions on North Korea, at the United Nations Headquarters in New York, on Aug. 5, 2017. (EDUARDO MUNOZ ALVAREZ/AFP/Getty Images)

The sources said lenders were asked to fully implement United Nations sanctions against North Korea and were warned of the economic losses and reputational risks if they did not do so.

Chinese banks received the document on Monday, the sources said.

China‘s central bank did not immediately respond to a request for comment.

“At present, management of North Korea-related business has become an issue of national-level politics and national security,” according to the document seen by the sources.

The document directed banks to explain to any North Korean customers that “our bank is fulfilling our international obligations and implementing United Nations sanctions against North Korea. As such, we refuse to handle any individual loans connected to North Korea.”

The document did not specify whether existing North Korean account holders could still deposit or remove money from their accounts.

Frustrated that China had not done more to rein in North Korea, the Trump administration considered new sanctions in July on small Chinese banks and other firms doing business with Pyongyang, two senior U.S. officials told Reuters.

China‘s Big Four state-owned banks have stopped providing financial services to new North Korean clients, Reuters reported last week, with some measures beginning as early as the end of last year.