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North Korea joins OECD anti-money laundering group

August 2014

North Korea has joined the Asia Pacific Group on Money Laundering (APG) as an observer. The APG aims to prevent the funding of terrorism or for the development of nuclear weapons.

APG is the Asia Pacific unit of the Financial Action Task Force (FATF) under the Organization for Economic Cooperation and Development (OECD).

FATF has 41 member countries including the U.S., South Korea, China, and Japan and observers that include countries such as Germany, France, and the UK, as well as 27 international organizations including the Asia Development Bank and World Bank.
As an observer, North Korea must follow a long list of rules and abide by APG resolutions. The resolutions include prevention of money laundering, nuclear terrorism and development of nuclear weapons. These are the opposite of policies followed by the North Korean government for many years.

The APG could raise North Korea from observer status to a member country after three years, based on its performance and following inspection visits.

South Korea and other APG members are puzzled by this unexpected move by North Korea, because it previously opposed joining the APG.

The action is particularly surprising because up until last year’s APG meeting, North Korea refused to join the organization because of the rule requiring members and observers to follow global standards. North Korea at the time argued that it would join the APG only after the agreement to abide by UN resolutions was taken out.

However, for now at least, North Korea has agreed to follow all regulations presented by APG.

A report by the US State Department this May designating North Korea as a country that is non-cooperative against terror may have prompted the change. The State Department cited North Korea’s failure to join either the FATF or APG in its report. Additional pressures on the North have come as sanctions imposed have steadily intensified.

One theory is that North Korea has joined the APG in an attempt to ease the sanctions imposed on it. However, there seems little chance that the country will give up its nuclear ambitions.

Although suspicious, neighbouring South Korea does not oppose the move by the North, since there are positive aspects such as better transparency of North Korea’s finances if it follows APG regulations.

However, if North Korea fails to follow the rules and loses its license as an observer, the sanctions against it will become more severe.
 




Asia | Ethical Trading

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