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China’s Banks Say They’re Complying With N. Korea Sanctions

May 10 (Bloomberg) -- China’s two biggest banks said they’re complying with efforts to isolate North Korean financial institutions that support the country’s ballistic missile and nuclear weapons programs.

North Korea’s Foreign Trade Bank doesn’t have an account with Industrial & Commercial Bank of China Ltd., a press officer for China’s largest lender by assets said today, asking not to be identified due to company policy. China Construction Bank Corp., the second-largest, doesn’t have business relations with any North Korean banks, said a press officer, who asked not to be identified because of company rules. ICBC and CCB are majority-owned by the Chinese government.

China is under pressure from the U.S. to show it’s implementing United Nations sanctions from March that targeted transactions linked to the North’s nuclear and missile programs. In defiance of previous sanctions, North Korea carried out a nuclear test in February, threatened atomic strikes against the U.S and scrapped the 1953 armistice that ended the Korean War.

While China won’t give up its role as North Korea’s main political and economic ally, it doesn’t trust leader Kim Jong Un to play the game of brinkmanship that his father, Kim Jong Il, was capable of, said Jin Canrong, a professor at the School of International Studies at Renmin University in Beijing.

Tactical Level

“At a tactical level China wants to send some signal to North Korea because the recent rhetoric in Pyongyang is too extreme and makes the situation worse,” Jin said. “That’s why China is implementing the UN resolution very seriously this time.”

China and the U.S. last month set out a joint commitment to end North Korea’s attempt to develop nuclear weapons, and the U.S. Treasury department froze American assets of Foreign Trade Bank, the North’s primary foreign exchange lender, in March.

David Cohen, U.S. under secretary for terrorism and financial intelligence, told reporters in March after meetings in Beijing it was “no secret” that there was a “fair amount” of a relationship between Chinese financial institutions and North Korea.

On April 25, China’s Ministry of Transport urged all departments to adopt measures to strictly carry out the UN sanctions, according to a notice on its website.

China Construction Bank strictly follows Chinese regulations and UN Security Council resolutions, the Beijing-based lender’s press officer said. The bank does not remit funds to North Korean banks, the press officer said.

Bank of China Ltd., the country’s fourth-largest, said this week it had closed Foreign Trade Bank’s account and ended all fund transfers related to it.

To contact Bloomberg News staff for this story: Henry Sanderson in Beijing at hsanderson@bloomberg.net; Jun Luo in Shanghai at jluo6@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

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