Seoul, August 13 (JoongAng Ilbo) – A claim has been made that Kyongnam Bank has provided a letter of credit to North Korea, when (South Korean) domestic companies were illegally importing North Korean pig iron. It is becoming a matter of concern for the US to conduct a secondary boycott.
The Korea Customs Service and the Ministry of Foreign Affairs claim that the secondary boycott should not apply to the case as the two institutions do not view the North Korea imports as illegal activities but it is too early to say that they are exempted from sanctions.
According to a politician, Yu Eui-Dong, “Analysis of the data submitted by the Financial Supervisory Service confirmed that Kyongnam Bank issued a letter of credit to the importer of North Korean coal.”
He conveyed that Kyongnam Bank issued a letter of credit to a company that brought in $710,000 (US) worth of pig iron through a vessel called ‘Ssanggang 5’ on August 7th of last year which is exactly the same as the case mentioned by the KCS as an illegal import case of North Korea.
If the bank in question is confirmed to be Kyongnam Bank, it could become a legitimate entity for secondary boycott by the world community and the US. Secondary boycott refers to sanctions against corporations, financial institutions and governments that have economic activities with the target country such as North Korea and Iran.
The US secondary boycott has been further strengthened in November, when the United States Senate Committee on Banking, Housing, and Urban Affairs passed the Otto Warmbier North Korea Nuclear Sanctions Act, which completely blocked North Korean access to international financial markets.
However, (South Korea’s) Ministry of Foreign Affairs and Customs continue to insist that companies using North Korean coal which was illegally imported and related financial institutions can not be subject to sanctions by secondary boycotts. As a matter of fact, Kyongnam Bank was dismissed from an investigation by the Korea Customs Service given the reason that there is no circumstances in recognizing illegal activities
In an interview with VOA on Monday, Deputy Assistant Secretary of the Ministry of Foreign Affairs Cho Hyun said, “It is non-sense. Before anything, there was no transaction through the bank at all. We are not going to be a target of secondary boycott of US financial institutions. I think it is an accusation in the form of accusation without any proof. The subject entity to be targeted (for sanctions) should be on an individual who caused the problem, not our businesses or banks. “
However, there is still a concern in the financial sector. If the bank is subjected to sanctions, major overseas business functions such as import and export business and foreign exchange business of the bank may be immediately suspended and thus the international credit rating may fall.
Banco Delta Asia (BDA) of Macao, which was boycotted for distributing counterfeit North Korea counterfeit bank notes and money laundering for illegal international transactions such as drugs, went bankrupt in 2005.
In the United States, there are voices hinting the possibility of a secondary boycott. Joshua Stanton, a lawyer at the US House of Representatives Foreign Affairs Committee, said, “All banks have legal responsibilities and obligations to make it clear that North Korea does not have access to the US financial system. (Regarding this incident) There were clues suggesting that the coal was from North Korea.”
Domestic banks are raising their voices that they can not see a legitimate reason for boycott in the incident. A bank chief on a phone call with a reporter questioned that, “Even if (the coal) was imported through a bank, how can one verify these claims ? the banks only deal with the paperwork. I do not understand why they keep trying to connect the banks with the deal?”