DHID used 22 shell companiesThe Dandong-based Chinese trading firm sanctioned by the U.S. last month for laundering money for a North Korean bank linked to the regime’s weapons of mass destruction program used at least 22 front companies for U.S. dollar transactions, according to U.S. court papers.
Dandong Hongxiang Industrial Development Co. (DHID) established shell companies in places like the British Virgin Islands, Seychelles, Singapore and Hong Kong, according to a copy of a complaint filed by the New Jersey District Court and the U.S. Department of Justice obtained by the JoongAng Ilbo on Monday.
DHID was revealed to have laundered at least $110 million between December 2009 and 2015 through 25 bank accounts of its subsidiaries, according to an analysis of the documents.
The shell companies in third countries worked as intermediaries for the North’s Korea Kwangson Banking Corporation (KKBC) and North Korean companies. The shell companies were said to be used for financial transactions designed to evade U.S. sanctions on Pyongyang.
Kwangson was blacklisted by Washington in 2009 for providing financial services to entities contributing to North Korea’s nuclear and missile programs.
DHID is accused of hiding its involvement with Kwangson Bank and other sanctioned North Korean entities by conducting financial transactions through its front companies.
On Sept. 26, the U.S. Treasury sanctioned DHID, along with four of its executives, including its founder and chairwoman Ma Xiaohong.
On the same day, the U.S. Department of Justice announced that it had filed criminal charges against DHID and the four executives for using front companies to facilitate prohibited transactions of U.S. dollars on behalf of sanctioned North Korean entities.
U.S. Magistrate Judge Joseph A. Dickson of New Jersey on Aug. 3 signed a criminal complaint charging DHID and the four executives with defrauding the United States, conspiring to launder monetary instruments and violating the International Emergency Economic Powers Act.
The criminal and civil complaints allege that from 2009 to 2015, DHID formed front companies and established offshore jurisdictions in havens such as the British Virgin Islands, Seychelles and Hong Kong, then opened Chinese bank accounts to conduct U.S. dollar financial transactions through the American banking system when completing sales to North Korea.
The U.S. government’s criminal complaint says that between December 2011 and January 2012, DHID front companies acted as intermediaries to send two shipments of 3,000-tons of urea fertilizer from a Chinese distributor to a North Korean company.
DHID’s front companies purchased the fertilizer for $1.27 million while the North Korean company paid DHID a total of some $1.65 million, a 22 percent mark-up.
Similar mark-ups were seen in other transactions using its front companies.
Some 13 front companies were registered in Hong Kong, two in the Seychelles, but there were others in locations such as Wales, England and Anguilla.
KKBC, in September 2015, transferred $500,000 to a bank account DHID maintained at the Pyongyang branch of Kwangson Bank, in violation of U.S. law.
DHID is a subsidiary of trading conglomerate Liaoning Hongxiang Group, also headed by Ma.
Ma, majority owner of DHID, is described in the court complaint as holding 80 percent of shares of the company and is considered the main beneficiary of charging North Korean entities for engaging in prohibited U.S. dollar transactions through the front companies.
The document notes that Ma is directly associated with several front companies and used her national identification number to register several.
She was also accused of having knowledge that such financial transactions with North Korea could be subject to sanctions.
BY YOO JEE-HYE, SARAH KIM [firstname.lastname@example.org]