Why did the U.S. seize that ship?
The author is a Washington correspondent of the JoongAng Ilbo.
The Wise Honest, a North Korean cargo vessel recently seized by the United States, has emerged as a variable in inter-Korean relations. On Tuesday, North Korean Ambassador to the UN Kim Song threatened: “Think what consequences it will bring!” The next day, Han Tae-song, North Korea’s ambassador to the UN in Geneva, said, “North Korea would not obsess over resuming negotiations if the United States does not make a decision.” North Korea presented returning the Wise Honest as a condition to resuming talks.
But Washington does not budge. After Kim’s interview, the U.S. State Department said that sanctions will continue, though diplomatic negotiations were open. U.S. Treasury Secretary Steven Mnuchin said in the House Financial Services Committee that U.S. President Donald Trump was firm on continuing both the UN and U.S. sanctions on North Korea, as they had an important effect on bringing North Korean leader Kim Jong-un to the negotiation table.
There is a reason why the United States cannot back down on the Wise Honest issue. That involves a loophole in the U.S. dollar settlement network. According to the seize warrant released by the U.S. Department of Justice, the Wise Honest left the Nampo Port in Pyongyang on March 14 last year with 25,000 tons of coal and was detained in Indonesia on April 2 last year. The U.S. authorities returned the coal and crew members to North Korea and seized the vessel on charges of money laundering to finance certain illegal acts under the 1974 International Emergency Economic Powers Act.
The Wise Honest used two New York banks to wire dollars for operation and maintenance costs. Evidence of using a bank in New York was discovered from bills and emails related to the Wise Honest’s cargo and maintenance parts purchased from November 2016 to January 2017. On coal smuggling in March 2018, a total of $750,000 was wired through an account in another bank in New York. A fake document indicating the port of loading as Nakhodka, Russia, instead of Nampo, was used.
International financial transactions using dollars go through banks in New York. The ability to expel banks and companies aiding North Korea’s money laundering from the international settlement network is at the hands of the United States. As such, the United States cannot return the Wise Honest easily, as it apparently avoided sanctions using U.S. institutions. Mnuchin said the United States will tighten sanctions, focusing on international financial transfers and money laundering. Korean banks need to pay heed to the developments, as they were shaken by warnings from the Treasury Department over inter-Korean financial cooperation projects shortly after the Pyongyang summit between Moon and Kim in September 2018.
JoongAng Ilbo, May 24, Page 29