Two Singapore companies have been reported to have violated United Nations sanctions which forbid the supply of luxury goods to North Korea.
According to BBC, the final report has been submitted to the UN Security Council and is likely to be published later this week.
Singapore’s government stated that it was aware of the cases and had begun investigating where there was credible information of possible offences.
Global sanctions against North Korea have tightened considerably over the last two years as Pyongyang has continued to conduct nuclear tests and launch missiles. Both the UN and Singapore ban the sale of luxury goods to North Korea. Under UN Sanctions, it has been illegal to sell luxury items to North Korea since 2006. While, Singapore’s laws have banned the sale of these items to North Korea for several years.
Analysts told BBC that the alleged violations by Singapore companies, if proven, raise questions about how widespread such breaches might be across Asia.
The leaked UN report highlights two Singapore-based firms, among others in Asia, which alleges the two firms supplied a range of luxury goods to North Korea, including wines and spirits, until as recently as July 2017.
The two Singapore-based firms under investigation are OCN and T Specialist, which happen to be sister companies and share the same director.
However, both of the companies have denied any wrongdoing.
The UN report claimed that between 2011 and 2014 transactions valued at more than $2 million (S$2.6 million) flowed from an account that OCN and T Specialist set up in a North Korean bank, Daedong Credit Bank, to T Specialist’s bank accounts in Singapore. The money was alleged to be a proceed from the sale of goods in North Korea.
Ministry of Foreign Affairs (MFA) stated that Singapore has banned its financial institutions from providing financial assistance or services for facilitating any trade with North Korea.
T Specialist has testified to the UN that the funds did not come from North Korea. It stated that it came from a company registered in Hong Kong and related to sales before 2012.
UN also accused the two companies of having long-standing and close ties with Ryugyong Commercial Bank, a bank the US put on its sanctions list in 2017. However, the companies declined the allegation, saying that they have no interests in the bank.
Edmond Pereira, the company’s lawyer, has confirmed that they are under investigation by Singapore authorities.
The lawyer insisted they did not have any current financial links, interests, or any sort of relationship with entities in North Korea. however, he acknowledged that his clients have done business with North Korean entities before the UN sanctions came into force.
He also said that the companies had reduced their involvement in North Korea but these things take a bit of time.
Lawyers have said part of the problem is these sanctions are expected to be enforced by companies who are often unaware of the changes in the law. Singapore banned trade with North Korea entirely in November 2017. Some trade was allowed before that period of time.
The UN report noted that some of the transactions in the OCN and T Specialist cases appear to have used the Singapore financial system, as well as saying that it was the responsibility of member countries to make sure their banks had a more “robust scrutiny” of individuals and companies opening accounts with them.
Monetary Authority of Singapore (MAS) told the BBC it was working closely with the UN on these casessaying in a statement to BBC that the authority will take stern action against any financial institutions in breach of regulations relating to proliferation financing.
MAS also stated that it expected banks to be aware of “the use of multi-jurisdictional front companies, shell companies, joint ventures, and complex or opaque ownership structures”.
A former member on the UN Panel of Experts, William Newcomb, told BBC that it was precisely these financial loopholes North Korea seeks to exploit.
He said, “What they will do is set up a shell company, then establish a company in another location, a bank in a third location, and do business in another location. And now you have multiple jurisdictions involved. So it becomes quite complicated, and it’s one of the techniques they use to defeat the sanctions.”
Financial crime researchers also stressed that it is difficult for banks to catch this sort of behaviour.
Tim Phillipps, Asia Pacific Leader for Deloitte’s Financial Crime Network, “You would probably never know that the funds were coming from North Korea,” adding that the problem could be much bigger across South East Asia.
“If you’re named in a report in this environment in Singapore, the MAS are highly likely to demand extensive transaction history examination. But if you start to look across the other countries in South East Asia, they generally haven’t got the maturity of systems to prevent this,” he said.