SWIFT, a global provider of financial messaging services, has banned multiple North Korean state banks from its financial messaging network, effectively freezing out the country from one of the most international financial cooperatives.
North Korea had already been facing headwinds in the banking space, a stance only compounded by its dissonance with US and European authorities. The latest banning and action by SWIFT followed on the heels of a United Nations report earlier this week, which had uncovered evidence that select banks had continued to utilize SWIFT’s global services despite being on its sanctions lists.
Previously, SWIFT has sanctioned countries from its services often in response to geopolitical events or other international situations. Other countries that have previously been banned from its services include Iran, Russia after its invasion of Ukraine, and North Korea.
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SWIFT’s network is an integral component for most commerce and global banking transactions, especially in countries without a more established lending framework. A departure from this network usually has coincided with a more informal commercial structure, including an uptick in barter trade, illicit smuggling, and black market operations.
Select Banks Slipping Through Cracks
North Korea previously was facing restricted access via its existing international laundry list of sanctions. However, the country had enjoyed periodic access to financial markets via front or shell companies in China, Southeast Asia, and Africa – a total of seven blacklisted North Korean banks have continued to use the SWIFT network in recent years, citing a UN report.
Four of the banks voluntarily exited, however three of these continued to be active on Swift throughout 2016, the report said. It wasn’t clear how the three banks – Bank of East Land, Korea Daesong Bank, and Korea Kwangson Banking Corp – kept using Swift despite being blacklisted for illicit business practices.