January 30, 2020 Top Story

Comity Not Enough to Save Chinese Banks from Contempt Order

National security interests outweigh complying with Chinese laws

By Anthony R. McClure

In a case involving allegations of money laundering in support of North Korea’s nuclear program, the U.S. Court of Appeals for the D.C. Circuit affirmed a contempt order against three Chinese banks for failing to comply with U.S. government subpoenas. In so holding, the court agreed with the district court that “the United States’ national security interest easily outweighs China’s interest in safeguarding its banking secrecy laws.”

Chinese banks did not comply with subpoenas requesting information about North Korea, which allegedly used the banks as fronts to evade U.S. sanctions

Chinese banks did not comply with subpoenas requesting information about North Korea, which allegedly used the banks as fronts to evade U.S. sanctions

Photo illustration by Genuine Pyun / iStockphoto by Getty Images

Banks Refuse to Comply with the Subpoenas

In In re: Sealed Case, the U.S. government issued subpoenas to three Chinese banks seeking information about North Korea’s nuclear program. The government claimed that “North Korea manages to evade [U.S.] sanctions by using Chinese front companies that cloak the true ownership of the funds involved.”

All three Chinese banks that received subpoenas hold correspondent bank accounts in the United States. Two of the banks operate branches in the United States, and those banks received grand jury subpoenas. The third bank received a subpoena from the U.S. Attorney General pursuant to the Patriot Act. As the D.C. Circuit observed, “[t]he government does not currently suspect the subpoenaed Banks of any wrongdoing.”

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