Given the zero tolerance attitude that the United States is now taking towards North Korean sanctions, compliance officers at North American banks whose clients import clothing from Chinese factories would do well to take their due diligence a bit further. If your bank clients are bringing in what the labels say are goods of Chinese origin, obtain some additional assurance, of an affirmative nature. lest you find a Federal law enforcement agent in your office, in two years, asking tough questions, and carrying a subpoena for bank records.
Recent studies indicate that North Korea's state-owned apparel factories can save overseas importers as much as 75% on labor costs, compared with the costs of manufacturing the same items of clothing in Chinese factories. That has stimulated massive cheating: most of those DPRK-made items are mislabeled "Made in China," and transshipped, through north China, to the West.
It is humbly suggested that bankers who clients are engaged in importing clothing items from China be required to execute a sworn affidavit, prepared by your counsel, affirmatively stating that they have performed adequate due diligence on origin of the goods that they are purchasing, and that they are indeed of Chinese origin, made at a specific factory, with the address, that your client will periodically review the situation, and will send a representative to the factory site, to verify the information.
Keeping your clients honest, by adding additional protection, protects your bank from subsequent Willful Blindness exposure.
Chronicles of Monte Friesner - Financial Crime Analyst
Contributed by Kenneth Rijock - Financial Crime Consultant