China banks fear US North Korea sanctions

China's big banks have been quietly but surely weaning themselves off North Korean money.

This is not particularly about their troublesome neighbour. It is because of a fear of US repercussions.

Bank branches near the North Korean border have told the BBC they've been instructed not to open any new accounts for that country's citizens and businesses.

This is not part of any United Nations sanctions regime.

It is an attempt to head off further US measures targeting Chinese banks which are accused of doing sanctions-busting business with North Korea.

Quite apart from the UN, the US Treasury has its own sanctions regime blacklisting companies and people who are said to have assisted Pyongyang in developing nuclear weapons.

Once a person or a company is placed on the American list of prohibited entities, US (and even foreign) companies can face strict penalties within the US for having dealings with them.

China's financial institutions have been accused of laundering funds used to facilitate North Korean intercontinental ballistic missile and nuclear warhead development.

The government in Pyongyang is said to use front companies to move money around the world via Chinese banks.

For this reason, officials in Washington DC have been threatening to place major Chinese banks on the black list: international sanctions against these enormous institutions could cause global economic shockwaves.

So the US fired a warning shot.

In recent months, the relatively small Bank of Dandong was blacklisted.

Announcing that Americans would be barred from doing business with it, the US Treasury said: "The Bank of Dandong acts as a conduit for North Korea to access the US and international financial systems, including by facilitating millions of dollars of transactions for companies involved in North Korea's WMD and ballistic missile programs."

China's big banks could not afford to face similar moves.

Staff from at least seven branches from the Bank of China and the Industrial and Commercial Bank of China have confirmed to the BBC that new North Korean bank accounts will not be opened.

They said this process had started months ago.

One ICBC bank worker said that this had followed an order from the country's central bank, the People's Bank Of China.

Telephone and faxed requests for information on this to the PBOC went unanswered.

In Changchun, the regional capital of Jilin Province, a Bank of China staff member said, "all bank activities related to North Korea are suspended now because it is a sanctioned country".

Naturally there will be ways around this.

All a North Korean official needs to do is carry a bag of money across the Tumen River, find a Chinese citizen to act as an intermediary, then get them to open an account on their behalf.

It's also unclear the extent to which existing accounts could still be used or potentially forced to close.

But China seems concerned enough about the US threats.

When the BBC asked Foreign Ministry spokesperson Geng Shuang about the blocking of North Korean bank accounts, he said: "I'm not aware of the details but we oppose unilateral sanctions, especially the imposing of the long arm of jurisdiction according to certain country's domestic law."

China might oppose the US throwing its weight around with "the long arm of jurisdiction" but it would prefer to cut lose some North Koreans than face economic turmoil at home and abroad.

According to the US government, that country's trade in goods and services with China last year totalled $648.2bn.

The big Chinese banks facilitate this trade. So you can't imagine Washington wanting to jeopardise it.

However - short of a full-scale sanctions - there might also be lesser measures available.

Yet even the bad publicity of any scandal involving its major financial institutions is not something China would welcome.

So Beijing will give up millions of dollars from North Korea if it means hanging on to hundreds of billions from the US.