Legal

Chinese Banks Held In Contempt By US

Appeals Court Upholds Contempt Decision For Chinese Banks

An appeals court in the U.S. has upheld the decision by a lower court to hold three Chinese banks in contempt for not turning over information requested in a subpoena, according to a report by the Financial Times.

The banks were asked to provide information about North Korea and its moves to avoid sanctions from the U.S.

Although the banks aren’t named and the proceedings have been mostly sealed, FT is reporting that it’s the Bank of Communications, China Merchants Bank and Shanghai Pudong Development Bank.

The appeals court in Washington made the decision on Tuesday (July 30) in a sealed opinion.

“The district court’s contempt orders against all three banks appealed from in these causes is hereby affirmed,” the court docket said.

This means that the Shanghai Pudong Development Bank (SPDB), which got an administrative subpoena stemming from the U.S. Patriot Act, could completely lose its access to the American financial system.

Under the terms of the Patriot Act, the U.S. attorney general, as well as the secretary of the Treasury, can remove foreign banks from correspondent relationships with U.S. firms if they don’t comply with an administrative subpoena.

The three banks are all very large and lend a lot of money. SPDB is the biggest bank in Shanghai, with around $900 billion in assets. The Bank of Communications is China’s fifth biggest. China Merchants Bank is the biggest lender in China.

The case started when the justice department opened a probe into Mingzheng International Trading Limited, a company based in Hong Kong that allegedly moved $105 million to a sanctioned North Korean bank called FTB, for three years between 2012 and 2015.

A court document said that Mingzheng used the three banks to move the money, which was in violation of sanctions against North Korea. The company was sanctioned in 2017 by the Treasury department.

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