According to a report in The Washington Post, three Chinese banks risk losing access to the US financial system over a potential violation of sanctions on North Korea. A judge has found three banks, unnamed so far, in contempt for their refusal to comply with subpoenas related to the probe.

The report refers to a court ruling from a 2017 civil forfeiture action that mentions three banks – Bank of Communications, China Merchants Bank and Shanghai Pudong Development Bank (SPDB), which could be the affected banks. In 2017, the Department of Justice had pulled up the banks for working with a Hong Kong-based front that had helped launder over $100 million to North Korea’s Foreign Trade Bank, which was under sanctions.

US investigators are probing the role of these banks in financing North Korea’s nuclear-proliferation efforts through willful money laundering activities. SPDB is China’s ninth-largest bank with nearly $900 billion in assets, and while it does not have any branches in the US, the bank does have US-based accounts to handle transactions in US dollars. At risk as a result of the ruling is the banks’ ability to process transactions made in US dollars – the most important currency used in international finance.

This news does not bode well for US-China relations, which remain fragile on the back of the ongoing trade war.