Money Laundering Sanctions U.S. Law

What the Trump administration’s first North Korea sanctions designations tell us

Last Friday’s designations of 11 individuals and one company by the Treasury Department are the first North Korea designations of the new Trump administration. So what do they tell us about the direction of the administration’s North Korea policy?

On the positive side, the designation of a North Korean coal company affiliated with the military should, in theory, send a strong message to its Chinese clients, although they don’t seem to have taken the last hint. Also on the positive side, the designated individuals are mostly front-men for North Korean banks, trading companies, arms dealers, and shippers in Russia, China, and Vietnam. It’s good that North Korean operatives in China — and Russia — aren’t off-limits. As I explained here, those governments are already obligated to expel most of these people by U.N. Security Council resolutions.

These are the kinds of targets we should be focused on to uproot His Porcine Majesty’s proliferation and money laundering networks, particularly in China. The designations will send a strong message to Russia and China to kick them out. They’ll also fill the Treasury Department’s SDN database — and consequently, the anti-money laundering compliance software the banking industry uses — with the names and addresses of North Korean agents and front companies. That will help make it harder for those agents’ bankers to defend their due diligence and compliance later, if and when Treasury files civil penalty cases against them.

On the not-so-positive side, this still isn’t what needs to be done — holding the Chinese banking industry accountable for breaking our laws and laundering North Korea’s money through our financial system. For a critical reaction to the new designations, see Anthony Ruggiero’s tweetstorm. As Anthony notes, all 12 entities designated last Friday are North Korean, so these are not the secondary sanctions we need to make North Korea sanctions effective.

Maybe it was too much to expect that some of North Korea’s Chinese front-men would be designated right before Xi Jinping arrives at Mar-a-Lago. I’ll be very interested in seeing what happens after Xi departs. If Trump really is the corrupt empty suit his harshest critics say he is, Xi Jinping will come to Mar-a-Lago, offer to turn a few Lotte stores into Trump hotels, and do what China always does when under sufficient pressure about North Korea — lie like a cheap rug until our national case of Attention Deficit Disorder sets in again.

Overall, however, I may be slightly less pessimistic than Anthony. For one thing, there is this report on the outcome of the administration’s policy review, which sounds like what I’d expected. For another, I interpret Trump’s statement that he’ll act against North Korea with or without China’s help as a threat to act against Kim Jong-un’s Chinese bankers and freeze his accounts. For another, although I might have expected Treasury to sanction Chinese enablers and trading companies now, I would not expect it to start nuking banks just yet. Instead, Trump’s message to Xi should be that the Bank of China is under investigation by the Treasury Department, soon to be followed by the Bank of Dandong and the 12 other banks that held accounts for Dandong Hongxiang and its many front companies and shell companies.

Finally, Trump can drop a veiled hint that ports that don’t inspect North Korean cargo, as U.N. Security Council resolutions require, can expect to be targeted with extra customs inspections. That could drive shippers away from those ports and damage the economies of those cities. Then, Trump would have someone leak that to the press and watch for signs like this.

As of today, however, it’s possible that none of those banks are under investigation because the investigative agencies simply don’t have enough staff to do it all. We’ll turn to that topic, and to this letter from senators Cory Gardner and Ed Markey, in tomorrow’s post. A full list of those designated last Friday below the fold (“continue reading” –>).

~   ~   Treasury Department designations, March 31, 2017   ~   ~

The following individuals have been added to OFAC’s SDN List:
CHOE, Chun Yong (a.k.a. CH’OE, Ch’un-yo’ng), Moscow, Russia; nationality Korea, North; Gender Male; Passport 654410078 (Korea, North); Ilsim International Bank representative (individual) [DPRK3] (Linked To: ILSIM INTERNATIONAL BANK).
HAN, Jang Su (a.k.a. HAN, Chang-su), Moscow, Russia; DOB 08 Nov 1969; POB Pyongyang; nationality Korea, North; Gender Male; Passport 745420176 expires 19 Oct 2020; Foreign Trade Bank chief representative (individual) [NPWMD].
JANG, Sung Nam, Dalian, China; DOB 14 Jul 1970; Gender Male; Passport 563120368 (Korea, North) issued 22 Mar 2013 expires 22 Mar 2018; Chief of the Tangun Trading Corporation branch in Dalian, China (individual) [NPWMD] (Linked To: KOREA TANGUN TRADING CORPORATION).
JO, Chol Song (a.k.a. CHO, Ch’o’l-so’ng), Dandong, China; DOB 25 Sep 1984; nationality Korea, North; Gender Male; Passport 654320502 expires 16 Sep 2019; Korea Kwangson Banking Corporation Deputy Representative (individual) [NPWMD] (Linked To: KOREA KWANGSON BANKING CORP).
KANG, Chol Su, Linjiang, China; DOB 13 Feb 1969; Passport 472234895 (Korea, North); Korea Ryonbong General Corporation Official (individual) [NPWMD] (Linked To: KOREA RYONBONG GENERAL CORPORATION).
KIM, Mun Chol (a.k.a. KIM, Mun-ch’o’l), Dandong, China; DOB 25 Mar 1957; nationality Korea, North; Korea United Development Bank representative (individual) [DPRK3] (Linked To: KOREA UNITED DEVELOPMENT BANK).
KIM, Nam Ung, Moscow, Russia; nationality Korea, North; Passport 654110043 (Korea, North); Ilsim International Bank representative (individual) [DPRK3] (Linked To: ILSIM INTERNATIONAL BANK).
KIM, Tong-ho, Vietnam; DOB 18 Aug 1969; nationality Korea, North; Gender Male; Passport 745310111 (Korea, North); Tanchon Commercial Bank representative (individual) [DPRK3].
KIM, Yong Su (a.k.a. KIM, Yo’ng-su), Vietnam; DOB 09 Feb 1969; nationality Korea, North; Gender Male; Passport 654435458 expires 26 Nov 2019; Chief Representative of the Marine Transport Office in Vietnam (individual) [DPRK2].
PAK, Il-Kyu (a.k.a. PAK, Il-Gyu), Shenyang, China; Gender Male; Passport 563120235; Korea Ryonbong General Corporation Official (individual) [NPWMD] (Linked To: KOREA PUGANG TRADING CORPORATION).
RI, Su Yong, Cuba; DOB 25 Jun 1968; nationality Korea, North; Gender Male; Passport 654310175; Korea Ryonbong General Corporation Official (individual) [NPWMD] (Linked To: KOREA RYONBONG GENERAL CORPORATION).
The following entity has been added to OFAC’s SDN List: