U.N. report: SWIFT banking network violated North Korea asset freeze

Since last year, this blog has covered SWIFT’s continued provision of financial messaging services to North Korean banks, despite suspicions that North Korea was involved in stealing almost $100 million from the Bangladesh Bank by hacking into SWIFT’s messaging software. Later, I wrote about an effort in the last Congress to ban North Korean banks from SWIFT, mirroring a sanction that was one of our most effective measures against Iran. SWIFT is effectively the postal service of the financial system, sending instructions between banks to credit and debit accounts to facilitate payments. Losing SWIFT access makes it slow, costly, and inefficient for a bank to operate.

The U.N. Panel of Experts’ latest report, released over the weekend, now confirms that SWIFT continued to provide services to three North Korean banks — Bank of East Land, Korea Daesong Bank, and Korea Kwangson Banking Corporation, the object of this recent Justice Department indictment — long after those banks were designated by the U.N. and the U.S. Treasury Department. Worse, the Belgian government authorized that. Generally speaking, both sets of designations require the freezing of any of the target’s assets, and prohibit any action that facilitates the target’s transfer of property or interests in property.

248. In response to inquiries by the Panel, SWIFT confirmed to the Belgian authorities that it provided financial messaging services to designated banks of the Democratic People’s Republic of Korea. As part of its procedure for doing so, SWIFT requests authorization from the Government to receive the moneys owed for the services. Upon receipt of such authorization, SWIFT receives payment for its services from the designated banks.  The payments are then entered in its books and recorded as revenue. The Belgian authorities have authorized SWIFT to receive the amounts set out in tables 13 and 14 from designated banks in exchange for the provision of financial messaging services, the provision of the SWIFT handbook, training in the use of the SWIFT network and maintenance costs.

SWIFT stopped providing services to four other North Korean banks — Amroggang Development Banking Corporation, Daedong Credit Bank, Tanchon Commercial Bank, and Korea United Development Bank — not because SWIFT was even minimally principled, but because “those banks themselves requested SWIFT to do so.”

Paragraph 8(d) of UNSCR 1718 requires all Member States, and all persons subject to their jurisdiction, to “ensure that any funds, financial assets or economic resources are prevented from being made available by their nationals or by any persons or entities within their territories, to or for the benefit of” designated entities. The whole point of financial messaging services is to make economic resources available. I can’t for the life of me see how financial messaging on behalf of designated North Korean banks is anything but a clear violation of 1718.

The unavoidable fact of SWIFT messaging is that it enables banks to effect financial transfers. Thus, messaging services that facilitate designated banks’ financial transactions violate a Member State’s duty (in this case, Belgium’s) to “prevent” the funds “from being made available” to designated entities, per paragraph 8(d) of UNSCR 1718 (2006), paragraph 11 of UNSCR 2094 (2013), and paragraph 10 of UNSCR 2270 (2016). To authorize the acceptance of payment from designated DPRK entities would permit those entities to purchase goods and services and access the global economy, which would contravene the plain meaning of an asset freeze. That’s exactly what Belgium and SWIFT did here. Bear in mind that last summer, the Justice Department indicted Dandong Hongxiang for using an off-the-books ledger system to move funds for one of the very same banks.

Then, there is the question of whether SWIFT provided “financial services” to North Korean banks. In relevant part, Paragraph 11 of UNSCR 2094 requires Member States to “prevent the provision of financial services . . . by their nationals or entities organized under their laws . . . of any financial or other assets or resources . . . that could contribute to” activities prohibited by the Security Council’s resolutions. By citing Paragraph 8 (d) of UNSCR 1718 (2006), this provision specifically applies to entities that have been designated by the Security Council.

Now, I take it that SWIFT’s highly-paid lawyers and lobbyists (at least, more highly paid than me) have gone to great lengths to persuade people that financial messaging services aren’t “financial services.” In paragraph 249 of the Panel’s report, Belgium cites domestic and EU law to that effect. At best, that’s a valiant effort to make chicken salad from chicken shit. To its credit, the Panel didn’t buy that, although it focused on a different angle — the receipt of fees by SWIFT from North Korean banks.

The Panel notes that, in the absence of a determination by the Committee that these payments fall under the exemptions in paragraphs 9 (a) and/or (b) of resolution 1718 (2006), the receipt of funds from a designated entity is a violation of the asset freeze pursuant to paragraph 8 (d) of resolution 1718 (2006) and paragraphs 8 and 11 of resolution 2094 (2013).

Myself, I’m much less concerned about the minuscule fees SWIFT received — a few thousand dollars — than the (undoubtedly, much larger) sums SWIFT’s messaging services helped those designated banks to move.

With U.N. resolutions, we’re lucky if many states’ officials read them at all. For the resolutions to have any chance to work as intended, thousands of officials in hundreds of member states have to interpret and apply them consistently. Not all of those officials are banking lawyers. Pedantic interpretations of resolutions that fly in the face of their plain meaning are a recipe for exceptionalism. That’s what happens when a Member State’s interpretation of its domestic law is allowed to contravene the plain meaning and purpose of the resolutions.

Belgium, of all places, now finds itself cast as a unilateralist rogue state defying U.N. resolutions and flirting with money laundering. Given SWIFT’s influence on both sides of the Atlantic, it probably saw itself as above the law. There is nothing on SWIFT’s website reacting to that revelation at the time of posting. But with the truth of SWIFT’s enabling of dirty North Korean banks now revealed, it’s hard for me to believe that it will be business as usual. At a bare minimum, I’d expect SWIFT to disconnect the three designated banks. The next move may well be up to Congress. For SWIFT, that’s a lot of risk to take to feed the hand that bites them.

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Update:

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Treasury fires a broadside at Kim Jong-un’s slave labor racket

This blog has promoted the outstanding investigative work and legal analysis of the Leiden Asia Center in exposing North Korea’s rental of forced labor to European shipyards and construction companies, under unsafe and exploitative conditions. That work, ably led by Remco Breuker, yielded this Vice documentary and reports filled with actionable information. 

Recently, Breuker wrote a long, sad, and funny opinion piece lamenting that LAC’s research has incurred much harassment from Pyongyang’s wacky bands of online sympathizers while having little apparent effect on the EU’s enforcement of its worker protection laws. That’s why I was so pleased to be the one to tell Mr. Breuker that, thanks in part to LAC’s work, the U.S. Treasury Department just froze the assets of several North Korean slave merchants LAC first identified.

OFAC designated the Mansudae Overseas Project Group of Companies, Korea General Corporation for External Construction, Namgang Construction, and Korea Rungrado General Trading Corporation for having engaged in, facilitated, or been responsible for the exportation of workers from North Korea, including exportation to generate revenue for the Government of North Korea or the Workers’ Party of Korea.  The Mansudae Overseas Project Group of Companies has been reported to conduct business in countries including Algeria, Angola, Botswana, Benin, Cambodia, Chad, the Democratic Republic of the Congo, Egypt, Equatorial Guinea, Ethiopia, Malaysia, Mozambique, Madagascar, Namibia, Senegal, Syria, Togo, and Zimbabwe.  Korea General Corporation for External Construction has worked to supply North Korean laborers in the Middle East for the purpose of earning hard currency for the North Korean regime.  Namgang Construction has worked to supply North Korean laborers in the Middle East and Asia for the same purposes.  The Korea Rungrado General Trading Corporation also works to supply North Korean laborers in Asia and Africa to earn foreign currency for the North Korean regime.  Some of the revenue generated by overseas laborers is used by the Munitions Industry Department, which was designated by the Department of State in August 2010 pursuant to E.O. 13382 for its support to North Korea’s WMD program. [U.S. Treasury Dep’t Press Release]

Leiden Asia Center’s work also had a greater impact on EU states’ policy than he acknowledges, even if that impact may be an indirect one. Poland and Malta have come under media and diplomatic pressure from the U.S. and South Korea over their acceptance of North Korean workers. Both have since stopped issuing visas to more of them. Per capita, Pyongyang’s slave laborers in the EU brought it its highest profits. There’s little question that the Leiden Asia Center’s work was the impetus for much of this change.

There are some notable exceptions. Mansudae Overseas Project Group was exposed by the 2016 report of the U.N. Panel of Experts for helping to build an arms factory in Namibia (a topic that merits its own post). Treasury’s list also omits one of the North Korean entities exposed by LAC and Vice, the DPRK Chamber of Commerce, which lists two Pyongyang addresses: “c/o Ministry of Foreign Trade, Central District, micom@co.chesin.com,” and “Jungsong-dong, Central District, P.O.Box 89.”

Once again, Treasury’s authority for the designations was Executive Order 13722, And once again, the executive order implements section 104(a) of the North Korea Sanctions and Policy Enhancement Act. 

Sec. 2. (a) All property and interests in property that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of any United States person of the following persons are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in: any person determined by the Secretary of the Treasury, in consultation with the Secretary of State:

[….]

   (iv) to have engaged in, facilitated, or been responsible for the exportation of workers from North Korea, including exportation to generate revenue for the Government of North Korea or the Workers’ Party of Korea; [EO 13722]

If diplomatic pressure was already starting to constrict Pyongyang’s slave trade before these new sanctions, it’s reasonable to expect that the freezing of the slave merchants’ assets and a new U.N. resolution expressing “concern” about the trade will give those efforts new impetus. Pyongyang still has some stubborn customers in Qatar, Kuwait, and Malaysia who might be persuaded to terminate those relationships.

Will Pyongyang simply shift those workers to China and Russia? Those markets may also be reaching the point of saturation. Employers of North Korean laborers in Russia have recently been embarrassed by a series of on-the-job deaths and injuries, defections, reports of torture and mutilation by local minders, video of a mass brawl with Russian workers, and at least one suicide by self-immolation. Even in China, Reuters recently suggested that the number of expatriate North Korean workers is declining. That, too, may be a function of defections, which have caused Pyongyang great embarrassment and forced it to plow some of its profits back into the deployment of more minders, and minders for the minders. The death spiral swirls.

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Yet another North Korean slush fund manager vanishes, this time in Europe

I’m no expert, but I don’t see how this could be a coincidence.

A North Korean official managing money for North Korean leader Kim Jong-un in Europe has disappeared, raising speculation that he might have defected with a large amount of state funds, a local media report said Friday.

Citing anonymous sources, major local daily newspaper the Dong-A Ilbo reported that the official in charge of money management for the so-called No. 39 office of the Workers’ Party vanished in June. The office is known for running money for Kim’s regime.

The North Korean official is currently staying in an unidentified European country. He and his two sons are also under the protection of local authorities, the report claimed.

The media report, which has not been independently verified, said that he disappeared with hundreds of billions of won that had been under his management. He was reported to have worked in the same European country for the past 20 years. [Yonhap]

For those of you keeping track, in the last year, that’s one banker from Russia, one diplomat from Russia, a colonel in the Reconnaissance General Bureau, the number two guy at the embassy in London, and possibly the general who runs Pyongyang’s money laundering operations in Southeast Asia. For reasons I explained here, I also believe we know a great deal about the location of North Korean slush funds in China.

According to informed sources, 10 North Korean diplomats defected to the South last year, but the number had reached almost the same level in the first half of this year. Of these defectors, most came from the North’s overseas missions in Europe, with some coming from Southeast Asian countries. [Yonhap]

rats sinking ship

As I said about Thae Yong-ho’s defection: trends that can’t continue, don’t. By now, there can be little doubt that if U.S. and South Korean intelligence agencies are cooperating, they must know where a large portion (if not the majority) of North Korean slush funds are. Of course, the North Koreans will be scrambling to move that money today. As they do, nervous bankers around the world will be filing Suspicious Transaction Reports. Gleeful regulators will tent their fingers and cackle watching them make stupid mistakes. This is a rare opportunity — too rare to waste.

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Why Treasury should require banks to keep records about N. Korean beneficial ownership

In my policy discussions about North Korea, two of the smartest sanctions skeptics I’ve debated are professors John Park and James Walsh. Not only are they both genuinely nice people, their skepticism points to flaws and gaps in the sanctions regime, and that skepticism ultimately serves to improve the quality of the sanctions and their enforcement. They’ve been particularly persuasive about the importance of pursuing “North Korea Inc.,” Pyongyang’s extensive and shadowy network of agents and trading companies in China, who facilitate not only its legal trade, but also act as money launderers and purchasing agents for its WMD programs and luxury goods demands. Such is the nature of money laundering; it uses legal trade to conceal illegal trade.

One answer to Park and Walsh’s criticisms is to add one additional special measure, found at 31 U.S.C. 5318A(b)(2), to the special measures Treasury previously announced on June 1st. This measure would require financial institutions to collect information on the beneficial ownership of property by North Korean persons, or of property in North Korea. That would mirror the European Union’s recent blacklisting of North Korea for money laundering, which triggers increased beneficial ownership reporting rules.

Happily, I’m joined in this view by the most accomplished North Korea sanctions expert I know, William J. Newcomb, who previously served with the CIA, Treasury, State Department, and the U.N. Panel of Experts (here’s a link to an address Bill gave to the Korea Society). Today, Bill and I posted a public comment on Treasury’s proposed special measures against North Korean money laundering. You can read the full text of the comment below the fold, annotated with hyperlinks. It should also be available on the federal regulations portal shortly.

To read the full comment, click the “continue reading” button below.

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RFA: Poland to stop granting work visas to N. Korean laborers

Last month, I wrote about Vice’s must-see investigative documentary on North Korean workers in Poland and the exploitative and unsafe conditions in which they work for little or no pay. Via Yonhap, Radio Free Asia now quotes South Korean Foreign Ministry Spokesman Cho June-hyuck as saying that Poland will stop granting new work visas and renewing existing visas to workers from North Korea.

“The issue of overseas North Korean workers has increasingly caused concern within the international community from the perspective of human rights abuses and the flow of money into the North,” Cho said during a regular press briefing. “The Polish government also decided early this year to halt the issuance of new visas to North Korean workers.”

North Korea is believed to have more than 50,000 workers stationed in some 50 countries, including China and Russia, to earn money for its cash-strapped regime.

Several hundred North Koreans are currently estimated to be working in Poland. Under the new measure, they will not be allowed to renew their visas.

Cho said other countries in Africa, the Middle East and Europe have also taken steps to reduce the number of North Korean laborers they receive by cracking down on illegal immigrants and not renewing work contracts.

“Our government takes note of such efforts by the international community to address the issue of overseas North Korean workers and plans to continue to seek possible steps in cooperation with the international community,” he said. [Yonhap]

That’s not a bad start, although it falls short of the better answer — revoking the existing visas, and blocking the assets of the North Korean firms involved in this trade. According to the Leiden Asia Center, whose research contributed to Vice’s documentary, those firms include the Rungrado General Trading Corporation, the Korea Cholsan General Corporation, the Korea South-South Cooperation Corporation (which seems a deliberate effort to confuse researchers), and the Korean-Polish Shipping Company (a.k.a. Chopol). For good measure, blocking the assets of the Polish wholesalers of this labor would serve as a useful example to others. The Leiden Asia Center’s report also contains other newsworthy information, including the fact that some shipyards that use this slave labor receive EU subsidies … and repair NATO warships.

The end of Poland’s use of North Korean laborers would be financially significant. The Leiden Asia Center reports that Poland issues around 500 visas to North Korean workers each year, “one of the highest numbers of work permits issued to North Koreans” in Europe. Between 2008 and 2015, that amounts to more than 2,700 work permits. That’s still a small percentage of the estimated total of 50,000 North Korean overseas laborers, but each North Korean worker in Europe earns nine times as much as a North Korean worker in Africa.

North Korean workers are active all over the world, but mainly in China, Russia, the Middle East, the African continent and the EU. General statistics from the ILO show that on average US$3,900 is earned in Africa per victim of forced labour; US$5,000 per victim in the Asia-Pacific region; US$15,000 per victim in countries in the Middle East; and US$34,800 per victim in so-called developed economies. While the actual amount will vary according to the particular situation, the overall relative distribution of profits is correct. The ILO further notes that “[total] profits are highest in Asia (US$ 51.8 billion) and Developed Economies (US$ 46.9 billion), mainly for two reasons: the high number of victims in Asia and the high profit per victim in Developed Economies.” [Leiden Asia Center]

RFA’s report attributes Poland’s decision to sanctions — implicitly U.N. sanctions — but nothing in the Security Council’s resolutions directly bans the use of North Korean laborers. There is, however, a requirement to ensure that U.N. member states prevent the transfer of funds to North Korea that could be used for its WMD programs. (For years, I argued that the Kaesong Industrial Complex’s see-no-evil payments violated this requirement, and this year, after a decade of denying it, the South Korean government finally admitted that I was right all along.)

The more direct sanction against North Korea’s labor exports, however, is a unilateral U.S. sanction, found in Executive Order 13722, signed in March of this year. That provision allows the Treasury Department to block the assets of any person found to have “engaged in, facilitated, or been responsible for the exportation of workers from North Korea, including exportation to generate revenue” for the North Korean government or its ruling party.

It’s possible that sanctions played some role in forcing Poland’s hand, or even in deterring the users of the laborers, but it’s more likely that the terrible publicity of Vice’s documentary and the Leiden Asia Center’s publications caused the Polish government to make this decision than sanctions.

Like Kaesong, the restaurant trade, tourism, and arms sales to Uganda, the termination of the labor trade by one country will not, by itself, bankrupt Pyongyang. But since this year began, we’ve seen many of North Korea’s external revenue sources come under pressure.

The loss of all of these revenue sources collectively would cause serious financial distress, the loss of elite confidence in His Porcine Majesty’s rule, and inter-factional competition over increasingly scarce resources. We’re a long way from hearing Ri Chun-hee sing “A Bicycle Built for Two,” but this is how things start.

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Stop saying N. Korean overseas laborers aren’t slaves. They are, and here’s proof.

You absolutely must watch this extraordinary work of investigative journalism by Vice, exposing the North Korean slave labor racket in Poland. There are English subtitles available.

What is so exceptional about this reporting is that its detailed and careful investigation makes it immediately actionable. With a little googling, it’s possible to identify the names, position titles, and e-mail addresses of the Polish and North Korean companies involved.

That’s enough for the Treasury Department to add all of them to the list of Specially Designated Nationals for violating Executive Order 13722, which prohibits “engag[ing] in, facilitat[ing], or [being] responsible for the exportation of workers from North Korea, including exportation to generate revenue for the Government of North Korea or the Workers’ Party of Korea.”

The prime target of designation should be the Korea Rungrado General Trading Corporation, Segori-dong, Pothonggang District, Pyongyang, and the DPR Korea Chamber of Commerce, P.O.Box 89, Jungsong-dong, Central District, Pyongyang, for supplying the laborers. As Vice notes, Rungrado was also implicated in the U.N. Panel of Experts’ most recent report for selling missile parts to Egypt. The Polish nationals and companies that knowingly employ this labor under such exploitative conditions — and who lie about it so blatantly — should also be designated, to make an example for other users of North Korean labor.

Although North Korean laborers in Europe (chiefly, Poland and Malta) are smaller in number than those in Asia and Africa, they also earn the regime more funds per capita than their counterparts in poorer countries. And do you suppose the working conditions for North Korean workers are better in Africa, Asia, or the Middle East? If the Obama Administration is serious about enforcing its new authorities, it should start by watching this report and taking careful notes.

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Update: On a related note:

North Korean workers are toiling for Chinese factories that make clothes for global labels like Ralph Lauren and Burberry, Radio Free Asia reported Wednesday.

One of their employers is Mei Dao Garment in Hebei Province, a source told the radio station.

Mei Dao first employed 54 North Korean workers via a North Korean trading company from January to July 2012. In April last year it also established another firm in Dandong, Miryong Garment, as a joint venture with another North Korean company.

Mei Dao now employs hundreds of North Koreans, according to the source.

Garment maker Phoenix Gold in Dandong also employs about 1,200 workers, and 800 of them are from North Korea, the source added. [Chosun Ilbo]

That’s specific enough to investigate, either by an outside NGO, or by the retailers themselves.

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European Union publishes new N. Korea sanctions regulation to implement UNSCR 2270

I’ve previously written about the importance of Europe’s role in enforcing U.N. sanctions against North Korea. On March 5th, the EU designated 16 people and 12 entities under its existing North Korea sanctions program. Yesterday, it finally announced the publication of a new “restrictive measures” regulation to implement UNSCR 2270. Based on the summary, the new regulation follows last month’s Security Council resolution right down the line.

The measures extend, inter alia, export and import prohibitions to any item (except food or medicine) that could contribute to the development of the operational capabilities of the DPRK’s armed forces. Member states will be required to inspect all cargoes to and from the DPRK on their territories, to ban DPRK chartering of vessels or aircraft and to de-register vessels. They will have to ban flights carrying prohibited items and port calls of vessels engaged in violation of the relevant UNSC resolutions. They will also be required to ban exports from the DPRK of certain mineral products (including coal, iron and gold) and exports to the DPRK of aviation fuel. Member states will be required to expel DPRK representatives and third country nationals involved in the DPRK’s illicit programmes (as identified by the relevant UNSC resolutions).

Moreover, additional financial measures being introduced include:

  • an asset freeze on government entities associated with the DPRK’s nuclear or ballistic missile programmes or other activities prohibited by UNSC resolutions

  • an obligation to close:

    • existing branches, subsidiaries or representative offices of DPRK banks;
    • existing joint ventures, ownership interests and correspondent banking relationships with DPRK banks; and
    • existing branches, subsidiaries or banking accounts in DPRK if they could contribute to DPRK’s illicit programme
  • a ban on private financial support for trade if such financial support could contribute to DPRK’s illicit programmes

The new regulation will become effective when it’s officially published in the EU’s official journal later today. The restrictions on exports and the requirement to inspect all cargo going to North Korea should also limit the supply of European luxury goods to North Korea, although some will invariably continue to leak in through China. It will be interesting to see if the new regulation also expands the definition of “luxury goods.”

The provisions that bear the most careful watching, however, are those that affect finance. The termination of correspondent relationships and the closing of certain accounts should trap large sums of money in European banks. If the dollar is by far the world’s most important reserve currency, the Euro is the second-most important, so this action closes off the most important remaining avenue of escape for those funds.

The Wall Street Journal also quotes EU foreign policy chief Federica Mogherini as saying that the EU “is still considering additional EU-only sanctions on top of the U.N. measures,” and cites unnamed officials as saying that “some preparatory work has started on this.” Previously, the EU has gone beyond U.N. requirements by blocking North Korea’s national insurance company, which is suspected of defrauding European insurers out of millions of dollars.

One important measure the EU could take would be to expel North Korean forced laborers. This working paper, by the North Korean Alliance for Human Rights in North Korea, documents the surprisingly widespread use of North Korean labor by EU nations, and notes that North Korean laborers in the EU earn more cash for Pyongyang per capita than those in China, Africa, or the Middle East. Two of the worst offenders are Malta and Poland.

The EU could also ban the sale of equipment that can be used for surveilliance or censorship, or by the security forces for political repression. According to multiple reports in the Daily NK, a German company is supplying North Korea with equipment to track down illegal cell phones. The EU should also implement the U.N. Commission of Inquiry’s recommendations by freezing any assets owned or controlled by individual North Korean officials found to be responsible for human rights violations.

The single most important step Europe could take would be to cut off North Korea’s access to the SWIFT financial messaging service. In the case of Iran sanctions, that measure was one of the most effective in putting financial pressure on that regime.

The new regulation will not completely terminate North Korea’s financial shenanigans on the continent, however. For example, Switzerland and Liechtenstein, two states where large North Korean slush funds are reportedly held, aren’t EU members. North Korean prison camp survivors have called on Switzerland to freeze North Korean assets. The new EU regulation should increase pressure on both states to fully implement UNSCR 2270, and both the U.S. and South Korea can add their own diplomatic voices to that pressure.

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Before Josef Schwartz spends an eternity in Hell, would Austria please send him back to prison?

Reading through the new Panel of Experts report, I saw a finding, at Paragraph 108, relating to two 2011 “[s]hipments of spare parts and equipment for submarines and military boats brokered by Green Pine” — a North Korean trading company designated by the U.N. over proliferation concerns — “from Austria to Angola and Viet Nam.” Reading on, I saw that “[t]he consignments were shipped from Vienna by an Austrian national, Josef Schwartz, through his company, Schwartz Motorbootservice.” Remember him? Sure you do. 

Azimut yachtItaly blocked the multimillion-dollar sale of two luxury yachts that Italian police say were destined for North Korean leader Kim Jong Il in violation of international sanctions.

The 105-foot and 95-foot Italian-made seafaring vessels were ordered from the Azimut-Benetti boatyard, a maker of luxury yachts near Turin, by an Austrian company. A Chinese company stepped in later to complete the purchase, Italy’s Economic Development Ministry said.

Italian financial police said the Chinese company paid a Hong Kong business to take delivery of the vessels, valued at nearly €13 million ($18.5 million).

An investigation determined that the yachts ultimately were bound for the reclusive communist nation in violation of international sanctions barring sale of luxury goods to North Korea, the ministry said.

Col. Antonio Leone, the financial-police commander in Lucca, said “it is an irrefutable fact” that Mr. Kim was the intended final recipient, according to Reuters. “There has been a thorough investigation, partly in Austria, backed up by confessions and investigative breakthroughs,” he said. [Wall Street Journal, July 24, 2009]

Europeans and American treat it like a joke when the quirky rulers of starving subjects buy yachts and limousines. But it’s no joke. It’s a crime, against humanity, and against the laws of the European Union. That the Italians stopped the sale is more than I can say for the British authorities, who let another yacht sale to the North Koreans slip through a few years ago. 

And then there are the Austrians, who let Josef Schwartz run free, despite his long history of repeatedly violating EU sanctions regulations. Austrian authorities prosecuted Schwartz for the yacht sale and sentenced him to nine months in prison. Evidently, that wasn’t enough to get the point across, because Schwartz has now been called out by name in no less than three Panel of Experts reports. This is from the 2012 Panel of Experts report:

84. The Panel obtained copies of contracts for the purchase of two yachts concluded by the Austrian firm Schwartz Motorbootservice und Handel GmbH. It also obtained associated financial records and copies of contracts transferring rights and responsibility for making payments from the Austrian firm to a Chinese firm, Complant International Transportation (Dalian) Company Ltd. Member States provided information that Josef Schwartz, during questioning by Austrian police, admitted to being aware of the triangulation that Complant was planning to carry forward, with the intent of selling the ships, subsequently, to the Democratic People’s Republic of Korea. He was convicted by an Austrian court of violating applicable law of the European Union on restrictive measures against the Democratic People’s Republic of Korea both for his attempt to export yachts and in a related case of exporting luxury automobiles to the Democratic People’s Republic of Korea, fined, and sentenced to a nine-month prison term (on parole for a period of three years).

85. The Austrian court judgement records Schwartz’s purchase of eight S-class Mercedes automobiles for the Democratic People’s Republic of Korea. The Chinese firm Complant International is identified as a falsely declared end user for some of these vehicles. Austrian authorities learned that Schwartz purchased the vehicles at the order of Kwon Yong Rok, a citizen of the Democratic People’s Republic of Korea and formerly long-term resident of Austria (he has since left). Numerous media reports and several books have linked Kwon Yong Rok to Office 39 of the Democratic People’s Republic of Korea. He was associated with Golden Star Bank in Vienna (a subsidiary of Korea Daesong Bank, itself subordinated to Office 39)57 before it was shuttered by regulators.

Schwartz gets another dishonorable mention in the 2014 report:

177. The Panel knows that the Democratic People’s Republic of Korea has used indirect payments in attempts to acquire prohibited items. It included in its 2012 final report a 2009 attempt to buy two luxury yachts in Italy.107 Financial techniques used to evade paragraph 8 (a) (iii) of resolution 1718 (2006) included pooling of funds in the Austrian bank account of Josef Schwartz, the owner of Schwartz Motorboot service, who signed the purchase contract. Funds were wired in various amounts from a number of companies in different locales as well as from banks in the Democratic People’s Republic of Korea itself.108 While under investigation, Schwartz reassigned the contract to a second company, Complant International Transportation (Dalian) Co., Ltd, which continued the subterfuge to conceal the actual destination. It used yet another company to wire at least a portion of more than €5 million paid to the shipbuilder, according to Italian authorities.

And yet, Schwartz is free again, enriching himself on money stolen from starving children. A guy with ethics like these probably doesn’t believe there will be retribution in Hell, but can’t someone at least lock up this repeat offender against the laws of man?

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Europe can play an important role in enforcing U.N. sanctions against N. Korea

With the enactment of UNSCR 2270, the EU foreign policy chief Federica Mogherini says the EU will soon move forward with what EU regulators refer to as “restrictive measures” against North Korea.

“There is scope for the European Union to adopt additional autonomous restrictive measures to complement and reinforce the new U.N. measures,” said a diplomatic note seen by Reuters on the latest discussions.

Germany, France, Spain and Poland want to see what more the bloc can do in areas such as finance and insurance, as well as hitting more North Koreans with asset freezes.

Germany, one of seven EU member states to have an embassy in Pyongyang, also wants better monitoring of the “non-diplomatic” activities of North Korean envoys, EU diplomats said. [Reuters]

Further on, the Reuters story defaults to drearily familiar arguments to impotence that have become de rigeur in reporting about North Korea sanctions. In focusing on irrelevancies such as whether Berlin would cut diplomatic ties to Pyongyang — who cares? — its author reveals little understanding of how modern sanctions work, or of Europe’s financial ties to North Korea. In fact, those ties are substantial, and consequently, so is Europe’s role in making sanctions work well enough to alter Pyongyang’s risk-benefit calculations.

First, despite existing U.N. sanctions, Europe remains a key supplier of luxury goods to North Korea, both directly and indirectly. Until now, its enforcement of the U.N. ban on luxury goods exports to North Korea has been lax to non-existent. Examples abound, including the European snow-grooming equipment at the Masikryong Ski resort, the recent sale of yachts to North Korea by a British manufacturer, and the entire Dennis Rodman/Paddy Power debacle. If the EU tightens the enforcement of its luxury goods sanctions, such as by increasing its due diligence and compliance rules, and by blacklisting Chinese and other vendors known to act as middlemen for North Korea, it can make it much harder for North Korea to maintain the lifestyle of its elites.

Second, Europe has shown us a smart way to shut down North Korea’s smuggling fleet, by going beyond the strict requirements of U.N. resolutions. America should take a cue from the EU’s blocking of the Korea National Insurance Corporation (KNIC). Then, the U.S. and the EU should both go one step further and block the Korea Shipowners’ Protection & Indemnity Association (it’s not entirely clear if KSPIA is a subsidiary of KNIC). As we learned from the Chong Chon Gang and Mu Du Bong incidents, North Korean ships rely on KSPIA to insure the fleet of U.S.- and U.N.-designated Ocean Maritime Management, a notorious arms smuggler. If the U.S. and the EU both designate KNIC and KSPIA, it will be difficult for North Korean ships to obtain third-country insurance or, lacking any insurance at all, to enter ports anywhere. (Paragraph 20 of UNSCR 2270 prohibits third countries from reflagging or insuring North Korean ships.) That would force North Korea to rely on third-country ships, which would fail to inspect the North Korean cargo they carry at great peril.

Third, Europe can lend its diplomatic, economic, and moral influence to campaigns against North Korea’s crimes against humanity. There is a rising consciousness among European nations about North Korea’s human rights crisis. Europe has led diplomatic efforts to hold the perpetrators of those crimes accountable at the U.N., and it should continue to do so. EU nations — specifically Germany — should also ban the sale of items to North Korea that the regime uses to censor and oppress its people, such as the rumored sale by a German company of devices used to track down illegal cell phones. Although North Korean forced laborers in Europe are relatively fewer (and probably better treated, as slaves go) than their counterparts in poorer nations, each laborer in Europe earns Pyongyang disproportionately more hard currency than each laborer in, say, China or Qatar. Does the EU know what that money pays for? If not, it should cut it off.

(One of my disappointments with UNSCR 2270 is that Paragraph 32, the asset freeze provision, only requires member states to freeze assets they “determine” to be associated with North Korean entities involved in violating the resolutions. If the EU wants the sanctions to work, it should begin with the fact that cash is fungible, and the understanding that Pyongyang’s highest priorities are those that violate U.N. sanctions. It should then make the same reasonable inferences that South Korea made about Kaesong, that the “wages” paid there were likely diverted to prohibited uses, and that Seoul could not meet its obligation to “ensure” otherwise. Despite the limits of Paragraph 32, I’ve long argued that Kaesong already violated the resolutions enacted before UNSCR 2270, and 2270 did not make similar arrangements legal. Under the same analysis, the use of North Korean laborers in Europe and other countries also violates U.N. sanctions.)

Finally, according to open source reports, vast amounts of North Korean cash are held in European banks. The catch is that some of these European nations (Luxembourg) are EU members, while other key nations (Switzerland and Liechtenstein*) are not. The EU’s implementing regulation should not simply drive North Korean slush funds into other states with less effective regulators; it should instead freeze North Korean assets, releasing only those it can verify are being spent for humanitarian or “livelihood” purposes. In addition to putting sufficient resources behind its regulations to enforce them, it should also exercise its influence over Switzerland to take a similar and coordinated approach. The EU should join the U.S. in blocking North Korea’s Foreign Trade bank from its financial system. Finally, the EU’s regulations should deny North Korean banks access to the SWIFT network, a measure that put severe pressure on Iran.

Thus far, the U.S. and the EU have each imposed relatively weak sanctions against North Korea; worse, U.S. and EU sanctions each attacked different vulnerabilities. A more coordinated U.S.-EU approach that includes (a) sufficient investigative and regulatory resources, (b) better coordination of strategy and targeting, and (c) coordinated diplomacy to encourage other states to join in that strategy, would help make sanctions work where they have failed before.

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* A previous version of this post said that Liechtenstein was an EU member; it is not. Thanks to reader Sebastian for the correction.

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Update: The EU has taken the first, minimum-requirement steps toward implementing the new sanctions by designating the North Korean persons and entities designated by UNSCR 2270. You can find the EU’s notice of regulation here, and a universal compilation of its restrictive measures here

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Sale of cell phone detectors to N. Korea adds to Germany’s debt to history

If there is any justice in our universe, there is a special septic tank in hell reserved for the people who profit by selling these things to Pyongyang:

According to local sources, North Korean authorities have recently begun carrying small, German manufactured radar detectors when patrolling near the Chinese border for the purpose of monitoring international phone calls made on Chinese-made cell phones.

These intensified measures follow a proliferation of stationary detectors installed in North Hamgyong Province in conjunction with enhanced wiretapping technology, as previously reported by Daily NK. [Daily NK]

What I wouldn’t give to know the name of the manufacturer and exporter. The Treasury Department has the authority — and the responsibility — to sanction them to extinction under Executive Order 13687.

gestapo-radio-detector-700x525

[Berlin, 1941: Gestapo officers demonstrate “a mobile radio detector to pick up resistance signals” to a visiting Spanish delegation]

Every government whose desire to open North Korea to the world matches its self-serving rhetoric ought to be investigating this case actively, including Germany, including South Korea, and including our own State Department.

On September 14th, Daily NK staff spoke with a source in Yanggang Province who confirmed that recently, personnel from a number of different security organs including the prosecutor’s office, the Ministry of People’s Security, and the State Security Department, have formed a ‘gruppa,’ or public order teams established for specific tasks, specifically for the purpose of cracking down on overseas phone calls. This unit patrols day and night using the small radar detectors to pick up on cell phone signals calling overseas.

An additional source in Yanggang Province confirmed these developments.

In the past,  the majority of sensors used for enforcement were carried in bags but the new radar detectors from Germany are small enough to be carried in a pocket, the source said, noting, “Before this, citizens who were wary of being caught would simply avoid any security officers toting bags. With the new devices, many people will see officers without bags and assume it is safe to make an overseas phone call–then they get caught.”

Knowing the human species’s gift for self-justification as I do, I’m sure that if you confronted the German government with evidence that one of its companies was helping Kim Jong-Un to seal the borders and oppress his population, at least one official would justify this trade by using the word “engagement.”

“Members of the task force, whether they are from the SSD or the MPS, are blindly rounding up citizens and searching the stored contents of their phones. If they find any South Korean songs, videos, or other materials the authorities deem ‘sensitive,’ the offender is arrested right then and there,” he said.

Despite the increase in and intensity of crackdowns, the appetite for South Korean dramas and films remains large and ever expanding, especially among university students. Because many students sell this type of media for a living, it is difficult to stamp out the problem at its roots.

But then, how different is the engagement that sells Kim Jong-Un cell phone detectors from the engagement that gives Kim Jong-Un the cash to pay for them?

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BBC “plans” daily broadcasts to N. Korea, but plans cost money

Having been fooled once before, I wasn’t about to accept that BBC was going to begin broadcasting to North Korea simply because Time, The Guardian, AFP, and The Financial Times say so. Digging further, these reports all cite this BBC.com report on a speech by Director General Tony Hall on the beeb’s plans for next year. Buried deep within that report is a plan for “significant investment” in the BBC World Service, “including a daily news programme for North Korea.” But plans are one thing; operations are another:

“The BBC is trying to justify its public funding by showing that it can do something political that the private sector wouldn’t do,” said Aidan Foster-Carter, a senior research fellow specializing in both Koreas at Leeds University. “It’s a clever move and will earn political brownie points, but it won’t happen without government money. The North Korean government would be furious.”

Michael Glendinning, who has campaigned for the launch of a BBC service in the so-callled hermit kingdom, is just as skeptical.

He points out that a BBC report, titled The Future of News, from earlier this year mentioned that there would be such a proposal, but it would require between £900,000 ($1.4 million) and £1.2 million in funding from the government per year according to the European Alliance for Human Rights in North Korea (EAHRNK). [Bloomberg]

What I cannot understand for the life of me is why the government of the United Kingdom gives a wet sack of guano what the government of North Korea thinks. The two states have almost no trade relations — indeed, no mutual interests that I can think of.

No doubt, the likes of Glyn Ford and Hazel Smith would gladly exercise their rights to free expression to demand that the North Korean people be denied theirs, but is the Foreign Office really so afraid of getting angry letters from them? There is a certain academic constituency that loves to talk about engagement with North Korea, right up to the point that transformational and subversive ideas make contact with the wavering and hostile classes — the very people who are the most likely to respond to those ideas.

For the time being, broadcasting is the closest we’re likely to get to “engagement” and “people-to-people” contact with those North Koreans who might hope for a life without 6 a.m. criticism sessions, paying MPS agents not to confiscate their stall merchandise, and dusting the portraits of obese men before seeing their stunted children off to school. Governments come and go. It is the people of nations who endure, and who remember who stood with them when things were worst. So long as nations fail to engage the people of North Korea, engagement will continue to fall on deaf ears, and to fail.

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Switzerland sells luxury watches to Kim Jong-Un, despite U.N. sanctions and food shortages

Throughout North Korea’s Great Famine, as millions of North Koreans either starved to death or watched their loved ones die, suppliers across Europe willingly sold Kim Jong-Il millions of dollars’ worth of luxury cars, yachts, cognac, and Swiss watches. In 2006, the U.N. Security Council recognized the obscenity of this practice by adopting Resolution 1718, which first banned the export of luxury goods to North Korea.

Among European nations, probably none has done more than Switzerland to enable the democidal kleptocracy of North Korea’s rulers. It served both as Kim Jong-il’s banker, and as a willing supplier of luxuries. According to Vanity Fair, Bureau 39 managed “multi-billion-dollar personal bank accounts in Switzerland and other private banking havens around the world” for Kim. Kim’s former Ambassador to Switzerland, Ri Su-Yong, is also said to have played a key role in the regime’s Swiss finances before his promotion to Foreign Minister. North Korean refugees have called on Switzerland to freeze those accounts.

In 2013, the Federation of the Swiss Watch Industry claimed that its exports to North Korea had fallen to just $76,000 per year. But as NK News’s Leo Byrne reports, Kim Jong-Un is on another Swiss watch-buying spree, even as 70 percent of North Koreans are “food insecure,” and as the World Food Program asks foreign donors for $111 million to feed North Korean infants, children, and pregnant women.

North Korean imports of Swiss watches rebounded to their highest levels in years in the first six months of 2015, according to official figures from the ITC Trade Map.

Swiss exports of the luxury items dropped to zero for the whole of 2014, however have since rebounded to nearly $80,000 since the start of the year. [NK News, Leo Byrne]

That is to say, North Korea spent as much on Swiss watches in the first half of 2015 as it spent in all of 2013. Byrne notes that the jump in exports “coincides with the opening of Pyongyang’s new airport terminal, where watches from Switzerland appear to be on sale.” KCNA recently published these photos of Kim Jong-Un — upgraded by me, and you’re welcome — touring one of the duty-free shops where watches were on sale.

watches4 watches3 watches2 watches1

Those photos, as lovely a juxtaposition as they are, did not show the watches in sufficient detail to reveal their cost or their origins. That question is now resolved.

“Air Koryo watches (for man) – Swiss made – price: (US$220) – they said it is a joint venture product with Swiss company – Sells in new Terminal 2 Pyongyang international airport,” Flickr user Jaka Parker writes under a recently taken picture of one of the watches.

Not the most expensive watch that’s been spotted in North Korea, but you can buy a lot of corn for that. Here’s the photo:

Screen Shot 2015-08-04 at 8.50.04 AM

Byrne’s report did not specify that North Korea imported the watches directly from Switzerland, but his report relies on International Trade Centre (ITC) data published by each exporting country, which implies a direct transfer

Although the Security Council resolution makes no distinction between luxury goods imported for domestic consumption and those imported for resale, the Pyongyang duty-free shop may well be a front for allowing the regime to claim that it is only importing the watches for resale, while gifting its elite with most of the inventory.

The U.N.’s ridiculously short list of luxury items does not list watches, but does list “jewelry of precious metal or of metal clad with precious metal.” Switzerland is not an EU member, but it is surrounded by EU states, and the EU list is instructive. It lists “[l]uxury clocks and watches and their parts.” Thus, with the sole exception of its refusal to sell Kim Jong-Un a ski lift, Switzerland continues to be an outlier among European nations for its failure to abide by U.N. Security Council resolutions, and for its irresponsible and unethical trade with North Korea.

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EU blocking of Korea National Insurance Corp. hints at key shift in N. Korea sanctions enforcement

The European Union’s administrative body, the European Commission or EC, has added seven additional designations to its regulation on “restrictive measures” against North Korea. The new designees include the Korea National Insurance Corporation, or KNIC, and six of its officials. There are several good reasons why the EC could have designated KNIC, but didn’t (the reason it did use is more interesting, but we’ll get to that later).

First, KNIC has been linked to Pyongyang’s luxury goods imports, which have been banned since the U.N. Security Council adopted Resolution 1718 in 2006. Historically, most of those goods have been of European origin. The EC notice, however, does not link KNIC to the luxury goods trade.

Second, the EC designation notice says that “KNIC headquarters Pyongyang is linked to Office 39 of the Korean Worker’s Party, a designated entity.” Office 39, a/k/a Bureau 39, the North Korean ruling party’s foreign currency-earning agency, is designated by the U.S. Treasury Department and the EC, but not the U.N., for financing North Korea’s prohibited WMD programs. The EC notice, however, does not say that KNIC is owned or controlled by Bureau 39.

Third, one of the ways KNIC has historically earned money is through insurance fraud. A former KNIC official, Kim Kwang Jin, revealed this in a 2009 Washington Post story, by Blaine Harden, and a 2013 Reuters story. The allegations of fraud arose even before Kim’s revelations, and led to protracted litigation between KNIC (on one side) and Lloyds and Allianz (on the other). The defendants alleged that KNIC had fabricated an accident to collect insurance payments from Lloyds and Allianz, which refused to pay, until the parties settled out of court. If the EC concluded that KNIC engaged in insurance fraud, that would also justify blocking it under UNSCR 2094:

“8. Decides further that measures specified in paragraph 8 (d) of resolution 1718 (2006) shall apply also to the individuals and entities listed in annexes I and II of this resolution and to any individuals or entities acting on their behalf or at their direction, and to entities owned or controlled by them, including through illicit means, and decides further that the measures specified in paragraph 8 (d) of resolution 1718 (2006) shall apply to any individuals or entities acting on the behalf or at the direction of the individuals and entities that have already been designated, to entities owned or controlled by them, including through illicit means;

The notice, however, does not accuse KNIC of fraud or other illicit activity.

Fourth, I’ve long suspected, but can’t prove, that KNIC is also involved in insuring ships owned or controlled by Ocean Maritime Management, a North Korean entity that was designated by the UN, the EC, and Treasury in 2014 for arms smuggling (specifically, for the Chong Chon Gang incident). OMM controls the ships through individual shell companies for each OMM vessel. According to this 2015 UN POE report, however, a different company, Korea Shipowners’ Protection & Indemnity Association, insured the sanctioned vessels. According to KNIC’s web site, however, KNIC is “a sole insurer of the DPR Korea” and sells maritime insurance. If the EC determined that KSPIA is a front company for KNIC, that would require the EC to block KNIC. There’s almost no information about KSPIA online, and nothing in the UN POE reports links it to KNIC. Anybody?

Unpack the language of the EC’s justification, however, and it doesn’t accuse KNIC of any of these things. It stops short of claiming that KNIC is controlled by Bureau 39. It merely says KNIC is funding the regime, and that those funds “could contribute” to North Korea’s WMD programs.

KNIC GmbH, as a subsidiary controlled by KNIC headquarters in Pyongyang (address Haebangsan-dong, Central District, Pyongyang, DPRK), a government entity, is generating substantial foreign exchange revenue which is used to support the regime in North Korea. Those resources could contribute to the DPRK’s nuclear-related, ballistic missile-related or other weapons of mass destruction-related programmes.
Furthermore, the KNIC headquarters Pyongyang is linked to Office 39 of the Korean Worker’s Party, a designated entity.’

I’m not complaining, mind you. The EC’s rationale is fully consistent with the language of UNSCR 2094, which raises the burden of due diligence that applies to transactions with North Korean state entities:

“11. Decides that Member States shall, in addition to implementing their obligations pursuant to paragraphs 8 (d) and (e) of resolution 1718 (2006), prevent the provision of financial services or the transfer to, through, or from their territory, or to or by their nationals or entities organized under their laws (including branches abroad), or persons or financial institutions in their territory, of any financial or other assets or resources, including bulk cash, that could contribute to the DPRK’s nuclear or ballistic missile programmes, or other activities prohibited by resolutions 1718 (2006), 1874 (2009), 2087 (2013), or this resolution, or to the evasion of measures imposed by resolutions 1718 (2006), 1874 (2009), 2087 (2013), or this resolution, including by freezing any financial or other assets or resources on their territories or that hereafter come within their territories, or that are subject to their jurisdiction or that hereafter become subject to their jurisdiction, that are associated with such programmes or activities and applying enhanced monitoring to prevent all such transactions in accordance with their national authorities and legislation;

The EC’s action has significant potential to crimp Pyongyang’s finances and improve the enforcement of the Security Council’s resolutions. The blocking of Pyongyang’s state insurer will make it much more difficult for it to engage in air and sea commerce with Europe. It could affect Air Koryo, which has long been under suspicion by the U.N. Panel of Experts for being a de facto arm of the North Korean military. It will affect ships in North Korea’s merchant fleet that haven’t yet been blocked by Treasury, and will impede Pyongyang’s ability to access luxury goods from Europe. It will send a strong signal that Pyongyang can’t seek refugee in the Euro system to escape from sanctions in the dollar system. It will require Pyongyang to draw from its hard currency reserves to buy insurance on the commercial market.

But for all the material effects the EC’s action may have, the action may be even more significant for the analytical shift it represents. As far as I’m aware, this is the first designation based on UNSCR 2094–on either side of the Atlantic–that does not make a direct link between the targeted entity and a specific prohibited activity. Instead, on its face, the EC designation applies Paragraph 11’s heightened due diligence requirement to say that KNIC could be funding sanctioned activities. That almost certainly happens to be true, even if the EC doesn’t directly say so.

The EU’s action, along with President Obama’s signature of Executive Order 13,687, represents movement–however glacial–from conduct-based sanctions to status-based sanctions, a shift Treasury officials recently told GAO would make the sanctions much easier to enforce. That is to say, the EU and the U.S. are both moving toward designating Pyongyang’s hard currency earning enterprises simply because they’re Pyongyang’s hard currency earning enterprises. That’s necessary because North Korea’s opaque and deceptive financial practices–as the Financial Action Task Force has alleged for years–make it impossible for the bankers who clear the transactions to meet the resolutions’ heightened due diligence requirements. Two years after UNSCR 2094 passed, governments are finally enforcing it according to its spirit and its letter.

That’s why this burden shifting represents such a welcome change. In fact, it’s one of the most important shifts the North Korea Sanctions Enforcement Act was intended to drive. It’s also fully consistent with how governments everywhere apply their financial regulations–by sanctioning entities that engage in deceptive financial practices solely for engaging in those practices, even without evidence that the underlying money flows involve illicit activity.

Just ask Dennis Hastert.

Now, a question for your consideration. If the U.S. and the EU are shifting toward status-based sanctions enforcement and enforcing the requirements for “enhanced monitoring,” how will South Korea continue to justify the Kaesong Industrial Park’s opaque financial arrangements? As Treasury Undersecretary (and now, CIA Deputy Director*) David Cohen said:

“Precisely what North Koreans do with earnings from Kaesong, I think, is something that we are concerned about,” said Cohen. “All of the hard currency earnings of North Korea are something I would say that we should be concerned about. [Voice of America]

The EC is acting on those concerns, and the U.S. has at least laid down a legal foundation for doing so. South Korea, a member of the Security Council when UNSCR 2094 passed and the principal beneficiary of the Security Council’s resolutions, simply refuses to acknowledge them, almost certainly for domestic political reasons.

Oddly enough, the EC’s action means it has designated KNIC, but that the U.S. Treasury Department hasn’t. The fact that European insurers were the main victims of KNIC’s insurance fraud may help explain this disparity. Still, as with the push for action on the U.N. Commission of Inquiry’s report on human rights, this is another case of U.S. “leading from behind” in holding North Korea accountable. It’s yet another disparity between U.S. and EC regulations that Section 202 of the NKSEA urges the U.S. governments to harmonize. If the U.S. won’t lead enforcement efforts, the least it can do is be a good follower.

Hat tip to Rob York of NK News. You can read NK News’s report here.

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* A previous version of this post said that David Cohen was the Director of the CIA. He is actually the Deputy Director. Thanks to a reader for bringing the error to my attention.

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N. Korean biowar researcher defects, will testify about human experimentation

[Update, 4 Aug 2015: I inquired with well-connected friends in Europe about when this testimony was likely to take place. Those friends instead questioned the accuracy of Yonhap’s report. Last week, I wrote to a Yonhap correspondent, and asked whether Yonhap stands by the story. Although the correspondent passed my question along to the author of this report, I have not heard back from Yonhap. The lack of a response is further reason to question the accuracy of Yonhap’s story.]

~   original post below   ~

A long-time reader emailed me this afternoon (thank you) to point me to this story in the U.S. edition of the Korea Times, which in turn cites a potentially explosive, game-changing report hiding in Yonhap’s business section. According to the report, a North Korean scientist has defected to Finland with some of his government’s most carefully guarded secrets: a storage device, probably a flash drive, filled with 15 gigabytes of “human experiment results.”

The 47-year-old researcher, identified only by his surname Lee, at a microbiology research center in Ganggye, Chagang Province, bordered by China to the north, fled to the European country on June 6 via the Philippines, said the source from a North Korean human rights group.

“His ostensible reason for defection is that he felt skeptical about his research,” the source told Yonhap News Agency.

Lee held a data storage device with 15 gigabytes of information on human experiments in order to bring North Korea’s inhumane tests to light, according to the source.

The North Korean defector will give testimony before the European parliament later this month. [Yonhap]

Depending on what the researcher’s information is and how credible it is, it could be of incalculable value to our understanding of Pyongyang’s asymmetric warfare capabilities—and also, of other, infinitely more important things about this regime.

For years, newspapers had published defectors’ unconfirmed allegations of chemical and biological experiments in North Korean prison camps (see here, here, here, and here). Of these allegations, the best known are the reports of a gas chamber at the since-closed Camp 22.

The account that Mr. Lee’s disclosure most closely resembles, because it alleges the use of biochemical weapons, is that of Lee Soon-Ok. I’d long harbored doubts about Ms. Lee’s account because of internal inconsistencies I saw in versions of her story I read at long-dead links. The new evidence may call for us to reexamine her story:

North Korea is suspected of having weaponized smallpox and anthrax, which is why your correspondent endured the small discomfort of seven anthrax vaccination injections (it would have been six had I not misplaced my shot record one day) and the low-grade fever that followed each of them.

If this witness presents credible evidence supporting North Korea’s responsibility for additional crimes against humanity, it will strengthen the calls for Kim Jong-Un’s indictment by the International Criminal Court, or failing that—and thanks to China, it will fail—the formation of an ad hoc coalition to raise the financial pressure on Kim Jong-Un and his regime. The revelations will give the UNHCR’s Seoul Field Office an important question to investigate, shortly after its opening. Politically, the EU’s active involvement in publicizing the new evidence would be a welcome departure from the ambivalence European nations have often harbored about holding Pyongyang accountable.

One wonders how much sooner this witness, and others like him, might have emerged from North Korea had Congress enacted the North Korea Freedom Act of 2003, with its informant asylum provisions in Sections 206 and 207. Perhaps that proposal could be revived if, one day, there’s still need for a North Korean Freedom Act of 2016.

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Then they came for the Germans: N. Korea’s global censorship campaign

Having seen “The Interview,” I’d rate it as good an artistic fit for the Berlin Film Festival as Klaus Nomi might have been for the half-time entertainment at a tractor pull. North Korean diplomats, however, aren’t widely esteemed for certain qualities — like, diplomacy, or diplomacy, academic rigor, or cultural sophistication. Consequently, when they heard that “The Interview” was to open in Germany on February 5th, they misunderstood that it was on the festival agenda. And they said this:

The North Korean statement issued Wednesday stated: “The screening of the movie that hurts the dignity of the supreme leadership of North Korea and openly agitates state-sponsored terrorism has nothing to do with the ‘freedom of expression’ touted by Germany. It is evidently agitation of terrorism quite contrary to the purpose and nature of the Berlin International Film Festival.” [Variety]

They also called the film “state-sponsored terrorism.” Sigh. Someone really should lend the North Koreans a dictionary or a law book, because words, like, you know, actually mean stuff.

It ended: “The U.S. and Germany should immediately stop the farce of screening the anti-North Korean movie at the film festival. Those who attempt at terrorist acts and commit politically-motivated provocations and those who join them in violation of the sovereignty and dignity of North Korea will never be able to escape merciless punishment.” [Variety]

You can thank me for verifying that quote on KCNA, the Phuket back-alley ladyboy of the Internet, so you don’t have to. KCNA even compares “The Interview” to the Holocaust, which is a privilege they’re not entitled because … well, this would be one reason. And this would be another. And this (OK, you get the idea). Read it in full below the fold. It’s a thing of such blithe obliviousness that a certain childlike wonder soon washes over one’s sense of outrage.

You’d think that in these times, Europe would be unusually principled and protective of free expression. To sterner folk, the appropriate response would have been a gruff “Verpiss dich!,” and the prompt addition of “The Interview” to the festival agenda. To other Europeans, “Je Suis Charlie” is the safeword their dominatrix taught them, to be cried out in vain during a prison riot. That attitude describes the reaction of the German government, which summoned the head of the festival to give the Norks a polite explanation. Or so say the rheumy-eyed, snaggletoothed old Trotskyites at The Grauniad.

Festival head Dieter Kosslick was reportedly forced to meet with the North Korean ambassador to Germany to explain. A spokesperson told Variety the situation was now resolved and Pyongyang understood the comedy was not being screened at the Berlinale. [The Guardian]

His name is even Dieter. Delicious ….

No word as to whether the North Koreans were able to suppress their embarrassment quickly enough to demand that the film be declared verboten everywhere else in Germany.

There are signs, however, that North Korea is expanding its campaign to suppress “The Interview” globally. On January 16th, The New York Times reported that North Korean diplomats demanded that Burmese authorities seize any copies of “The Interview” they find. (The copies were bootlegged; this may have been the first thing North Korea has done in the last two months that Sony Pictures approved of.) On January 25th, The Bangkok Post reported that North Korea had asked Cambodia to ban sales of “The Interview.”

Now, I suppose it’s better for Nork diplos to be wasting their time on a movie than on rounding up child refugees to send back to reeducation camps. Still, one fears that when the ostensibly democratic world would rather define free expression down than stand up for it, precious few of us will have the testicular fortitude to say, “Je suis Park Sang-Hak.”

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I wish all borders could be like this

I have a tendency to get lost in Wikipedia, bouncing from page to page chasing curiosities. Last night, I learned this about Liechtenstein:

During the 1980s the Swiss army fired off shells during an exercise and mistakenly burned a patch of forest inside Liechtenstein. The incident was said to be resolved “over a case of white wine”.

In March 2007, a 170-person Swiss infantry unit became lost during a training exercise and inadvertently crossed 1.5 km (0.9 miles) into Liechtenstein. The accidental invasion ended when the unit realized their mistake and turned back. The Swiss army later informed Liechtenstein of the incursion and offered official apologies.

Yes, really.

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Incompetent translation could cost N. Korean teen his life

The Swedish government has denied the asylum claim of a teenager who claims to be a North Korean from North Hamgyeong Province. The denial is based on a report by a contractor, Sprakab, that failed to identify the teen’s dialect, or the places he named in his interview. A Korean expert hired by Sprakab now claims that the company misquoted her. An appeal is all that stands between the young man’s life and deportation to China, repatriation to North Korea, and almost certain death:

A Korean expert hired to assess the teenager’s dialect by a controversial Swedish linguistic company that evaluates asylum applications told journalists that his strong dialect had left her in no doubt that he came from North Korea.

The company, Sprakab, nevertheless concluded in its report that his dialect did not fit with his story of growing up in North Korea’s northern districts.

The woman, who has not been named, accused the company her of twisting her words in its report. “I never said that he didn’t come from North Korea,”she said. “What they are saying is wrong. It’s ridiculous.”

The teenager has appealed against the decision. “If I go back to North Korea then I will die,” he told Swedish radio.

His lawyer, Arido Dagavro, said he had proof that the places the teenager had mentioned did in fact exist, as well as testimony from other North Korean refugees that he had spoken with a recognisable dialect from North Hamgyong province in recorded interviews.

“It’s obvious that the migration board didn’t have the expertise required to take a decision in this matter,” Degavro said. [The Guardian]

I don’t know any of the facts beyond what’s reported here, but I certainly hope the Swedes aren’t too tone-deaf to what’s happening at the U.N. to deny this young man a carefully considered decision on appeal. If the translation company, Sprakab, screwed this case up, that calls for more training about the circumstances of North Korean refugees at a bare minimum. It may also call for a reevaluation of Sprakab’s contract, and an inquiry into whether Swedish officials pressured Sprakab to deny applications.

To a degree, the error is understandable. Every country considering asylum applications must deal with a large percentage of fraudulent claims—claims that ultimately disadvantage those with legitimate fears of persecution. Governments must learn to distinguish those cases by understanding the circumstances and languages of the claimants.

Hat tip to a reader.

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On Europe, the U.N., luxury goods, and the ethical limits of engagement.

The latest rant from Professor Lee and me is published here, on CNN International, in the hope that it will catch the eyes of European audiences (and maybe even give Felix Abt a migraine).

Mind you, I think the EU’s leadership of the U.N. response to the Commission of Inquiry report has been commendable, but Europe has to do a better job of enforcing U.N. sanctions, and curbing the actions of unethical profiteers who would sell Kim Jong Un cigarette-making machinery and ski equipment, cash his checks, and let North Korean kids starve.

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