Category Archives: Sanctions

South Korea’s new unilateral sanctions point to a multilateral sanctions strategy

South Korea has imposed unilateral financial sanctions “on six Taiwanese individuals and entities for their alleged arms trade with North Korea,” and on the Syrian Scientific Studies and Research Center. The Taiwanese entities include Global Interface Company, Trans Merits, Trans Multi Mechanics, Tsai Hsein Tai, Su Lu-Chi and Chang Wen-Fu. None of the entities are currently designated by the U.N. Security Council, whose designation process has historically been slow and subject to Chinese and Russian obfuscation.

It is the first time that the government has taken such a punitive step against foreigners and groups who are not from North Korea, in a bid to put pressure on the nuclear-armed communist neighbor.

Officials said there is “evidence of illegal ties” between those blacklisted and the North.

“It’s evident that they are involved in weapons trade with North Korea. They have already faced U.S. sanctions,” a ministry official said, requesting anonymity. “We have shared related information sufficiently with the ally and international organizations.” [Yonhap]

The measure requires South Koreans doing business with the blacklisted companies to request permission from the Bank of Korea. Engaging in any such transactions without BOK permission carries criminal penalties, including fines and prison time. The process sounds roughly similar to the process requiring a license from the U.S.

Continue reading »

U.S., allies talk sanctions and human rights (emphasis on talk)

We’d hardly had time to digest all those rumors of “exploratory talks” with North Korea just two weeks ago, before John Kerry was in Seoul, sounding like his speechwriters had slipped him some cut-and-pasted OFK text. There, Kerry denounced Pyongyang’s “recent provocations,” said it wasn’t “even close to” ready for serious about talks, and accused it of “flagrant disregard for international law while denying its people fundamental freedom and rights.”

“The world is hearing increasingly more and more stories of grotesque, grisly, horrendous public displays of executions on a whim and a fancy by the leader against people who were close to him and sometimes for the most flimsy of excuses,” he said, referring to a report from South Korea’s spy agency that the North Korean defense minister was publicly executed with an antiaircraft gun after he fell asleep during a meeting led by Kim.

Kerry vowed to speak out against “North Korea’s atrocities against its own people” and warned that Kim’s mercurial behavior is likely to lead other nations to push for charges against him and North Korea at the International Criminal Court in The Hague. [Washington Post, Carol Morello]

This is all good, although if there’s one execution in North Korea that I care less about than any of the rest of them, it’s Hyon Yong-Chol’s.

Continue reading »

Gloria Steinem was right about isolation (of South Africa)

Gloria Steinem can look back on a life of activism that has built deep reserves of good will among many people. Steinem must have spent heavily from those reserves last week, when Women Cross DMZ attracted largely critical media coverage (and I suspect, an even more critical public reaction). As NK News informs us, its events were stamped from the same propaganda assembly line as those put on for the clown-shod Quisling Alejandro Cao de Benos.

To what end would Steinem jeopardize that good will by entangling herself with a regime that treats women the way Pyongyang does, and whose state media ejaculate this level of misogyny? Steinem’s answer is interesting and telling: “The example of the isolation of the Soviet Union or other examples of isolation haven’t worked very well in my experience.” A prepared (but not as well edited) statement by Women Cross DMZ was on-message: “If history has taught us anything, it is that isolating people only alienates them.”

But Gloria Steinem clearly didn’t believe this on December 19, 1984, when she was arrested outside the South African Embassy while protesting against Ronald Reagan’s “policy of seeking change in South Africa through quiet diplomacy.” The demonstrations were coordinated by the lobby TransAfrica, which led America’s (and ultimately, the world’s) movement to isolate South Africa, and to force it to repeal its apartheid laws.

Continue reading »

GAO: State Dep’t must step up diplomacy to enforce N. Korea sanctions

The General Accountability Office has released a new report on the enforcement of sanctions against North Korea. The report, requested by Senate Foreign Relations Committee Chairman Bob Corker, will probably influence the contours of the Senate’s version of the North Korea Sanctions Enforcement Act. You can read the full report here and a summary here, and listen to a podcast here.

The report correctly points to a key flaw in the enforcement of the sanctions that exist now — a lack of financial intelligence. The reasons for this, however, are multi-layered. The report explains some of those underlying reasons, but not all of them.

Agency officials cited obtaining sufficient information about North Korean persons to be their greatest challenge in making sanctions determinations. Most North Korea–specific sanctions authorities require a determination that a person engaged in a specific activity…

. However, officials said that gathering information on the activities of North Korean persons and personal identifying information can be difficult because of the nature of North Korean society, whose citizens are tightly controlled by the government. Without sufficient information, the United States could mistakenly designate and therefore block the assets of the wrong person, particularly one with a common surname. [GAO 15-485, p.

Continue reading »

N. Korea’s expatriate labor needs ethical and financial limits

N. Korea increasingly relies on expat labor for hard currency

A series of new reports suggests that the export of labor has become a major source of income for Pyongyang. The Financial Times cites an NGO estimate that the regime earns $1.5 to $2.3 billion a year from contract labor, in line with educated estimates of its annual revenue from missile sales ($1.5 billion) or arms deals with Iran ($1.5 billion to $2 billion). Ahn Myeong-Cheol, a former prison camp guard and leader of the NGO NK Watch, says that there are now 100,000 North Koreans working overseas, double the number it had posted overseas in 2012. Ahn believes North Korea is increasing its use of contract labor to compensate for arms revenue lost to U.N. Security Council sanctions. Marzuki Darusman gives the lower estimate of 20,000. In testimony appended to the end of this post, Greg Scarlatoiu of the Committee for Human Rights in North Korea puts the figure at around 53,000. He also offers this very specific breakdown:

Currently, 16 countries reportedly host workers sent by the North Korean regime: Russia (20,000), China (19,000), Mongolia (1,300), Kuwait 5,000), UAE (2,000), Qatar (1,800), Angola (1,000), Poland (400-500), Malaysia (300), Oman (300), Libya (300), Myanmar (200), Nigeria (200), Algeria (200), Equatorial Guinea (200) and Ethiopia (100).4 Although North Korea is not a member of the International Labor Organization (ILO), all but two of the 16 states officially hosting North Korean workers are ILO members.

Continue reading »

Obama Administration hints at sanctioning N. Korean human rights violators

A year after a U.N. Commission of Inquiry found the North Korean government responsible for crimes against humanity whose “gravity, scale and nature … reveal a State that does not have any parallel in the contemporary world,” action at the U.N. has effectively stalled in the face of Chinese and Russian veto threats. As I have written before, Congress can impose effective sanctions on those responsible in ways that the U.N. can’t and the Obama Administration won’t. But now, the administration is warning that it is “reviewing options” to hold North Korean officials accountable for their crimes against humanity:

“We’re reviewing options related to accountability for North Korean officials responsible for serious human rights violations, which the Commission of Inquiry concluded in many instances may amount to crimes against humanity,” a State Department spokesperson told VOA’s Korean Service, in reference to a United Nations panel report on North Korea’s human rights conditions released in February 2014.

The State Department official said Friday the U.S. will work with the international community to press for North Korea “to stop these serious violations, to close its prison camps, to urge greater freedoms for North Koreans and to seek ways to advance accountability for those most responsible.” [VOA]

According to the VOA report, the spokesman and Sung Kim, U.S.

Continue reading »

Expert: cash shortage could undermine Kim Jong Un’s succession

You won’t find a more authoritative open-source study of North Korea’s police state than the one Ken Gause did for the Committee for Human Rights in North Korea. When it comes to North Korea’s internal security, kremlinology, and command systems, Gause earns a great deal of respect among North Korea watchers. So when Ken Gause tells Yonhap that Kim Jong Un “has not fully consolidated his power,” and is at risk of failing to do so “in a couple of years” because of a lack of hard currency, I pay attention to that. Gause explains:

“The royal economy, which is part of the economy surrounding the Kim family, is losing money. They can’t bring in as much money. He’s having to spend about twice as much money than his father did to buy support within the regime,” Gause said. “He doesn’t have the resources to be able to consolidate his power and buy relationships.”

Power struggles, which have been frozen in place since Kim’s execution of his uncle Jang Song-thaek, could thaw out in one to two years, and if those power struggles happen, Kim no longer has the regent structure around to protect him, the expert said.

“He is now directly exposed to those power struggles and he can be undermined by that.

Continue reading »

Why does North Korea still need food aid? (Updated)

The UN aid agencies working in North Korea — the Food and Agriculture Organization, the UN Population Fund, UNICEF, the World Food Program, and WHO (writing collectively as Relief Web) — have published a new report. I draw three main conclusions from it. First, despite some reports of improved food production, the humanitarian situation is still bad. Second, aid agencies still aren’t being forthcoming about the most important reasons for that. Third, various UN entities are working at cross purposes, and don’t share a single coherent vision of how to balance providing for North Koreans in need with responding to the aggressive behavior of their government.

The Relief Web report finds that “[f]rom a population of 24.6 million, approximately 70 per cent (18 million) are food insecure and highly vulnerable to shortages in food production.” As a misery index, this is a lower estimate than in the December 2013 WFP and FAO study, which found that 84% of North Korean households have “poor” or “borderline” food consumption, a difference that’s probably attributable to slightly different questions and methodologies. (The 2013 study looked at consumption during the lean season, the Relief Web report focuses on dietary diversity.) The new report also finds that “[t]he chronic malnutrition (stunting) rate among under-five children is 27.9 per cent (about 540,000) while acutely malnourished (wasting) affects four per cent of children under-five (about 90,000).”

As always, one should accept such estimates with great caution.

Continue reading »

On N. Korea’s crimes against humanity, Congress can do what Obama won’t and the U.N. can’t.

It’s nearly a sure bet that you hadn’t heard that last month, American diplomats in Geneva co-sponsored yet another resolution (HRC/28/L.18) at the U.N. Human Rights Council, expressing “deep concern about human rights violations in North Korea.” For those who may have lost track, that follows the HRC’s vote to begin an inquiry into human rights in North Korea (March 2013), the presentation of the report (February 2014), an HRC vote endorsing the COI report (April 2014), a General Assembly resolution (November 2014), and eventually, placement of the human rights question on the Security Council’s permanent agenda (December 2014). Placing the issue on the UNSC’s agenda was not subject to a veto for the simple reason that this move, by itself, is likely to amount to approximately nothing as long as China and Russia remain certain to veto any meaningful resolution.

North Korean diplomats reacted to each of these events with lies, denials, whataboutisms, insults, and the occasional racial slur. Safe to say, there is no sign that Pyongyang has any plans to accept political reform.

And yet, the U.S. diplomats have the gall to call the latest HRC resolution introduction “important,” apparently expecting us to forget that the move puts us right back where we were a year ago.

Continue reading »

With Sony in mind, Obama signs new cyberwar E.O., but will he enforce it?

On Wednesday, the President signed a new executive order authorizing sanctions against anyone the State and Treasury Departments decide has engaged in conduct we’d colloquially call cyberespionage, cyberwarfare, or cyberterrorism. The new categories of sanctionable conduct include —

(A) harming, or otherwise significantly compromising the provision of services by, a computer or network of computers that support one or more entities in a critical infrastructure sector;

(B) significantly compromising the provision of services by one or more entities in a critical infrastructure sector;

(C) causing a significant disruption to the availability of a computer or network of computers; or

(D) causing a significant misappropriation of funds or economic resources, trade secrets, personal identifiers, or financial information for commercial or competitive advantage or private financial gain. [link]

The E.O. also targets the theft of trade secrets and intellectual property, and in a novel provision, also authorizes the blocking of property of those who profit from those crimes. Deep breath now:

(A) to be responsible for or complicit in, or to have engaged in, the receipt or use for commercial or competitive advantage or private financial gain, or by a commercial entity, outside the United States of trade secrets misappropriated through cyber-enabled means, knowing they have been misappropriated, where the misappropriation of such trade secrets is reasonably likely to result in, or has materially contributed to, a significant threat to the national security, foreign policy, or economic health or financial stability of the United States; [link]

The order also contains standard (but crucial) clauses authorizing sanctions for assisting, sponsoring, facilitating, or attempting to commit those crimes.

Continue reading »

Tell me who you boycott and I’ll tell you who you are: On Indiana, S. Africa & N. Korea

As I write this, advocacy groups nationwide are recomposing the tested strategy of using economic isolation to coerce an oppressive, backward regime to improve its human rights practices. The regime, unfortunately, isn’t North Korea; it’s Indiana. That strategy, however, is a moral muscle memory to those of us who came of age as America and Europe mobilized to boycott and sanction apartheid out of existence. Then, when President Reagan came out for “constructive engagement” with South Africa, he was met with such universal outrage that congressional Republicans abandoned him and overrode his veto of the Comprehensive Anti-Apartheid Act of 1986. Until F.W. de Klerk put South Africa irreversibly on the path to democracy, breaking the cultural or economic boycotts would have been career suicide for any celebrity, and would have risked a shareholder revolt in any corporation.

By May of 1990, however, Nelson Mandela was a free man, and South Africa was on that path, irreversibly. By then, it did not trouble my conscience to accept a temporary job there. I arrived there just late enough to watch apartheid die from the vantage of a conservative mining town just outside Johannesburg, one repeal at a time, but just soon enough to witness a system that was grossly unjust, profoundly loathsome, and only recently and reluctantly self-aware of this.

Continue reading »

Must read: Iranian bank handled arms transactions for Tehran, Pyongyang through Seoul branch

Investigative journalist Claudia Rosett, who covered the Tienanmen Massacre and exposed the U.N. Oil-for-Food scandal, has written an extensive report about the operations of Iran’s Bank Mellat in Seoul during the administrations of Roh Moo-Hyun and Lee Myung-Bak:

In a cable dated March 20, State asked its embassy in Seoul to tell the South Korean government that “Bank Mellat has facilitated the movement of millions of dollars for Iran’s nuclear program since at least 2003.”

Four days later, State followed up with a cable asking its embassy to “Inform Seoul that the U.S. views Bank Mellat’s Seoul branch as a key node for facilitation of proliferation-related activities.” That same cable included a list of U.S. allegations regarding specific transactions of Bank Mellat in Seoul. For example, State alleged that in 2007 Bank Mellat in Seoul had served as an intermediary for a Hong Kong company that was “almost certainly a front company for Tanchon Bank (North Korea’s primary weapons trade bank)” and that Bank Mellat in Seoul had played a role in financial transactions related to Iran’s ballistic missile program, purchase of a surface-to-air missile system, and illicit nuclear procurement networks in China.

Tanchon is a front for KOMID, the Korea Mining Development Trading Corporation, a notorious proliferator for North Korea.

Continue reading »

Breaking news! FINCEN rehashes same old North Korea advisory.

To hear Yonhap tell it, the Treasury Department’s Financial Crimes Enforcement Network just stuffed Kim Jong Un into a size XXXXL iron maiden, financially speaking:

The United States has issued another advisory on financial transactions with North Korea, designating the communist country as a jurisdiction with high money laundering and terrorist financing risks, a U.S. report said Wednesday.

The guidance to U.S. financial institutions, issued Monday by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), is based on the international money laundering watchdog Financial Action Task Force’s updated list of countries with anti-money laundering and counter-terrorist financing deficiencies, according to the Radio Free Asia (RFA) report. [Yonhap]

The truth is much less dramatic. In reality, FINCEN didn’t “designate” North Korea as anything. It’s just echoing the latest iteration of the same call for “countermeasures” against North Korean money laundering that the Financial Action Task Force (FATF) has been issuing since 2011. If you actually read FINCEN’s advisory, there’s a section called “Summary of Changes to this List,” which shows that the advisory language applicable to North Korea didn’t change at all.

Jurisdictions in this section (Iran and DPRK) are subject to the FATF’s call on its members and other countries to apply countermeasures to protect the international financial system from AML/CFT risks.

Continue reading »

Russia’s nuclear cooperation with N. Korea violates at least three UNSC resolutions

My final excerpt from the draft U.N. Panel of Experts report is a lengthy graf (below the fold) describing long-standing and continuing Russian assistance to, and cooperation with, some of the same scientists involved in North Korea’s nuclear weapons program.

It’s hard for me to understand how this is not a violation of the UNSC sanctions. Despite the fact that key scientists in designated North Korean agencies (for example, its General Bureau of Atomic Energy) were invited to do research in Russia, Russia argues that technically, it didn’t invite any designated individuals, that its own facility’s purposes are peaceful, and that North Korea “should not be excluded from fundamental science activities.”

The POE responds that “all … nuclear programmes” means what it says. I’ll helpfully insert the relevant provisions, starting with this one from UNSCR 1718 (2006):

6. Decides that the DPRK shall abandon all nuclear weapons and existing nuclear programmes in a complete, verifiable and irreversible manner, shall act strictly in accordance with the obligations applicable to parties under the Treaty on the Non-Proliferation of Nuclear Weapons and the terms and conditions of its International Atomic Energy Agency (IAEA) Safeguards Agreement (IAEA INFCIRC/403) and shall provide the IAEA transparency measures extending beyond these requirements, including such access to individuals, documentation, equipments and facilities as may be required and deemed necessary by the IAEA;

And there is this, from UNSCR 1874 (2009):

“8.   Decides that the DPRK shall abandon all nuclear weapons and existing nuclear programmes in a complete, verifiable and irreversible manner and immediately cease all related activities, shall act strictly in accordance with the obligations applicable to parties under the NPT and the terms and conditions of the IAEA Safeguards Agreement (IAEA INFCIRC/403) and shall provide the IAEA transparency measures extending beyond these requirements, including such access to individuals, documentation, equipment and facilities as may be required and deemed necessary by the IAEA;

And this, from UNSCR 2094 (2013):

“5.   Condemns all the DPRK’s ongoing nuclear activities, including its uranium enrichment, notes that all such activities are in violation of resolutions 1718 (2006), 1874 (2009) and 2087 (2013), reaffirms its decision that the DPRK shall abandon all nuclear weapons and existing nuclear programmes, in a complete, verifiable and irreversible manner and immediately cease all related activities and shall act strictly in accordance with the obligations applicable to parties under the NPT and the terms and conditions of the IAEA Safeguards Agreement (IAEA INFCIRC/403);

Under Section 104(a) of the NKSEA, the Russian institute concerned would be subject to mandatory asset blocking, and possibly to criminal prosecution leading to the forfeiture of its U.S.-based assets.

Continue reading »

Why legal investments in North Korea are a money laundering risk

You’ve often seen me write about the importance of “financial transparency” in transactions with North Korea. For a decade, economic engagement has mostly been done by one of two models: (1) controlled interactions with members of the elite, the actual effects of which are negligible at best; and (2) barbed-wire capitalism, where a few North Korean officials relay orders from foreign managers to hand-picked workers, and where the regime seals the whole enterprise off to prevent it from influencing the local community.

The former are, for the most part, of little financial significance. The latter may represent a significant source of income for illegitimate uses, and may also help the regime hide its flows of dirty money.

It wasn’t supposed to be this way by now. The idea behind economic engagement was to gradually draw North Korea into compliance with the rules that the civilized world lives by. Yet ten years later, the South Korean Unification Ministry can’t tell us how much (if anything) Kaesong’s workers receive after the regime takes its cut from their wages, and the Undersecretary of the Treasury recently expressed his concern about just how North Korea is spending that money.

The U.N. Panel of Experts now expresses a related worry — that North Korea could be using its ostensibly legal businesses to conceal and launder the proceeds of illicit activity:Screen Shot 2015-03-03 at 7.32.53 AMScreen Shot 2015-03-03 at 7.33.11 AMA few days ago, we saw that North Korean diplomats have been smuggling gold to earn hard currency for Pyongyang.

Continue reading »

North Korea evades U.N. sanctions with shell games, spell games, and whack-a-mole

On any given day, the U.S. Treasury Department’s Office of Foreign Assets Control may publish several pages of new designations for the list of Specially Designated Nationals. Inevitably, most of the designations will be designations of aliases. That’s because one of the oldest sanctions-evasion tricks is renaming an entity, so that when banks type its name into their software, they don’t get a hit that might warn them to decline the transaction, block the account, or file a Suspicious Activity Report.

In the case of North Korea, there’s an additional and related problem. North Korea can also play spell games with the English transliteration of Korean names. The U.N. Panel of Experts has specifically raised that issue as a problem that requires closer attention from national governments.

So when Treasury designates a list of North Korean smuggling ships, as it did last July, it’s not enough to publish their names and IMO numbers and call it done.

Screen Shot 2015-02-27 at 6.53.33 PM

Like any sanctions program, the enforcement of sanctions against North Korea requires constant attention and follow-up.

Screen Shot 2015-02-27 at 7.07.49 PM

It’s a long game of what Marcus Noland calls Whack-a-Mole. And judging by the POE’s latest report, we aren’t winning that game.

Screen Shot 2015-02-27 at 6.44.03 PM

This isn’t a grand new revelation. NK News’s Leo Byrne, one of the very best reporters to cover North Korea for any publication, noticed this last October.

Continue reading »

Yes, North Korea is still using the dollar system to launder its money.

The Financial Action Task Force has re-issued its call for “countermeasures” against the risks of money laundering and terrorist financing emanating from North Korea. The FATF’s call is not significantly different from advisories the FATF has issued since 2011, but it is significant in one way.

More sensible Korea-watchers are accustomed to the pavlovian response of the South Korean press, and of certain American academics, whenever North Korea hints at being willing to talk. We saw this again after Kim Jong Un’s New Year speech, which was (as is traditional) so selectively overanalyzed that Kim Jong Un’s intent could not be identified from dental records. We saw it when the editors of The New York Times seized on a risible North Korean offer and called on President Obama to “test North Korea’s intentions” — it would be equally enlightening to test Dennis Rodman’s urine — as if the last 20 years have tested nothing. By my count, North Korea has conducted three underground tests of its intentions. But I digress.

We saw the same Pavlovian response in some reporters after North Korea agreed to hold talks with the FATF, and after its Central Bank issued a statement committing “to implementing the action plan of ‘international standard’ for anti-money laundering and combating the financing of terrorism.” (As if.) Yonhap even took it seriously when Pyongyang announced that it had established its own anti-money laundering body.

Continue reading »

North Korea’s arms trade flourishes as U.S. diplomacy falters

The latest U.N. Panel of Experts report is a bleak one for the U.N., and for an Obama Administration that seems content to outsource its policy to it. North Korea shows no sign of complying with the resolutions, and every sign of pursuing its WMD programs at full speed. Yongbyon was active for a while last year, and as recently as last September, there were signs of new excavation at North Korea’s nuclear test site at Punggye-ri. North Korea has improved its Seohae missile test site, tested a KN-08 engine, and fired off large numbers of rockets and missiles from its east coast.

By design, the U.N. can’t enforce its own resolutions, and governments’ enforcement of the U.N. sanctions is flagging. This chart from the latest U.N. Panel of Experts report should tell you most of what you need to know:

Screen Shot 2015-03-02 at 8.23.14 AMIn other words, most member states are less likely to have reported back to the U.N. on their enforcement of North Korea sanctions than they were to have reported on their enforcement of other U.N. sanctions. We’ll turn to why later in this post, but a number of anecdotes reported by the POE should give you a good idea:

– Iran (of course) has been shipping North Korean weapons to Yemen (most likely to Houthi militias).

Continue reading »
1 2 3 17