Archive for Sanctions

The U.N. Panel of Experts is starting to follow Kim Jong Un’s money.

The main headlines that will come of the U.N. Panel of Experts’ new report on the enforcement of North Korea sanctions will mostly cover the Chong Chon Gang incident — the large amount of weapons seized, the brazenness of its deception, and the complexity of its corporate and financial links to entities operating from Russia, Singapore, and China. There has been relatively little attention paid to the newly revealed evidence that North Korea has helped Syria and Iran arm terrorists. In this post, I’ll discuss some other important conclusions we can draw about the enforcement of UNSCR 2094 a year after its adoption.

1. North Korea is still making a lot of money selling weapons.

In case you doubted it, the latest POE report finds that North Korea “remains … actively engaged in trade in arms and related materiel in violation of” U.N. Security Council resolutions, and concludes, “[T]here is no question that it is one of the country’s most profitable revenue sources.” How profitable? The POE doesn’t pretend to know and “doubts that all existing illicit cooperation has been identified,” but something is paying for all that rice and baby formula ski lift equipment. There has been a construction boom in Pyongyang recently, and those who know how Kim Jong Un is paying for it aren’t saying.

Clearly, North Korea is doing a brisk trade in weapons, mostly with Africa and the Middle East. Paragraphs 90 to 115 of the report recount a long series of reports of North Korean arms smuggling — everything from the fuzes in rockets fired at Israel to specialized alloys to submarine parts to gas masks — that the POE is either still investigating, or found out about after the fact and by happenstance. It’s obvious that the sanctions are leaky, and the U.N. POE admits it.

That’s why I can only shake my head when the Foreign Minister of Korea says that the POE report shows that “relatively successful in restricting the country’s ability to raise funds.” The statement could only mean two things: either he didn’t read the report, or South Korea isn’t serious about enforcing these sanctions at all. I mean, just have a look:

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Obviously, I can’t say what this construction costs, but it’s safe to assume it’s enough to feed a lot of hungry North Koreans. The POE doesn’t know how North Korea can afford to build two high-rise bank towers in Pyongyang, either, but judging by its inference about the arms trade, it’s fair to say that plenty of the money that’s paying for these buildings is illegally derived and laundered. This is not a picture of effective enforcement.

The report calls for no new sanctions, but once you read it, it’s apparent why: states aren’t even enforcing the sanctions that exist now. It says that member states already have adequate enforcement tools at their disposal — a point I’d quibble with — although it’s obvious that not all member states are using those tools.

2. China is violating North Korea sanctions — flagrantly.

China, naturally, is caught in flagrante delicto. The POE recounts the story of a trade show in China last year, when a concerned citizen spotted a booth festooned with a banner bearing the name of Korea Ryonha Machinery Joint Venture Corporation, a subsidiary of a firm designated by the U.N. for proliferation activities, and an entity named on Treasury’s list of Specially Designated Nationals.

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When the POE pointed that out, hilarity ensued:

149. In its reply to the Panel’s inquiry, Chinese authorities reported that Ryonha’s name was not on the list of exhibitors provided by the Democratic People’s Republic of Korea, nor did it appear on any booth before the fair’s opening. Upon discovering its presence, China requested Ryonha to withdraw from the fair and ensured that the relevant persons left its territory (according to Panel information there were at least seven Democratic People’s Republic of Korea nationals working on behalf or at the direction of Ryonha during the fair).

150. The Panel also discovered that, even though designated, Ryonha remained listed as a “recommended company and member” on the website of the China- Democratic People’s Republic of Korea Trade Network.103 In reply to an enquiry from the Panel, China responded that Ryonha had been removed from the listing.

At the end of the day, the POE wasn’t even able to confirm that the ChiComs had frozen Ryonha’s assets and seized the machinery on exhibit, as required under UNSCR 2094. Another North Korean firm, Leader International, still appears on Hong Kong’s official business registry more than a year after its U.N. designation.

Embarrassments like this will not cause China to actually enforce the sanctions it supported in the Security Council. Nothing less than sanctions against the Chinese entities that knowingly fail to enforce sanctions will do that. And because China would block those additional sanctions at the U.N., it’s up to the Treasury Department, which can bar those companies from the global financial system, to put some teeth into the sanctions now.

3. Other nations, including nations in Europe, aren’t taking sanctions seriously enough.

China isn’t the only member state that has failed to enforce North Korea sanctions effectively. Taiwan, in particular, has emerged as North Korea’s main new source of precision machine tools and related technology since it lost its access to the Japanese market. Plenty of states haven’t met their requirements to file compliance reports with the POE. Others aren’t reporting violations they find out about.

Notably, not a single Member State reported a violation of the luxury goods ban, despite the many violations that occurred at the Masik Pass Ski Resort. Even the U.K. failed to report North Korea’s attempt to purchase a yacht from a British manufacturer.

In most of these cases, the non-enforcement isn’t coming from the highest levels of the government, as with China. It’s a simple problem of member states failing to make enforcement a priority, or failing to reign in the profiteers in their jurisdictions. That’s a problem that could be dealt with through competent bilateral diplomacy in most cases, though sanctions and criminal prosecution should be options for deserving violations.

There is an another, more fundamental problem — what, exactly, are member states supposed to report? U.N. definitions of controlled items are often too narrow. For example, ski lift equipment doesn’t fit the U.N. definition of a “luxury good.” (Update: It does fit the U.S. and EU definitions.)

The same problem recurs with North Korea’s acquisition of missile parts. When the South Korean Navy recovered the remains of the last Unha-3 from the bottom of the Yellow Sea, it found that the rocket contained numerous foreign components, including some of U.S. origin, that were not on the U.N. list of controlled items.  A shipment intercepted by “a Member State” contained parts described as being for “freezing carriers”and “fish-factory mother ships,” all of which were “spare parts or other items related to Scud ballistic missile systems.” Yet those items also did not meet “the criteria defined by the lists of prohibited items, material, equipment, goods and technology related to nuclear, other weapons of mass destruction and ballistic missile programmes.”

This calls for the POE itself to proffer an expanded list of controlled dual-use items, something that was (but for a few especially sensitive items) lacking in the POE’s report. (Update: If it wanted to, the U.N. could borrow or cross-reference the U.S. Munitions List.)

4. Existing financial sanctions on North Korea only show the tip of a big, dirty iceberg.

The best news in this report is that it appears to be the work of people who are intelligent, inquisitive, and serious about their work. They’ve begun investigating how North Korea launders the money it makes from its illicit activities:

166. During its mandate, the Panel commissioned an in-depth study to learn more about how the Democratic People’s Republic of Korea makes use of foreign-based firms and individuals to evade scrutiny of its assets, financial and trade dealings. It sought a comprehensive view of the Democratic People’s Republic of Korea’s commercial footprint abroad to learn how entities and individuals that have figured in its investigations relate to this broader network and to one another. The Panel believes that an examination of those linkages would assist its efforts to detect and advise the Committee and Member States about others who might play controlling and supportive roles in evading trade and financial measures adopted in the resolutions.

167. [....] The study provided the Panel with a rich database of leads for further investigation. Starting with less than 500 loosely connected or unconnected individuals and entities that had come to the Panel’s attention during its investigations, the study found connections to an additional 700 individuals, more than 1,600 companies and nearly 2,500 corporate identifiers.

168. The results of the study show that the operations of the Democratic People’s Republic of Korea abroad no longer fit the description of “two persons and a fax machine”. Instead, it found a relatively mature, complex and international corporate ecosystem. Patterns that emerge from examination of the connections between identified individuals and entities show six large, discrete networks, all of which share links.

Other North Korean banks come under suspicion because of the POE report.  A table at Annex XXXIV gives a list of banks known to be affiliated with North Korea, including those designated by the U.S., the U.N., and the EU. But among those not designated —

  • The Ilshim International Bank “was reported to be associated with the Ministry of People’s Armed Forces.”
  • The Koryo Bank is “possibly associated with Office 38 of the KWP.” (Office or Bureau 38 is the slush fund of Kim Jong Un and his court, and receives funds from the more notorious Bureau 39, which is in charge of laundering the proceeds of North Korea’s illicit activities by co-mingling those proceeds with the proceeds of “legitimate” business operations, like its overseas restaurants. The restaurants are believed to fall under the control of Bureau 39.)
  • The Kumgang Bank is “described as a window of the Foreign Trade Bank,” which was recently designated by the Treasury Department for its involvement in proliferation.
  • The North East Asia Bank is “[a]ssociated with the Korea National Insurance Corporation,” whose massive insurance fraud scam was the subject of international litigation and revealed by former KNIC official Kim Kwang Jin.

Curiously absent from the list is Sili Bank, which is based in Shenyang, China, and which briefly aroused international curiosity when it began offering e-mail services to and from North Korea, but which has no functioning English web site today. At one time, Sili Bank was the only game in town for anyone, including North Korean companies, to obtain international e-mail service.

Ocean Maritime Management, which the Washington Post describes as “a Pyongyang-based company with links to the North Korean government,” used a Sili Bank e-mail address to send a protest letter to the Panamanian authorities when they boarded the Chong Chon Gang and found a cargo of MiGs, MiG engines, missiles, and other weapons hidden under a layer of sugar. OMM, which arranged the shipment from its Vladivostok office, denied knowing of any cargo other than the sugar, which it describes as “essential for our people’s living” and “a cargo of humanitarian nature.”

5. Air Koryo is effectively an arm of the North Korean Air Force, and is involved in suspicious financial dealings.

North Korea’s General Administration of Civil Aviation, which is controlled by the North Korean Air Force and in turn controls Air Koryo, also lists a Sili Bank e-mail address. Air Koryo falls under the POE’s suspicion for a series of “dubious” debts owed to it by “recently formed shell companies” related to gold trading.

The Panel is suspicious that the Democratic People’s Republic of Korea may be using or considering the use of precious metal sales on credit terms to create “accounts payable”. Such sources for funds would not necessarily show as being under its control and even could be swapped with other firms to further distance its connection and thereby better evade sanctions and enhanced due diligence by banks.

Because of its military links, the POE says that “providing financial transactions, technical training, advice, services or assistance related to the provision, maintenance or use of Air Koryo’s aircraft” could be a violation. It will be interesting to see whether future POE reports confirm whether Sili Bank (a) still exists and (b) is knowingly facilitating illicit activities.

6. North Korea’s overseas monument business may be a money laundering scheme, too.

Finally, North Korea’s work building memorials and statues overseas has drawn its share of snark from bloggers and reporters, but the POE gives us cause to suspect that those operations could be used as fronts for money laundering, too:

Available media reports, particularly about projects in several African countries, note that project values appear inflated. Participation in overseas construction also takes place through joint ventures where a foreign partner could hold funds on behalf of or for the benefit of designated entities and prohibited programmes.

For example, if the Syrians wanted to pay for North Korean technical assistance with a missile program or a reactor while avoiding detection, they could commission the construction of a grandiose memorial at an inflated price. All perfectly legal, right?

If so, the POE should be wondering whether North Korea has recently made illicit deals with Zimbabwe and Namibia. Ironically, Zimbabwe once paid North Koreans to train their troops, who proceeded to kill tens of thousands of civilians in areas backing the Zimbabwean African Peoples’ Union, led by Joshua Nkomo. Today, Zimbabwe is paying North Korea to build a statue of Joshua Nkomo, and Zimbabwean dissidents have taken note.

A Christian blogger in Namibia also protests his government’s hiring of North Korea to build political monuments in Windhoek, when North Korea is rumored to be shooting people for having contact with Christian missionaries. (By contrast, nearby Botswana severed diplomatic relations with North Korea when the U.N. COI report came out.)

U.N. Panel of Experts releases new report on N. Korea sanctions enforcement

The report, which you can find here, publishes photographs and a detailed description of the weapons seized from the Chong Chon Gang.

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I had not realized how big the shipment was:

72. The Panel found that the hidden cargo (see figure XI, a complete list at annex VII and detailed analysis at annex VIII) amounted to six trailers associated with surface-to-air missile systems and 25 shipping containers loaded with two disassembled MiG-21 aircraft, 15 engines for MiG-21 aircraft, components for surface-to-air missile systems, ammunition and miscellaneous arms-related materiel. This constituted the largest amount of arms and related materiel interdicted to or from the Democratic People’s Republic of Korea since the adoption of resolution 1718 (2006).

The POE goes into great detail about the modifications to the ship, the false bills of lading, deceptive statements by both the Cuban and North Korean governments, and other deceptive practices to conceal the cargo, its ownership, and its destination. It also calls out a Vladivostok-based shipping company, Ocean Maritime Management Company, for operating the Chong Chon Gang without listing it as a part of its fleet.

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The report concludes that the incident was a violation, but suggests that in many cases, North Korea isn’t the final destination for the weapons, but a middleman that buys up old equipment, refurbishes it, and resells it. In this case, as I noted here, the Chong Chon Gang MiG engines already appeared to have been refurbished when shipped.

The POE also implicates Burma, Eritrea, Ethiopia, Tanzania, Uganda, Somalia, and of course, Iran for suspected arms deals with North Korea. This casts considerable doubt on the news item here, suggesting that North Korea exported only $11 million in arms last year.

The POE also discusses suspected violations of the luxury goods ban, including the Masikryong ski resort, a attempted yacht purchase from the UK, and Dennis Rodman’s gifts to Kim Jong Un.

Most tantalizingly, the report begins to examine North Korea’s sanctions-busting financial arrangements in greater detail. Here’s a taste.

164. Financial measures in the resolutions, along with the strengthening of standards governing international finance, have combined to change fundamentally the financial environment in which the Democratic People’s Republic of Korea operates. In particular, it has become much more difficult to make direct use of its banks to remit earnings and make payments for transactions in prohibited goods, training and technology. The long-term trajectory of changes to improve standards promoted by the Financial Action Task Force (FATF)106 promises it will face even more difficulty in future. The technical efforts of FATF, especially recent steps taken to help counter the financing of proliferation, complement Security Council actions.

165. Consequently, the Democratic People’s Republic of Korea has had to adapt, explore and perfect ways to evade detection and circumvent constraints on the financing of prohibited programmes and activities. All evasion techniques involve higher risk, extra cost and loss of timeliness. The Panel has begun to examine more deeply the institutional frameworks and operational techniques it employs. It is experienced in using foreign-based individuals, front companies and shell companies and joint ventures engaged in legitimate business to mask illicit activities associated with sourcing nuclear, ballistic missile and other weapons of mass destruction programmes. Ownership structures often are complex and opaque and take advantage of lax rules in some Member States regarding the identification of beneficial owners.

The report calls for a more in-depth investigation of North Korea’s financial activities, connections, and methods. I certainly look forward to reading it.

I think the U.N. has been trying to confuse me by being effective recently. It’s working. But then, the U.N. still can’t really enforce measures like these without the cooperation of U.S. and EU financial regulators. POE reports can, however, be highly complimentary of national enforcement authorities, including those of Treasury.

Unlike most other U.N. products, Panel of Experts reports make for interesting reading, and often contain hard-hitting findings. Here are links to previous UNPOE reports from 2010, 2012, and 2013, along with the U.N.’s list of persons designated for asset blocking. Note that the list does not match the EU list, or the U.S. Treasury list of Specially Designated Nationals. Members states (and the U.N. itself) have far to go to harmonize their enforcement efforts, but reporting on those gaps is a good beginning.

In the New York Times: Pyongyang’s Hunger Games

Here’s the latest from Professor Lee and me on the policy implications of the Commission of Inquiry’s report. The theme is that sanctions can be a tool to make Kim Jong Un’s misused wealth a source of funding for the U.N.’s underfunded aid programs — assuming Kim Jong Un allows the aid to be monitored.

Look how fast Treasury can freeze assets when it wants to

Yesterday, Treasury’s Financial Crimes Enforcement Network (FINCEN) released this advisory to banks around the world to be on the lookout for deceptive financial practices designed to move the ill-gotten wealth of 18 former Ukrainian officials, including Viktor Yanukovich. The chilling effect of this will likely be that banks around the world refuse to move large sums of money for mysterious figures linked to these 18 people, for fear of losing their access to the financial system. Although the advisory says “U.S. financial institutions,” in financial regulation, that term is understood to mean any financial institution when it’s accessing the U.S. financial system. As a practical matter, that’s just about every bank on earth, especially when you consider that around 80% of international transactions are denominated in dollars.

Nothing about that troubles me. You’ve probably seen the pictures of Yanukovich’s palace by now and made the sensible inference that he didn’t pay for that on a civil servant’s salary. That wealth is likely derived from kleptocracy, something Treasury has gotten increasingly good at blocking as it moves through the financial system. So nothing here should be read as a dig against Treasury. It’s only doing what the political leadership is telling it to do.

Yet, weeks after the U.N. Commission of Inquiry issued a report that makes North Korea’s crimes against humanity pretty much undeniable — and months after even I knew that the Commission would say as much — the Obama Administration has done exactly nothing about it. It hasn’t even committed itself to push for a vote in the U.N. Security Council.

Let’s unpack what that tells us about the priorities of the Obama Administration. Kleptrocracy that hasn’t resulted in mass starvation is now a higher enforcement priority than kleptrocracy that may have killed 2.5 million people, and that perpetuates one of the world’s top threats to both the global financial system and the global counter-proliferation system. Massive non-lethal corruption is a top priority. Crimes against humanity — including murder, rape, extermination, mass starvation, racially motivated infanticide, and the operation of gulags — are not a priority for the Obama Administration, period.

Either (1) John Kerry really thinks he’s this close to Agreed Framework III, (2) we’ve outsourced our North Korea policy to our friends in Beijing, or (3) nobody gives a damn.

Samantha Power was not available for comment.

Open Sources, March 6, 2014

~  1  ~

THANK YOU TO THOSE WHO CAME to this event on Capitol Hill yesterday and helped make it a huge success. We filled the room well beyond its capacity. There was an energy in the room that went beyond the question of numbers. It was who was there — young, old, in-between, conservatives, liberals, and a variety of ethnicities, including a very sizable Korean-American contingent. I don’t have words to express my admiration for the leadership of Suzanne Scholte, Greg Scarlatoiu, and Judy Yoo of the Federation of Korean-Americans. Human Rights Watch also made a very welcome contribution to the discussion.

~  2  ~

ADRIAN HONG, in The Christian Science Monitor:

We teach our children the heavy legacies of humanity’s grave past injustices: Nanjing. Auschwitz. The Killing Fields. Rwanda. Srebrenica. Darfur. Implicit in such education is the belief that had we been alive, or had we been in positions of influence while the great atrocities of the past century had been perpetrated, we would’ve acted decisively to stop them.

But the moral clarity with which we judge those who preceded us is elusive when we see our world today. Museums and memorials to the fallen victims of yesterday’s tyrants are meaningless if they do not translate to stands against the perpetrators of brutality today.”

~  3  ~

ANDREW W. KELLER, an American lawyer in Korea, writes in The American Thinker:

The United States Congress should pass H.R. 1771, the North Korea Sanctions Enforcement Act of 2013, which is currently in committee.  Sanctions restrict the export to and import from North Korea of goods and technology for the use, development, or acquisition of nuclear, chemical, and biological weapons.  Sanctions also ban the export of luxury goods to North Korea, a tactic that could help undermine the North Korean regime, which bribes its VIPs in Pyongyang with imported luxury goods while people in the countryside starve. 

~  4  ~

THE WASHINGTON POST writes a strongly worded denunciation of the Obama Administration’s foreign policy, and of the isolationist escapism of too many Americans recently:

The urge to pull back — to concentrate on what Mr. Obama calls “nation-building at home” — is nothing new, as former ambassador Stephen Sestanovich recounts in his illuminating history of U.S. foreign policy, “Maximalist.” There were similar retrenchments after the Korea and Vietnam wars and when the Soviet Union crumbled. But the United States discovered each time that the world became a more dangerous place without its leadership and that disorder in the world could threaten U.S. prosperity. Each period of retrenchment was followed by more active (though not always wiser) policy. Today Mr. Obama has plenty of company in his impulse, within both parties and as reflected by public opinion. But he’s also in part responsible for the national mood: If a president doesn’t make the case for global engagement, no one else effectively can.

The White House often responds by accusing critics of being warmongers who want American “boots on the ground” all over the world and have yet to learn the lessons of Iraq. So let’s stipulate: We don’t want U.S. troops in Syria, and we don’t want U.S. troops in Crimea. A great power can become overextended, and if its economy falters, so will its ability to lead. None of this is simple.

But it’s also true that, as long as some leaders play by what Mr. Kerry dismisses as 19th-century rules, the United States can’t pretend that the only game is in another arena altogether. Military strength, trustworthiness as an ally, staying power in difficult corners of the world such as Afghanistan — these still matter, much as we might wish they did not. While the United States has been retrenching, the tide of democracy in the world, which once seemed inexorable, has been receding. In the long run, that’s harmful to U.S. national security, too.

These isolationist interludes are a feature of our history, just like our interventionist excesses. They remind me of Trotsky’s adage that you may not be interested in war, but war is interested in you (hat tip). These interludes eventually end with unpleasant awakenings, and I worry that we haven’t seen the last of those yet.

While this certainly counsels against the dramatic reduction in our armed forces that the President has proposed, I also wonder when we’ll realize that the best way to protect U.S. interests abroad is often to ally ourselves with the people of the affected country who share our interests and values, arm them to the teeth, and train them well. If the Russian experiences in Finland, Afghanistan, and Chechyna tell us anything, it’s that the Russians are especially bad at fighting determined opponents who use unconventional tactics. If a messy border war eventually forces Putin out of power, Russia gaining control of the historically and ethnically Russian Crimea would be a small price to pay.

~  5  ~

I AM IN RARE AGREEMENT WITH JOHN KERRY when Kerry says that North Korea is “an evil place,” but then, there isn’t much we know about North Korea now that we didn’t know in 2003, when John Bolton made substantially similar comments about the North, and the North Koreans went histrionic on him. Now it’s Kerry’s turn. Does this disqualify Kerry as an effective diplomat?

“This is another vivid expression of the U.S.’ hostile policy toward the DPRK,” a spokesman for North Korea’s foreign ministry said, according to Pyongyang’s Korean Central News Agency. DPRK stands for North Korea’s official name, the Democratic People’s Republic of Korea.

Kerry’s remarks “are no more than a manifestation of his frustration and outbursts let loose by the defeated as the DPRK is winning one victory after another despite the whole gamut of pressure upon it over the nuclear issue,” the spokesman said.

“Before blaming others, Kerry had better ponder over what to say of the U.S., a tundra of human rights, as it commits horrible genocide in various parts of the world in disregard of international law under the signboard of ‘liberty’ and ‘democracy,’” the spokesman said.

Kerry should “bear in mind that no pressure is workable” on the North, he said. [Yonhap]

What’s dramatically different, of course, is that when Bolton said it, it was more evidence that Bolton was “a crazy neocon” and further reason to derail his nomination as U.N. Ambassador. Since Kerry said it, and since the North Koreans went histrionic on Kerry, there’s been almost complete media silence. Some of this is certainly because the consensus on North Korea has shifted, but the consensus has shifted because (quelle surprise) North Korea kept right on being North Korea after January 21, 2009. Bolton was right all along, but too many of us allowed our political polarities to blind us to the truth he spoke.

Update: The North Koreans make a similar comparison.

~  6  ~

NOW, THE U.N. PANEL OF EXPERTS is investigating Dennis Rodman’s gifts to Kim Jong Un.

~  7  ~

THE PANEL MAY ALSO DESIGNATE two more North Korean companies over the Cuba MiG-21 smuggling deal, which will eventually result in the blocking of their assets once Treasury and the EU get around to listing them:

The two include Ocean Maritime Management (OMM), a Pyongyang-based company with links to the North Korean government that is also the registered manager of the Chong Chon Gang. The other is Chinpo Shipping Co., registered in Singapore, allegedly used for the payment of costs for the Chong Chon Gang’s operation.

Chinpo Shipping? Really? So I take it the Urban Dictionary is blocked in North Korea. Pity.

I often ask myself why North Korea goes to so much risk and expense to buy up equipment that hasn’t had a combat advantage since the Johnson Administration. I often worry that North Korea’s doctrine for the use of these aircraft concentrates on low-altitude, one-way missions. After all, it’s clear that some of their airfields are fit for take-offs, but not really fit for landings.

~  8  ~

OVERALL, SANCTIONS ENFORCEMENT has a mixed record since the approval of UNSCR 2094, and my lapse of optimism about sanctions enforcement last summer was probably premature. First, via Yonhap and IHS Janes, we learn that North Korea is still able to trade in weapons, exporting $11 million and importing $63 million in weapons last year (that we know about). Admittedly, this isn’t very much, and some of these imports are probably pursuant to a loophole in the Security Council resolutions allowing North Korea to import light weapons from China. It isn’t clear whether that sum includes technology transfers and technical assistance, or North Korea’s recent acquisition of six road-mobile ICBM transporter-erector-launchers.

Second, and more worrisome, we see that despite signs of a banking crackdown last spring, trade between North Korea and China continues to increase. Obviously, the North Koreans have (1) found Chinese banks willing to accept their deposits and handle their financial transactions, and (2) avoided any significant financial disruption of their network of commercial agents in China after the Jang Song -Thaek purge.

This sort of rope-a-dope game is typical of China. They pretend to comply with sanctions for a few weeks, and go right back to the same old dirty business. That’s why we need H.R. 1771.

Boston Globe endorses the North Korea Sanctions Enforcement Act

The Boston Globe, a newspaper with “a long and proud tradition of being a progressive institution,” writes:

Nevertheless, there is much the United States can do unilaterally to step up the pressure on this irresponsible regime. Passing the North Korea Sanctions Enforcement Act of 2013 is a logical step that would ensure that bad behavior faces consequences.

Much as Iran was confronted with crippling financial sanctions, the act would punish international financial institutions that do dirty work for North Korea. Under the act, the president of the United States would have the power to take action to deny the regime funds for serious human rights abuses, as well as nuclear proliferation, arms trafficking, kleptocracy, and imports of luxury goods by government officials. Banks that do business with Pyongyang would be faced with a choice: Risk being cut off from the US market, or stop doing business with North Korea. The act also stipulates that cargo that moves through ports that regularly fail to inspect North Korean cargo would face long delays entering the United States.

While no sanctions regime is perfect, Congress already knows that this one works. From 2005 to 2007, the United States imposed similar sanctions on North Korea. The Treasury Department designated Banco Delta Asia, a Macau-based bank, as a “primary money laundering concern” and cut it off from the US financial system. The result was devastating for the North Korean regime. Macau banking authorities froze 50 North Korean accounts worth $24 million, severely hampering the regime’s ability to access cash and purchase goods. Foreign businesses and banks shied away from doing business with North Korea — even from legal business ventures. The effect was so crippling that in 2008, North Korea agreed to destroy some of its nuclear technology and return to international talks. As a reward, President George W. Bush lifted the sanctions. [Editorial, Boston Globe]

Royce goes to Seoul, calls for cutting off Kim Jong Un’s cash

So Ed Royce, Chairman of the House Foreign Affairs Committee, was in Seoul last week, and sat down for an interview with Yonhap to talk North Korea:

“It seems that the strategy that slows down North Korea the most is not allowing them access to the hard currency which they use in order to create their offensive nuclear weapons capabilities,” said Royce in an interview with Yonhap News Agency in Seoul. 

Royce is now in Seoul along with a delegation from his foreign affairs committee. He met with President Park Geun-hye and Foreign Minister Yun Byung-se earlier in the day. 

“We have tried various strategies and at this point, one of the problems is that if we give any additional support to the regime of North Korea, for example, we were to give them inducement in the form of currency, they would use that hard currency to further expand their nuclear weapons capabilities,” the lawmaker said. [....]

Royce also said the new United Nations report on the North Korean regime’s brutal human rights violations may help add pressure on Pyongyang to give up its nuclear program and may possibly make North Korean leader Kim Jong-un stand trial on crimes against humanity in the International Criminal Court (ICC). [....]

“Perhaps there will be new opportunities (following the publication of the U.N. report) to have fresh pressure brought from governments such as Beijing on North Korea in order to try to slow its development of nuclear capabilities,” the U.S. politician said.

“I think it will galvanize international public opinion with respect to the conditions inside North Korea and hopefully can push to put North Korea on a different track.”

When the final report is submitted to the U.N. Human Rights Council on March 17, the international community could take actions to refer the North Korean leadership to the ICC, he said, adding, “I know there’s much discussion of that at the U.N.”

If you’re one of those who wonders why people worry so much about North Korea’s nukes when other countries also have nukes, read the COI report. It isn’t the proliferation of nuclear weapons that scares me. It’s the proliferation of nuclear weapons to people who don’t value human life and who have no compunction about killing large numbers of people that scares me.

And lest we think that South Korea has completely recovered from the Sunshine fad, its interviewer hasn’t quite shaken it off.

“An issue for the Obama Administration and Congress is to what extent they will support – or, not oppose – Park’s possible inter-Korean initiatives,” the Congressional Research Service (CRS) said in a report posted on its Web site Thursday.

For instance, it pointed out, the Park government has indicated a desire to someday internationalize and expand the Kaesong Industrial Complex, a historic joint venture between the two Koreas located just north of their land border.

“These moves could clash with legislative efforts in Congress to expand U.S. sanctions against North Korea, such as H.R. 1771, the North Korea Sanctions Enforcement Act,” it added. [Yonhap]

As much as it cramps my fingers to write this, I actually believe there are ways that South Korea could make Kaesong into something most Americans would accept. As it is, Kaesong “wages” are not only paid directly to the regime itself, but they’re paid at a ludicrous, confiscatory exchange rate. Then, there are also various “taxes” the regime charges the tenant companies, which requires the South Korean government to subsidize those companies to keep them afloat. In effect, it’s a scam to launder money from the South Korean government to the North Korean government, with slave labor as the medium of exchange.

The other problem with these arrangements is that they’re increasingly at odds with U.N. Security Council resolutions that require transparency in financial dealings with North Korea. That’s particularly true of UNSCR 2094, which passed with a “yes” vote from South Korea, as a non-permanent UNSC member. Need I remind everyone that those resolutions were passed, in large part, to protect South Korea’s own security? If you doubt me here, read Paragraph 11 and tell me how you square a big, fat, no-questions-asked cash pipe with that. Korea isn’t in a very good position to complain that China is violating UNSC sanctions when it’s arguably guilty itself. 

As it was advertised, Kaesong was going to be an engine of reform. But if we don’t know there all that money goes — and we don’t — then it could be used, for all we know, for nukes, yachts, and ski resorts. But Kaesong could become palatable to Americans if Park Geun Hye extracts enough financial transparency from the North Koreans, and ensures that those workers really are getting the $70-or-so a month, and to ensure that the money isn’t being used to build centrifuges. If that happens, Kaesong might diminish as a potential irritant in U.S.-ROK relations. It might even become an engine of change — this time, of North Korea.

Feds investigating Rodman for violating N. Korea sanctions


U.S. Commerce ** 2014-01-10 at 12.48.39 PM

You’re welcome, feds! Email me and we’ll do coffee sometime. On me.

Hey … isn’t that video of Dennis Rodman personally giving banned luxury goods to Kim Jong Un?

Skip to the two-minute mark. Well, that certainly looks incriminating. (Hat tip to a reader.)

[I guess he picked the wrong week to quit drinking.]

If you haven’t read my post explaining the ban on importing luxury goods to North Korea, you should probably start there.* And since you ask, yes, as a matter of fact, I do believe the bottles are engraved with likenesses of Kim and Rodman.

Just to be clear, I don’t think Dennis Rodman should do time over five bottles of liquor, but when you flaunt your disregard for the law, you almost force the feds to do something about it, even if that something is a modest civil penalty and a Cautionary Letter.

Of course, five bottles of liquor may not be quite the full extent of it, either. Chad O’Carroll at NK News has done some first-rate investigation of this story. Don’t miss this one — it’s an absolute must-read.

It’s hard to watch something this … insane and not laugh. Try harder; so will I. The luxury goods ban is in place because most of the other 23 million North Koreans are living on the verge of starvation while this tiny oligarchy lives like this. There’s nothing funny about that.


* Or, you can watch it on Arirang News, whose report uses language nearly identical to my post, but spares me the burden of attribution. Start at 1:45. You’re welcome.

Source: Dennis Rodman brought luxury gifts to Kim Jong Un (and that’s punishable by 20 years in prison).

Writing at The Weekly Standard today, Dennis Halpin informs us that Dennis Rodman (no relation) was bringing more than his august presence to Kim Jong Un’s birthday party. Halpin, citing a “diplomatic source” he understandably won’t name but says is reliable, claims that Rodman was also carrying “several hundred dollars’ worth of Irish Jameson whiskey,” “European crystal, an Italian suit for him, and Italian clothing, a fur coat, and an English Mulberry handbag” for Kim’s wife, Ri Sol Ju.

The level of detail here is compelling. According to Halpin’s source, the total value of the gifts is “well over $10,000.” Halpin is a former U.S. Consul in Busan, Korea, a former House committee staffer, a scholar at Johns Hopkins’s School of Advanced International Studies, and (full disclosure) a good friend of mine. I trust Dennis Halpin, but I obviously can’t vouch for the source who provided him the information. The circumstances would suggest that the source’s government collected detailed intelligence, which it now seeks to publicize. Furthermore, Halpin’s information is only current up to the point of Rodman’s arrival in Beijing, so it doesn’t prove that Rodman actually brought his gifts into North Korea.

Those questions, however, should be easy to answer. Ask Dennis Rodman anything and he’ll talk. The man can’t keep his mouth shut.

In his article, Halpin notes that bringing luxury goods into North Korea is prohibited by U.N. Security Council resolutions (several of them, in fact). Those sanctions were first imposed in 2006, after North Korea’s first nuclear test, as a response to Kim Jong Il’s obscene luxury purchases as his people went hungry. Most North Koreans starve to death out of sight and out of mind, but a North Korean guerrilla journalist did film this victim in June 2010, a few months before her decomposed body was found in the fields nearby.

A U.N. report recently found that 84% of North Korean households can’t find enough to eat, yet Kim Jong Un recently spent $300 millionthree times what the World Food Program recently asked foreign governments to donate to feed hungry North Koreans — on such amenities as a ski resort, a water park, a dolphinarium, an amusement park, and a 3-D cinema.

But since when has anyone enforced a U.N. resolution against North Korea? For example, if Chinese customs inspected Rodman’s gifts and let them onto the flight for Pyongyang, that should tell you all you need to know about China’s compliance with the U.N. Security Council resolutions it voted for.

~  ~  ~

Unfortunately for Rodman, in 2010, President Obama signed an implementing executive order, Executive Order 13,551, that provides for some harsh penalties for any U.S. person found “to have, directly or indirectly, imported, exported, or reexported luxury goods to or into North Korea.”

Executive Order 13,551 is promulgated under the authority of the International Emergency Economic Powers Act, 50 U.S.C. app. sec. 1701 et seq., and authorizes the Treasury Department “to employ all powers granted to the President” under the IEEPA to enforce it. As Treasury makes clear, those powers include the criminal penalties provided in Section 206 of the IEEPA, including up to 20 years in prison and a fine of $1,000,000. There are also civil penalties.

The definition of “luxury goods” is found at Supplement 1 to 15 C.F.R. Part 746. Rodman’s gifts clearly fall within the proscribed categories. In fact, according to Section 746.4 of that Part, licenses for the export of “designer clothing,” “fashion accessories,” and “wine and other alcoholic beverages” to North Korea are subject to “a general policy of denial.”

Although exports to North Korea are not always prohibited, they must be licensed by the Treasury Department. Treasury imposes export licensing requirements on sanctioned countries to ensure that U.S. exports don’t provide targeted governments with sensitive technology or violate U.N. Security Council resolutions, which the U.S. is obligated to enforce. Violations of Executive Order 13,551 are also prohibited under a Treasury regulation, 31 C.F.R. sec. 510.201(b).

The fact that these were gifts seems to be of little consequence. The executive order prohibits imports, exports, and reexports, and doesn’t make the payment of compensation a necessary element of a violation.

(As I noted recently, U.S. sanctions against North Korea are actually much, much weaker than those pertaining to Iran, Cuba, Sudan, and Burma. They are more analogous to our sanctions against Belarus and Zimbabwe. Although North Korea is holding one U.S. citizen captive and recently held another for several weeks over his Korean War service, there are no travel sanctions preventing U.S. citizens from visiting North Korea.)

Rodman, who has compared North Korea’s political prison camps to prisons in the United States, could soon gain some first-hand experience in (at least) one side of that equation.

Halpin also alleges that Irish bookmaker Paddy Power financed Rodman’s trip due to contractual obligations. Financing Rodman’s trip wouldn’t necessarily mean that Paddy Power financed luxury gifts to Kim Jong Un, but under EU sanctions regulations, it is prohibited “to sell, supply, transfer or export, directly or indirectly, luxury goods” to North Korea, including high quality “spirits and spirituous beverages,” “handbags and similar articles,” “garments,” and “lead crystal glassware.”

I don’t know if Rodman had an export license for his gifts, of course. If he did, that should be a scandal for the Treasury Department that issued the license, the State Department that denied any U.S. government involvement in Rodman’s trip, and the administration.

I strongly doubt, however, that Rodman had a license. If I’m right about that, and if Rodman exported those items into North Korea, he’d be well advised to stop talking and lawyer up. Having done a fair amount of criminal defense work in the Army, however, it’s my experience that criminal suspects almost never understand this intuitively. In Rodman’s case, it’s especially doubtful that his good sense can suppress his compulsion to attract attention. And if you saw this today, you’d be hard pressed to disagree:

[The expressions on the faces of the other players: priceless.]

My guess is that any reporter who simply asks Rodman what he carried to North Korea will elicit an admissible, and probably incriminating, statement.

Having said this, I’ve already explained why Rodman has, inadvertently, done a tremendous service for the cause of human rights in North Korea by unwittingly publicizing the horrors there. More importantly, his association with Kim Jong Un is likely discrediting the North Korean dictator among his minions, and could even hasten his downfall.

Given the choice, I would rather see Rodman stigmatized and shunned as an international imbecile-at-large than made into a martyr for his ideas, however repellent. Ideally, the feds would fine him just enough to keep him from profiting from his endorsements, but not enough to keep him from going back to Pyongyang, while running his mouth all the way there and back.

Update:  According to North Korea’s official “news” service, “Rodman presented Kim Jong Un with a gift he prepared with the deepest respect for him.” No further details.