Archive for Sanctions

Top N. Korean money man defects to “third country”

A senior North Korean banking official who managed money for leader Kim Jong Un has defected in Russia and was seeking asylum in a third country, a South Korean newspaper reported on Friday, citing an unidentified source.

Yun Tae Hyong, a senior representative of North Korea’s Korea Daesong Bank, disappeared last week in Nakhodka, in the Russian Far East, with $5 million, the JoongAng Ilbo newspaper reported. [Reuters, Ju-Min Park and James Pearson]

Daesong Bank is sanctioned by both the U.S. Treasury Department and the European Union, and is closely linked to the infamous Bureau 39. This guy could know where a lot of bodies are buried, metaphorically speaking. Also, literally.

The Joongang Ilbo, which broke the story, says that Yun “officially worked as president of the bank” and “was in charge of raising and managing slush funds for Kim in Northeast Russia.” Apparently, Yun made a withdrawal of about $5 million from that slush fund before his defection, and North Korea has a substantial penalty for early withdrawal.

North Korea’s activities in the region include its infamous logging camps and the recently-sanctioned, Vladivostok-based Ocean Maritime Management, the agent for the Chong Chong Gangthe Mu Du Dong, and other sanctioned vessels. And, God-knows-what else.

“We were tipped off that Jon Il-chun, the first deputy director of the Central Committee of Workers’ Party who was effectively in charge of Office 39, is currently in a very unstable position in an ongoing power struggle [in the ruling party] following several recent incidents,” another source said. 

The allegation suggests to Seoul officials that in his third year of power, Kim Jong-un may be having problems managing his financial affairs.

Some sources said Yun’s defection could be part of the aftermath of the brutal execution of Kim Jong-un’s uncle, Jang Song-thaek, in December 2013.

North Korean officials in charge of foreign currency in China and other Western countries were allegedly part of Jang’s inner circle, sources said, and some of them felt threatened by Jang’s death and have vanished. [Joongang Ilbo]

After Jang’s purge, there were reports that dozens of North Korea’s offshore financiers had been called home, and (wisely) didn’t come. The Joongang Ilbo has done the best reporting of North Korean money laundering of all of the Korean papers.

God, how I hope the CIA and Treasury will have a chance to debrief this man. And that he brought his laptop with him. And that he isn’t the only one who has reached safety in the embrace of “third-country” intelligence officers.

Hat tip to a reader and friend.

Australian MP calls for divestment from mining venture in N. Korea

To maintain its iron-fisted hold over the North Korean population, the Pyongyang regime needs hard currency, and it is clear that these projects could provide billions of dollars to the North Korean leadership.” [Michael Danby, MP]

It won’t surprise you that I oppose any investment in an unreformed North Korea that continues to slaughter its own people and menace its neighbors. I believe that those who justify investment as a driver of reform have it completely backwards, that investing in the status quo only perpetuates and reenforces it, and that denying the regime the hard currency that sustains it is the only way to force change. As the North Korea human rights movement gains strength, I hope it will catalyze a divestment movement like the one that helped destroy apartheid.

But that’s not the only question I have about this particular investment. The Australian concern peddling this project is a British Virgin Islands-registered company called “SRE Minerals Limited,” which is doing so as part of a joint venture with a North Korean entity known as the “Natural Resources Trading Company of the DPRK,” or alternatively, as “Korea Natural Resources Trading Corporation.” North Korea watchers know that as a general matter, “North Korea’s mining resources are a major source of revenue for its nuclear and missile programs.” But what about this specific entity?

As the U.N. Panel of Experts recently reminded us, North Korean entities are notorious for their use of multiple similar aliases. Recalling something familiar about the name of that North Korean entity, I checked the SDN list and found several entities designated under executive orders 13382 or 13551 that have suspiciously similar names:




To be clear, neither the “Korea Natural Resources Trading Corporation” nor the “Natural Resources Trading Company of the DPRK” is on the SDN list, but can anyone establish whether it is or isn’t an alias or subsidiary of one of the listed, blocked entities? I’ve put the question to Treasury’s Office of Foreign Assets Control; in the end, it’s their job to clarify that.

Perhaps one of my journalist friends can pursue this further.

Technically, John Kerry and the State Department didn’t violate their own Burma sanctions

… by staying in the hotel of a regime crony whose assets are blocked, but only because of the travel exemption at 31 C.F.R. § 537.210(d). Still, doesn’t patronizing a bloody-handed crony send a pretty lousy message – especially given Burma’s unsteady progress toward reform?

Is Obama’s North Korea policy at a tipping point?

Following of Congress’s resounding, bipartisan vote of no confidence in the Obama Administration’s North Korea policy last month, Secretary of State John Kerry has been traveling around the Pacific. In Australia, while meeting with that country’s Foreign Minister and Defense Minister, he traversed his gargantuan mandible toward Pyongyang and threatened to tighten sanctions “if it ‘chooses the path of confrontation.” If? If?

“The United States — I want to make this clear — is absolutely prepared to improve relations with North Korea if North Korea will honor its international obligations,” Kerry said at a joint news conference, according to the State Department. “But make no mistake. We are also prepared to increase pressure, including through strong sanctions and further isolation, if North Korea chooses the path of confrontation.” 

In a joint communique, the U.S. and Australia underscored their “serious concern” that North Korea’s behavior has undermined the stability of the entire region and called on it to cease its threats and provocations and comply with its international commitments and obligations, including abandoning its nuclear, missile and proliferation activities.

They also expressed deep concern for the welfare of the North Korean people and called on Pyongyang to implement the UN Commission of Inquiry’s recommendations for ending its ongoing systematic, widespread, and extreme violations of human rights. They said that those responsible must be held to account. [Yonhap]

It’s interesting that Kerry is trying to sound concerned about human rights. Sure, you say, President Obama could have issued an executive order targeting the assets and travel of North Korean human rights violators at any stage of his presidency, and could have modeled that executive order on similar ones it has imposed on Iran, Belarus, Zimbabwe, or South Sudan, to name a few. Still, Yonhap reports that the State Department “intends to increase pressure on North Korea to improve its human rights situation.”

Kerry, in his speech at the East-West Center in Honolulu, described human rights violations in North Korea as “horrific” and cited a U.N. human rights panel’s release in February of a report that chronicled abuses suffered by many of its people.

He said the report, which documented crimes against humanity including extermination, enslavement, enforced disappearance and deliberate starvation, “revealed the utter, grotesque cruelty of North Korea’s system of labor camps and executions.”

“Such deprivation of human dignity just has no place in the 21st century. North Korea’s gulags should be shut down — not tomorrow, not next week, but now. And we will continue to speak out on this topic,” he said. [Kyodo News]

We’ve since seen Pyongyang’s response to that. We’ll soon know just how sincere Kerry’s concern is, when the U.N. General Assembly votes to send the Commission of Inquiry’s report to the Security Council. Words are no substitute for more tangible actions, they are a start, and a necessary part of a campaign to rally allies toward a common objective.

Kerry made the demand in an unusually strong tone in an Asia policy address on Wednesday, saying such deprivation of human dignity “just has no place in the 21st century.” He stressed that gulags must be shut down “not tomorrow, not next week, but now.” The top American diplomat also said the U.S. will continue to speak out on the issue. [Yonhap]

Continue? And merely speak? Or actually do something that would matter, like deploy the Treasury Department to sanction the persons and government agencies that are running a string of concentration camps unlike anything the world has seen since 1945?

Financial and other sanctions imposed on Iran, Russia and North Korea will be among major topics discussed when a senior U.S. Treasury official visits Seoul this week, government sources said Tuesday.

David S. Cohen, Treasury Under Secretary for Terrorism and Financial Intelligence, is scheduled to visit Seoul from Wednesday through Thursday, according to the sources. The U.S. Treasury Department said Monday that Cohen will visit Japan, South Korea, China, the United Arab Emirates and Oman during the period of Aug. 18-25.

Cohen is in charge of Washington’s sanctions on Pyongyang for its nuclear and long-range missile tests. In Seoul, he will meet with Lee Kyung-soo, deputy minister for political affairs at South Korea’s foreign ministry as well as Hwang Joon-kook, the country’s top nuclear envoy, the South Korean sources said. Cohen’s planned visit to Seoul comes on the heels of the recent visit by Peter Harrell, a senior U.S. diplomat on sanctions affairs.

Harrell, deputy assistant secretary for counter threat finance and sanctions at the State Department, visited in Seoul late July to ask Seoul to join Washington-led efforts to impose tougher sanctions against Russia. [Yonhap]

This doesn’t mean that the Obama Administration is laying a foundation for action, or that the action will be effective. If the administration does intend to act, however, a visit like this would be a prerequisite to that. In the wake of Japan’s bilateral lifting of sanctions to the detriment of U.S. and South Korean interests, it’s particularly essential to shore up South Korea’s determination to keep its existing sanctions in place, even as Park Geun-Hye comes under domestic political pressure to lift them. Fortunately for Park, that pressure is somewhat attenuated by her party’s good performance in recent bi-elections:

President Park Geun-hye warned Thursday that South Korea’s sanctions on North Korea are inevitable as long as Pyongyang persists in its nuclear weapons program. [....]

Under the sanctions, South Korea has suspended inter-Korean projects and banned new investments in the North, except for their joint factory park in the North’s border city of Kaesong.

Nonetheless, Park said South Korea will gradually expand exchanges and cooperation with North Korea as far as they do not undermine international cooperation on implementing U.N. sanctions. [....]

Park also said South Korea is seeking to lay the groundwork for peaceful unification with North Korea by gradually expanding exchanges and cooperation. She unveiled her unification initiative in Dresden, the former East German city she traveled to in March.  [Yonhap]

Park has to be thinking that North Korea hasn’t done anything to deserve sanctions relief, and she isn’t one to give away something for nothing. She says she’s interested in a larger bargain with Pyongyang, and that sanctions relief can be one chip in that bargain. North Korea’s unsurprising position is that the South will have to lift its sanctions as a precondition to talks. Park’s answer is that that isn’t going to happen.

That means that on multiple tracks, all talks about talks with North Korea are stuck on the preconditions. As Pyongyang stalls for time and increases its capacity to threaten its interlocutors, the interlocutors struggle to maintain a coherent and consistent position, in furtherance of a policy whose ostensible desired end state, the negotiated denuclearization of North Korea, has never seemed less likely. With nuclear diplomacy in rigor mortis and North Korea advancing its weapons programs at full speed, what those allied against North Korea need desperately is leverage, and they know sanctions are the best way to get it.

Will they finally act? If they do act, will they simply ratchet up the sort of incremental pressure that North Korea has learned to adapt to, or will they deliver enough of a shock to its system to convince Kim Jong Un that time is no longer on his side?

John S. Park of the Harvard Kennedy School thinks North Korea has …

become more adept at sanctions evasion, and sounds bearish about the prospects for success. I have no doubt that the first part of Park’s thesis is correct. I’m sure Pyongyang has diversified its income streams since Banco Delta Asia, which means that it will be harder to get back to where we were in 2005. On the other hand, I don’t think it will be impossible for sanctions to work, either. Al Qaeda, Iran, and the Medellin Cartel all have smart money launderers, and in the end, Treasury was effective against all of them. Unless North Korea has reinvented money laundering in ways that these targets haven’t, sanctions will work if given the appropriate investigative resources.

I’ll withhold judgment on the second part of Park’s thesis until I read it. I did contact Park to ask if he had published a paper or explained the basis for his views in detail, but so far, he hasn’t responded (he might be on his way back from Korea). I’ve read dozens of opinions that argued that sanctions haven’t worked against North Korea, but not one of those opinions showed much understanding of sanctions law, or how weak U.S. sanctions against North Korea really are. Without understanding the limitations of our current sanctions, or the extent of the authorities we still haven’t used, it’s impossible to understand their potential.

Australian government finds “abandoned” N. Korean funds.

While most of these were accounts held by people in China, Hong Kong, Japan, Britain and the United States, some can be traced to addresses as far afield as North Korea, Syria and the Democratic Republic of the Congo. Some will doubtless never be claimed.” I’ll bet there’s a fascinating story there.

Japan sanctions Ocean Maritime Management, following the U.N.’s designation …

of OMM, and amid its own ransom negotiations with North Korea. One of the terms of that ransom was the lifting of Japan’s national shipping sanctions, which obviously predated the U.N. designation. [link]

About Damn Time: Treasury sanctions 2 N. Korean companies, 18 ships over Chong Chon Gang (updated)

More than a year after Panamanian authorities uncovered a massive shipment of Cuban weapons on its way to North Korea, in clear violation of multiple U.N. Security Council resolutions, the U.N. and Treasury have finally done something about it. That something could contain the makings of one part of an effective sanctions strategy, but it will still probably disappoint some powerful members of Congress in both parties.

As I noted yesterday, and after public criticism by former head U.N. sanctions expert Martin Uden that the U.N. had been slow to respond to the Chon Chong Gang incident, the U.N. Sanctions Committee finally got around to designating a single entity — Vladivostok-based Ocean Maritime Management (OMM), the shipping agent for the arms deal. The U.N. failed to designate other involved entities, including Singapore-based Chinpo Shipping, conveniently co-located with the local North Korean embassy, or any of the Cuban entities involved in the deal.

I wrote yesterday morning that the U.N.’s decision would probably force Treasury to designate OMM, and that prediction was proven correct within hours of my posting. Treasury also designated Chongchongang Shipping Company, evidently a one-ship enterprise, but it declined to strike at Kim Jong Un’s Chinpo.*

At this hour, there’s still no word from Vladimir Putin about whether he intends to comply with U.N. sanctions, close down OMM, and force it to move to Conakry or Dar-es-Salaam under a new name.

The more interesting part of yesterday’s Treasury announcement was treated as an afterthought in reports from Reuters, The Wall Street Journal, and Yonhap — the designation of 18 North Korean merchant ships. A cursory examination of NK News’s North Korea shipping tracker, however, reveals that this is a significant percentage of North Korea’s merchant fleet.

Better yet, one of the ships designated was the OMM-linked M/V Mu Du Bong, which sits stranded in a Mexican port after returning from Cuba. The designation signals that the U.S. government may ask Mexican authorities to search the ship, as I urged in this post.

The authority for the designations was Executive Order 13551, which authorizes sanctions against —

(ii) any person determined by the Secretary of the Treasury, in consultation with the Secretary of State:

    (A) to have, directly or indirectly, imported, exported, or reexported to, into, or from North Korea any arms or related materiel;

   (B) to have, directly or indirectly, provided training, advice, or other services or assistance, or engaged in financial transactions, related to the manufacture, maintenance, or use of any arms or related materiel to be imported, exported, or reexported to, into, or from North Korea, or following their importation, exportation, or reexportation to, into, or from North Korea;

The designation of a ship makes it difficult for the vessel obtain insurance, repairs, fuel, and other bunkering services that it needs to operate. Similar sanctions have been reasonably effective against the Iranian tanker fleet. The inclusion of the vessels’ IMO numbers will make it difficult for North Korea to evade sanctions by constantly reflagging its ships, something it is notorious for.

The vast majority of North Korea’s shipping traffic is with China. It remains to be seen whether these ships will continue to ply their trade across the Yellow Sea. It will be worth watching that shipping tracker carefully in the coming weeks.

Expect North Korea to adapt by switching off the transponders on its ships. An interesting question I haven’t researched (but perhaps commenter David knows) is whether a U.S. Navy vessel encountering a Treasury-designated vessel on its way to, say, Bandar Abbas with its transponder and its lights switched off has a right to search it at sea.

In February, Hugh Griffiths and Lawrence Dermody of the Stockholm International Peace Research Institute wrote a very interesting analysis of how sanctions against North Korean shipping companies could be an effective tool against smuggling and proliferation.

Treasury’s action raises the number of designated North Korean entities from 43 to 63, still far less than Zimbabwe or Belarus, whether you measure that in terms of raw numbers or the significance of the designations themselves. Yesterday’s designations closed that gap just a bit, and sent the message that at least North Korea isn’t absolutely immune from all its bad acts — just that genocide stuff.

If expanded, sanctions against North Korean ships could make it more difficult (but not impossible) to smuggle arms by relying on third-country vessels. And of course, there’s always Chinese airspace. If enforced aggressively, shipping sanctions could complement expanded financial sanctions to pressure North Korea and deny it one means to proliferate.

The Administration’s failure to designate any Cuban entities, however, will not please the eight members of Congress who recently signed a letter to our U.N. Ambassador, noted genocide-prevention expert Samantha Power, calling on her to push the Security Council to designate “Cuban officials and entities involved in arms smuggling to North Korea.” 

Whether Power pushed for sanctions against North Korea’s Cuban vendors isn’t clear, but it’s clear the U.N. isn’t going to impose them. The Panel of Experts’ report on the Chong Chon Gang incident didn’t find the evidence against Cuban entities to be as strong as it was against North Korea, mainly because the Cubans didn’t cooperate with the POE, and because it wasn’t their ship that was caught in the act. It’s a well-recognized principle in the law** that when a party hides evidence, fact-finders are entitled to make adverse inferences about just what party is hiding. And designating North Korea’s co-conspirators sends an important message to governments like those in Ethiopia, Somalia, Congo, and Tanzania, which were named in previous U.N. POE reports as suspected North Korean arms clients.

Most of the letter’s signatories are members of the House Foreign Affairs Committee. All but one, Rep. Albio Sires of New Jersey, are Republicans. Sires is also one of Congress’s strongest advocates of human rights in North Korea, and is said to be a close ally of New Jersey’s senior senator, Robert Menendez, the Chairman of the Senate Foreign Relations Committee. Both Sires and Menendez are conservative Cuban-American Democrats.

(While I’m on the topic of Menendez, I have to ask whether the ultra-conservative bloggers who may have been taken in by a Cuban government smear operation against Menendez would really prefer to have Barbara Boxer as Chair of SFRC. Don’t get me wrong — Boxer has a great reputation on human rights, but on national security issues, she isn’t nearly as tough-minded as Menendez. For that matter, neither was Richard Lugar — not by a mile.)

The Chong Chon Gang incident was an opening for North Korea human rights activists to reach out to Cuban-Americans in both parties. The Cuban-American contingent in Congress is one of the most powerful on the Hill, and also includes rising Republican star Senator Marco Rubio, and firebrand Congresswoman Ileana Ros-Lehtinen. And if powerful constituencies matter, last week’s revelation that North Korea is selling rockets to Hamas won’t help Pyongyang’s position on Capitol Hill.

The letter is the latest sign that Congress is increasingly uncomfortable with the pace of the Obama Administration’s enforcement of U.N. sanctions against North Korea. In light of these new developments, these members of Congress should consider calling for additional EO 13551 designations of the Cuban entities involved in Chong Chon Gang.

I’ve pasted a list of Treasury’s new designations below the fold.

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* The Editor preemptively apologizes for this.

** The obvious exception is that in criminal cases, no adverse inference can be drawn from a suspect’s invocation of his right to remain silent. 

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Update, 1 Aug 2014: It’s starting to look good for my prediction that the Cuban-American reaction would be fierce. Capitol Hill Cubans has a furious reaction to Cuba’s omission from the list of designated entities.

Read more

Former U.N. sanctions investigator calls U.N.’s slow response to Chong Chon Gang incident “regrettable”

If you care at all about North Korea sanctions, then NK News’s interview with Martin Uden, the former head of the U.N. Panel of Experts investigating the enforcement of sanction on North Korea, is an absolute must-read. I’ll give you a taste, and then you’ll have to read the rest on your own:

In particular, the seizure of a DPRK cargo vessel in Panama in 2013 – the Chong Chon Gang – highlighted that North Korea remains actively engaged in sanction-breaking behavior.

But even though the most recent Panel of Experts report published in March concluded that the vessel’s cargo of munitions – MiG fighter jets and Soviet-era radar systems – did constitute a breach of sanctions, the response from the UN Sanctions Committee was muted.

“The problem of course is the lack of action by the Sanctions Committee, and that I think is more regrettable. This [case] was a pretty much an in flagrante delicto violation of UN sanctions” Uden said. [Leo Byrne, NK News]

It’s reporting like this that makes me hope we’ll have NK News at least as long as we have North Korea.

Lo and behold, five days after that interview is published, the Sanctions Committee has finally designated Ocean Maritime Management, but not Chongchongang Shipping, Chinpo Shipping, Korea Central Marketing and Trading Corporation, Tonghae Shipping Agency, or any of the Cuban entities involved in the transactions.

Or, the bank that processed the transactions, whose identifying information was redacted out of the documents published in the POE Report. (Although it’s interesting that the sugar transaction, at least, was denominated in dollars.)

At this point, Treasury probably has no choice but to designate OMM, but of course, OMM could fold up and restart in Magadan, Trinidad, or the Seychelles next week.

Another OMM ship, the M/V Mu Du Bong, remains stranded in a Mexican port after running aground and damaging a nearby coral reef.

Where is John Bolton when we need him?

Yonhap interviews Ed Royce, on H.R. 1771

The day after the North Korea Sanctions Enforcement Act passed the House, Royce gave an interview to Yonhap:

“We have tried every approach to engage North Korea and the only time that we’ve ever really had their attention was when we’ve used some leverage on the regime itself,” Royce said in the interview in his office shortly after the bill’s passage on Monday, referring to the BDA sanctions. [....]

Royce said that chances of the bill passing through the Senate are “very good.”

“There’s a lot of bipartisan support for this legislation,” he said. “I know the feelings of many of the senators I’ve talked with. The senators feel as we feel that this is a step that we need to take.”

But the chairman stressed the bill won’t affect humanitarian aid to the North.

“What we are looking at doing is — instead of cutting off the aid to the regime itself — cutting off the institutions that the regime uses, not only to consolidate its power over the people of North Korea and violate their rights but also the institutions they use to build up, continue to build up their nuclear weapons program and their ICBM program,” he said. [Yonhap]

I’m interviewed further down in the piece.

H.R. 1771 passes House of Representatives on a voice vote

Chairman Royce (R, Cal.) and Congressman Gerry Connolly (D, Va.) both spoke strongly in favor. No member was opposed, and no member asked for a vote. The “ayes” had it just after 3 p.m.

If there’s any aspect of this that’s bittersweet, it’s that a lot of people who worked hard for this outcome could not be there to see it because the vote was scheduled on such short notice.

Here is the version that passed the House today.

Now, on to the Senate.

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Update: Jean Arthur explains congressional procedure to Jimmy Stewart in the classic “Mr. Smith Goes to Washington.”

I love that clip.

H.R. 1771 scheduled for a House floor vote on Monday

It’s on the calendar. And while I doubt there will be serious opposition in the House, we’ll need Kim Jong Un’s help to pass the Senate this year. But if not this year, next. Eventually, he’ll do something stupid, and when he does, we’ll be ready.

By itself, passage in the House would be a major symbolic victory. No one will ever be able to say there’s no alternative to standing by and watching a nation be slaughtered, strangled, and starved to death.

You hear a lot about how polarized this Congress is politically, but the Foreign Affairs Committee is a haven from that. The (relative) partisan and ideological balance in this bill’s support reflects that even in the Congress, there’s still a place where the two parties can work together. Royce himself has called our North Korea policy “a bipartisan failure.” H.R. 1771 represents a bipartisan recognition that we need a better strategy.

I can’t overstate my appreciation for so much hard work by Korean-American and other groups that mobilized to pass this bill: the Federation of Korean Associations, the North Korean Freedom Coalition, the Korean Church Coalition (which ran an outstanding event to support this bill two weeks ago), and of course, the Committee for Human Rights in North Korea.

[The Korean Church Coalition, 2014 Leadership Conference, Washington]

Finally, I can’t overstate my appreciation to Chairman Royce for delivering, and to the Foreign Affairs Committee’s talented, overworked, underpaid, and often unrecognized staff members — of both parties, and in the Asia Subcommittee — who did the hard work that made this bill possible.

APG needs N. Korea like the Vienna Boys’ Choir needs Jerry Sandusky

The Asia/Pacific Group on Money Laundering describes itself as “an autonomous and collaborative international organisation … consisting of 41 members and a number of international and regional observers [who] are committed to the effective implementation and enforcement of internationally accepted standards against money laundering and the financing of terrorism, in particular the Forty Recommendations of the Financial Action Task Force on Money Laundering (FATF).”

APG has an Associate Membership in FATF, the world’s primary international organization dedicated to fighting money laundering and terrorist financing, and one of the few international organizations in this world that actually works. Although membership in APG does not confer membership in FATF, it does allow the member (or observer) a degree of secondary influence over FATF’s decision-making. And since 2010, FATF has issued statement after statement cautioning banks and finance ministries about North Korea’s “failure to address the significant deficiencies in its anti-money laundering and combating the financing of terrorism (AML/CFT) regime and the serious threat this poses to the integrity of the international financial system.”

No doubt, Kim Jong Un’s financiers in Pyongyang understand the potential consequence of being severed from the global financial system, which is why, since February, Pyongyang has “engaged” with FATF to “discuss” its deficiencies. Presumably, those discussions are nothing more than discussions; otherwise, FATF wouldn’t still be urging Pyongyang to “immediately and meaningfully address” the deficiencies. It also explains why North Korea wants into APG.

As always, the flaw in this engagement is the absence of evidence that Pyongyang has made a decision to abide by the rules and common values of the association engaged with. As U.N. Security Council Resolution 2094 points out, FATF also supports “targeted financial sanctions related to proliferation.” North Korea not only remains constitutionally dedicated to developing nuclear weapons in violation of that resolution (and others), it is also dedicated to financing its WMD programs by any means necessary. We saw this most recently when North Korea lost a World Cup match of sorts — no, not that internet hoax, but the one it played against the Cambodian police.

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Earlier this month, Yonhap reported that Cambodian authorities had arrested 15 North Koreans in Phnom Penh for running illegal gambling websites that were booking bets on the World Cup, which North Korea did not win, and for conducting cyber warfare against South Korea. The report was sourced to “a South Korean government source,” who also said the Cambodians “seized computers and other related equipment.”

It’s a far better thing to seize computers, which talk, than to seize North Koreans, who don’t. The computers could provide valuable information about North Korean bank accounts, financial relationships, co-conspirators, and the currencies and media of exchange used. It might even provide proof to support longstanding suspicions that North Korea’s overseas restaurants, including those in Cambodia, are fronts to launder money from the proceeds of activities like illegal gambling.

If the Treasury Department were at all serious about targeting North Korea’s financial enablers — a purely theoretical discussion, because it isn’t — an effective computer forensic analysis could give Treasury the basis to sanction North Korea’s third-country enablers.

North Korea has a long history of using illegal online gambling to finance itself. In 2011, the rheumy-eyed, snaggle-toothed old Trotskyists at The Guardian reported that “an elaborate hacking network” run by 30 North Koreas based in China “broke into online sites hosted in South Korea and stole prize points worth almost £3.7m ($6m)” using malicious code. Authorities also arrested five South Koreans for distributing the malware. Just four months before that report, the Russian Foreign Ministry “reprimanded the North Korean and Belarusian ambassadors for running illegal gambling on their premises in Moscow;” specifically, “a large network of underground casinos.” Even Dennis Rodman’s recent visit to Pyongyang was sponsored by Paddy Power, a (legal) Irish online gambling site. More here, here, here, and here.

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Given North Korea’s long, promiscuous history of counterfeiting, proliferation, arms sales to terrorists, and money laundering – and the fact that this history leads right up to the present day – I can’t help wondering whose bright idea it was to offer North Korea “observer” status in APG, whose “members and … observers” are supposed to be “committed to the effective implementation and enforcement of internationally accepted standards against money laundering and the financing of terrorism.”

The arguments against this are as obvious as the reasons why those Craigslist ads say “disease-free.” North Korea will use its usual Jedi mind tricks to make contacts, schmooze, and persuade APG members (and indirectly, FATF) that it’s this close to some endlessly receding horizon that may or may not be a real step toward financial transparency. If, like me, you spent the last ten years watching how well those tricks worked on South Korea and our State Department, you can imagine how they’ll work against APG. The consequence will be the relaxation, rather than the strengthening, of anti-money laundering enforcement standards.

It’s clear enough how accepting this invitation serves North Korea’s interest in perpetuating its money laundering and proliferation.

The APG will decide later whether to elevate North Korea from observer status to a member country once it evaluates Pyongyang based on its annual reports to the organization and visits by the representatives of the group over the next three years.

South Korea and many other members are trying to figure out the motive behind the unexpected move by Pyongyang, because North Korea was previously opposed to joining the APG.

“[North Korea’s motive] is a mystery to us,” said a high ranking government official, who requested anonymity. “We suspect that North Korea, while looking for ways to ease the international financial restrictions imposed on them, decided to show their efforts in improving their global image [by joining the APG].

“But since the lists that they need to follow are long, we will probably have wait and see how sincere and determined they are with their decision.”

In other words, it could be a facade as a way for North Korea to ease the sanctions imposed on it, since the possibility that Pyongyang will give up its nuclear ambitions is low.

The action is particularly suspicious because up until last year’s APG meeting held in Shanghai, North Korea refused to join the organization because of the rule requiring members and observers to follow global standards. North Korea at the time argued that it would join the APG only after the agreement to follow UN resolutions was taken out. [Joongang Ilbo]

It’s hard to see what good this invitation does for APG, FATF, or the financial system. North Korea clearly hasn’t made the fundamental decision to abide by the shared values of any of those associations. And that fundamental decision is what gives “engagement” the potential for those associations to change North Korea, as opposed to the very opposite outcome.

It’s easier to see the dangers this move creates — again, absent evidence that North Korea has seen the evil of its ways and decided to change them. The most obvious is that it gives North Korea undeserved legitimacy in area where it has been the world’s most flagrant recidivist.

Then, there is the example of the U.N. Human Rights Commission to draw from. I suppose that once, long ago, some addlebrained diplomat hypothesized that if only the leaders of China, Cuba, and Libya could be exposed to the principles by which the rest of civilized humanity lives, their leaders would feel compelled to conform themselves to those principles. What happened instead was that China, Cuba, and Libya took over the Human Rights Council, eviscerated its founding values, and destroyed it. So it goes whenever international institutions welcome members who don’t share the common principles of the institutions.

FBME Bank denies money laundering allegations

FBME Bank, whose correspondent accounts were ordered closed by a Treasury Department action under Section 311 of the USA PATRIOT Act last week, has responded to Treasury’s allegations of money laundering:

FBME said it was “shocked” by the content of the US Department of the Treasury notice “that sets out unexplained allegations of weak AML controls,” which, the bank said, it had not been given any opportunity to comment on or refute.

The bank denied the allegations, saying it had commissioned the German division of an international accountancy firm to carry out a detailed assessment into its operations and practices over the past two years.

FBME, it said, was found in compliance with applicable rules on AML regulations of both Cyprus and the European Union.

“FBME Bank welcomes the involvement of its regulator, is cooperating fully with it and reiterates its absolute continued commitment to full compliance with applicable laws and regulations,” the bank said in an announcement posted on its website. [Cyprus Mail]

That welcome may be a bit superfluous, because according to the Cyprus Mail and the Lebanese news site Ya Libnan, the Central Bank of Cyprus has taken over FBME’s operations for “as long as the central bank deems it necessary.” The move is similar to the Macanese government’s takeover of Banco Delta Asia in 2005, after Treasury published a similar set of notices against it for laundering money for North Korea. With Cyprus trying to stave off a broader banking crisis now, the last thing it needs is for a bank operating on the island to collapse, even if that bank is chartered in Tanzania and serving a largely non-Cypriot clientele.

I’ll offer a few points in response to FBME’s statement, which largely misapprehends how Section 311 (codified at 31 U.S.C. sec. 5318A) operates.

First, it is both technically true and legally irrelevant that FBME had no notice of this specific action. A Notice of Finding and a Notice of Proposed Rulemaking under Section 311 are intended to be no-notice actions to block correspondents accounts that may contain illegally derived funds. FBME’s opportunity to respond began with the publication of the notice and will end 60 days after that. After considering any comments on the proposed action, Treasury will make its final findings and conclusions and publish its Final Rule. Presumably, this process will give FBME an opportunity to hire lawyers to argue Treasury hasn’t met the criteria of 31 U.S.C. sec. 5318A(b).

Second, until that point, it would be fair to say the allegations are “unproven,” but it would not be fair to call them unexplained. Treasury’s notices explain them in great detail.

Third, Treasury has no obligation to warn the target of a law enforcement investigation that it is investigating the target for suspected illicit activity; rather, it is the duty of the financial institution to know its customers and make reasonable inquiries about suspicious transactions – that is, to perform due diligence. If true, FBME’s alleged provision of financial services to an unnamed front for a Syrian entity involved in WMD co-development with North Korea suggests that it fell short of these “know your customer” obligations. Presumably, FBME’s response and Treasury’s evidence will be given due consideration before Treasury publishes its Final Rule. If FBME can make the case that it didn’t fall short of these obligations, or that the shortfalls were inadvertent, Treasury should mitigate or rescind the special measure.

Finally, if half the allegations in Treasury’s Notice of Finding are true, FBME can’t honestly claim that it wasn’t on notice of deficiencies in its “know your customer” and anti-money laundering obligations. Of course, FBME has another 55 days to make its case to the contrary. After that, FBME can appeal Treasury’s decision to the federal courts, in which case Treasury’s decision would get a high degree of judicial deference, but its evidence would still be subject to judicial scrutiny. Even classified evidence Treasury relies on would be subject to the court’s in camera review.

You can read the full statement at FBME’s web site, which is loading rather slowly. For some reason.

U.S. should ask Mexico to search the M/V Mu Du Bong

Last week, I linked to a piece by investigative journalist Claudia Rosett (third item), noting the travels of the North Korean freighter Mu Du Bong from Cuba into points unknown in the Gulf of Mexico. Now, thanks to intrepid Miami Herald reporter Juan Tamayo, we learn that the Mu Du Bong has run aground in the Mexican Gulf Coast port of Tuxpan, not far from Veracruz. The ship is said to be empty, but there are a number of suspicious aspects of its behavior.

The 430-foot Mu Du Bong grounded Monday on a reef about seven miles from the Mexican port of Tuxpan, according to shipping industry officials. The job of pulling it off the reef will be complicated and take several days, they said.

The ship was empty and planning to pick up cargo in Tuxpan when it ran aground because its captain “lost his bearings,” according to a report by the Agence France Presse. Tuxpan is known as one of Mexico’s main sugar exporting ports.

Port administrators told El Nuevo Herald aid they did not know whether the Mu Du Bong was entering or leaving the port. An official at the Captain of the Port’s office said no one there was authorized to give information on the case. [Miami Herald]

Like the Chong Chon Gang, the North Korean ship that was caught carrying weapons from Cuba through the Panama Canal last year, the Mu Du Bong had its automatic location beacon switched off for several days, creating a potentially unsafe condition for other ships.

The Mu Du Bong crossed the Panama Canal into the Caribbean June 15. Its transponder signaled June 25 that it was near the port of Mariel, and on June 29-30 that it was in Havana, according to a Forbes magazine article Sunday that first reported its voyage.

For the next nine days its transponder fell silent, Forbes reported. It started working again on July 10, showing the ship was in Havana and then sailed north into the Gulf of Mexico, according to the magazine article.

One shipping industry official called the freighter built in 1983 “an ugly old rust bucket” and said photos of the ship’s deck show an odd mast surrounded by wires that could be some sort of jerry-rigged crane or an antenna. [....]

The Forbes report said shipping records show the two vessels share the same commercial agent, Ocean Maritime Management Company Ltd. U.N. experts who investigated the Chong Chon Gang incident said that company “played a key role in arranging the shipment of the concealed cargo of (Cuban) arms and related materiel.” [Miami Herald]

The Mu Du Bong’s shipping agent was Ocean Maritime Management, the same company that arranged for the voyage of the Chong Chon Gang.

Mu Du Bong

[Image source]

In other words, four months after a U.N. Panel of Experts report laid out conclusive evidence of OMM’s deliberate and premeditated violation of U.N. Security Council sanctions, the U.S. Treasury Department has not sanctioned OMM or any other entity under Executive Order 13551 over the Chong Chon Gang incident, or added it to the list of Specially Designated Nationals. Meanwhile, OMM is still acting as an agent for suspicious North Korean shipping traffic to Cuba.

Under a recent U.N. Security Council resolution, Mexican authorities have the legal authority to inspect the Mu Du Bong.

Moreover, in the effort to prevent the direct or indirect supply, sale or transfer to or from the Democratic People’s Republic or Korea or its nationals of any banned items, States are authorized to inspect all cargo within or transiting through their territory that has originated in the Democratic People’s Republic of Korea or that is destined for that country.  They are to deny permission to any aircraft to take off from, land in or overfly their territory, if they have reasonable grounds to believe the aircraft contains prohibited items. [UNSCR 2094]

I don’t know whether the U.S. government is currently pressing the Mexican government to assert that right, but a U.S. government with a genuine interest in enforcing U.N. Security Council sanctions would be pressing for an inspection of the Mu Du Bong.

A number of analysts quoted in various press reports doubted that the Mu Du Bong could be carrying weapons because its bills of lading list only civilian goods. But by the same faulty argumentum ad ignorantiam logic, North Korea has no concentration camps because it denies having them, and O.J. is still looking for the real killer. At page 92 of this U.N. Panel of Experts report, you can see the bills of lading for the Chong Chon Gang. They mention 210,000 bags of sugar, and nothing about MiGs or missile parts. The real answer is that we won’t know what the Mu Du Bong is carrying until the ship is inspected.

Update: I changed “press” to “ask” in the title of this post. Better to ask nicely the first time, and “press” only if asking nicely doesn’t work, right?

Update 2: More on this story via Reuters.

Treasury nukes bank with possible North Korea links (updated)

The Treasury Department has gone full Banco Delta on Cyprus-based, Tanzanian-chartered FBME Bank for money laundering, terrorist financing, and possibly even Syrian WMD proliferation — proliferation that is closely linked to North Korea.

According to Treasury’s press release, FBME promoted itself as a provider of no-questions-asked banking services with loose anti-money laundering controls, although I saw no evidence of this at FBME’s Web site. But according to Treasury’s more detailed Notice of Finding, FBME was laundering money for Hezbollah, illegal online gamblers, phishing hucksters, drug lords, African kleptocrats, and various swindlers who ripped off victims in California, Ohio, and Michigan.

Treasury invoked Section 311 of the USA PATRIOT Act against FBME, applying the dreaded Fifth Special Measure, which closes the target’s correspondent accounts and effectively cuts it off from the global financial system. You can read Treasury’s Notice of Proposed Rule-Making here. Or, for those of you who aren’t banking lawyers, I’ll simplify:

Well, almost. A bank can survive that sort of thing and continue to do business, but only on a small, local scale. Banco Delta Asia itself continues to do business for a local customers in Chinese Yuan and Macanese Petacas. In the case of FBME, however, its business model depends on international transactions. It isn’t offering commercial banking services in Cyprus, and it only has four branches in Tanzania.

So far, Treasury has invoked Section 311 against four jurisdictions — the Ukraine and Nauru (since rescinded), Burma, and Iran. It has also listed 13 financial institutions, including Banco Delta Asia, which remains listed to this day.

North Korea, the only existing state known to sponsor currency counterfeiting and drug trafficking, and to encourage illicit activity by its diplomats abroad, has never been listed. Discuss among yourselves.

Treasury’s case against FBME makes no direct reference to North Korea, but according to the Notice of Finding, one of FBME’s customers was a front for a sanctioned Syrian entity, the Scientific Studies and Research Center (SSRC), and used FBME to process transactions through the U.S. financial system. (This is the part that people never get — the bad guys love them some dollars. They just don’t think they’ll get caught, probably because they usually aren’t.)

Treasury did not name the front company.

According to the Nuclear Threat institute, SSRC “collaborates heavily with Iranian and North Korean entities” on missile technology. In February 2013, the Israeli Air Force bombed a convoy loaded with anti-aircraft missiles at SSRC’s complex north of Damascus, damaging what The New York Times described as “the country’s main research center for work on biological and chemical weapons.” Further on, the Times article says, “Intelligence officials also believe that the center has links to North Korea, a source of much of Syria’s missile technology.”

Oh, and those anti-aircraft missiles were SA-17s, the same kind suspected of shooting down that Malaysian airliner today. [Update: Subsequent press reports have said that the missile used to shoot down the airliner was an SA-11.]

Earlier this year, the Times of Israel, citing Jane’s Defence Weekly, alleged that SSRC has gone into the business of manufacturing its own ballistic missiles domestically to bypass international sanctions against Syria, and that it has done so “with the assistance of countries including Iran, North Korea, and Belarus.”

The SSRC is also working on a project with North Korea to help improve its Scud D missile capabilities. North Korean officials at the Tangun corporation have already begun researching and producing components for Scud D missiles which would make it difficult for enemy targets to calculate the missiles’ flight trajectory upon atmospheric entry, Jane’s reported, thus preventing or delaying interception by anti-missile systems, including those in Israel’s possession.

Korea Tangun Trading Corporation appears on the SDN List. For more about the links between SSRC and North Korea, NK News has done some superb investigative reporting on this topic.

According to the Notice of Finding, the SSRC front company shared the same address in Tortola, British Virgin Islands with 111 other shell companies that are also subject to international sanctions. There are only 74 targets on the SDN list with Tortola addresses. Most are fronts for Cuba; a few are sanctioned for links to Hezbollah, Iran, or Zimbabwe. One, DCB Finance, is North Korean, and is a front for Daedong Credit Bank. DCB Finance and Daedong Credit Bank were sanctioned last June for proliferation-related activities.

By itself, the coincidence of address adds little to Treasury’s case, which presumably relies on financial evidence of the SSRC front company’s transactions. It does suggest that in financial terms, you will never find a more wretched hive of scum and villainy than Road Town, Tortola.

FBME had did not immediately respond to a Wall Street Journal reporter who contacted it for comment. Perhaps when he called, the reporter heard a Board of Directors cry out in terror before it was suddenly silenced.

~   ~   ~

[Update: Greetings to my visitors arriving from FBME Bank and FBME Card Services on the lovely island of Cyprus. If you want to get your side of the story out there, do feel free to send an email or drop a comment. I have to say this for FBME -- after a lot of searching, I never did find the evidence that it marketed its lax AML compliance, although the pre-paid card services it offered did not have a particularly good compliance reputation.]

You’d be surprised how much tougher our Zimbabwe and Belarus sanctions are than our North Korea sanctions.

The Treasury Department has just tightened its sanctions regulations on … Zimbabwe, more than doubling the number of Zimbabwean entities on Treasury’s List of Specially Designated Nationals (called the SDN List) from 77 to 161, including “President” Robert Mugabe, his wife, and his son. The sanctions are largely directed at the Mugabe regime’s human rights violations, corruption, and subversion of the democratic process. Here, from Treasury’s Federal Register notice, is a summary of what those sanctions do:

Section 1(a) of E.O. 13469 blocks, with certain exceptions, all property and interests in property that are in the United States, that come within the United States, or that are or come within the possession or control of United States persons, including their overseas branches, of any person determined by the Secretary of the Treasury, after consultation with the Secretary of State: 

(i) To be a senior official of the Government of Zimbabwe;

(ii) to be owned or controlled by, directly or indirectly, the Government of Zimbabwe or an official or officials of the Government of Zimbabwe;

(iii) to have engaged in actions or policies to undermine Zimbabwe’s democratic processes or institutions;

(iv) to be responsible for, or to have participated in, human rights abuses related to political repression in Zimbabwe;

(v) to be engaged in, or to have engaged in, activities facilitating public corruption by senior officials of the Government of Zimbabwe;

(vi) to be a spouse or dependent child of any person whose property and interests in property are blocked pursuant to E.O. 13288, E.O. 13391, or E.O. 13469;

(vii) to have materially assisted, sponsored, or provided financial, material, logistical or technical support for, or goods or services in support of, the Government of Zimbabwe, any senior official thereof, or any person whose property and interests in property are blocked pursuant to E.O. 13288, E.O. 13391, or E.O. 13469; or

(viii) to be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked pursuant to E.O. 13288, E.O. 13391, or E.O. 13469.

The property and interests in property of the persons described above may not be transferred, paid, exported, withdrawn, or otherwise dealt in. [79 Fed. Reg. at 39313]

Read together, the old and new rules effectively block all of Robert Mugabe’s closest relatives and key minions out of the global financial system, and specifically penalize (and therefore, deter) activities in furtherance of stealing public funds or votes, censoring free expression, or abusing the human rights of Zimbabweans.

Treasury’s new amendments to the Zimbabwe sanctions regulations tighten existing rules against facilitating or evading the existing sanctions, including a new requirement to obtain an OFAC license before donating food, clothing, or medicine to an entity on the SDN list. They even take the extraordinary step of blocking the assets of family members of those designated. Implicitly, they allow for the designation of entities that use non-dollar currencies to evade these sanctions, allowing for those enablers to be barred from the dollar system as well.

Our North Korea sanctions authorities consist of Executive Order 13466, in which President Bush lifted most of our previous sanctions but preserved some restrictions and the blocking of certain property; Executive Order 13551, which blocks the property of named entities involved in proliferation, weapons trafficking, and money laundering in a non-comprehensive way; Executive Order 13570, which imposes import sanctions; and regulations at 31 C.F.R. Part. 510. Now, how many of the above sanctions from the Zimbabwe regulations appear in North Korea-specific sanctions authorities? If you answered “none,” go get yourself a cookie.

This comparison chart, now slightly outdated, should give you the general idea — our North Korea sanctions are some of the weakest that we bother to maintain against any country. Note the empty squares indicating the lack of “comprehensive” or “financial” sanctions against North Korea, despite everything we’ve learned about how well they worked.

At the top of this post, I told you that 161 Zimbabwean entities are sanctioned. Wanna know how many are designated under North Korea-specific sanctions authorities? Seven. An additional 11 individuals and 25 entities are designated under Executive Order 13382, a Bush-era executive order that isn’t specific to North Korea, but authorizes sanctions against entities trafficking in WMD components and technology. I didn’t count, but it’s likely that most of those entities were designated during Bush’s first term. (I’ve pasted the full list of 43 designated North Korean entities below the fold.)

In case you’re wondering, no, Kim Jong Un, his royal family, and his senior government officials are not listed. The only sanctioned entities of any national consequence are Bureau 39 and the Foreign Trade Bank. The others are largely front companies, minor government ministries, and officials that are as easily replaced as whacked moles.

We can extend this comparison further. Slobodan Milosevic – a dead guy – still appears on the SDN List years after his death (presumably, to prevent the misuse of his estate’s assets). He is one of 231 “persons”* still designated under the Balkans sanctions program, two decades after the end of the Balkans wars. Treasury was so thorough in its targeting that it named many individual alleged war criminals by their nomes-de-guerre.

Alexander Lukashenko, the President of the neo-Soviet fossil state called Belarus, is one of about 50 “persons” designated under the Belarus sanctions program, along with his Justice Minister, KGB head, and the officials in charge of Belarus’s media and “elections.” Let no one say that the targeting of a head of state or a state’s top officials is unprecedented because sensitivities to the state’s powerful sponsor are too great.

The SDN List designates 164 “persons” as part of the Burma sanctions program, including Beijing-based China Focus Development Company. Let no one say that China’s economic links to its oppressive satellites are inviolable.

A whopping 397* “persons” are designated under the Cuba sanctions program, including what must be every website domain name registered in Cuba, and curiously, former Panamanian dictator Manuel Antonio Noriega. (Oddly enough, Fidel and Raul Castro are not designated.)

[*It's likely that I counted a few aliases in these numbers.]

So many Iranian entities are listed — the number clearly runs into the hundreds — that I didn’t have the courage to count them all. Iran sanctions are clearly a small industry, but you can’t deny that Treasury’s focus has gotten results.

Hundreds of other targets are designated under Executive Order 13224, authorizing sanctions against terrorists, their sponsors, and their organizations.

Now, I’m no fan of Robert Mugabe, or any of these other regimes. I spent a few nervous days there in 1990 — and those were much better days for Zimbabweans — and the place certainly felt like a dictatorship. I don’t doubt that Mugabe deserves everything President Obama has dropped on him, but would anyone argue that Zimbabwe represents a strategic threat to the United States or to global peace? Or that its human rights abuses, however tragic, compare to the scale of those going on in North Korea?

When your list of sanctioned entities runs into the triple digits and you publish frequent updates to the list of Specially Designated Nationals, it means you’re serious about sanctioning your target. If, as in the case of North Korea, you’ve sanctioned a paltry three-and-a-half dozen over an entire damn decade, it means you aren’t. This, along with the Obama Administration’s utter inaction five months after the release of the U.N. Commission of Inquiry’s report, can only mean that President Obama is either disinterested in or unserious about addressing North Korea’s proliferation, money laundering, threats to peace, or crimes against humanity — even as he sanctions serious but less severe violations in Zimbabwe, Belarus, and other places.

Read more

Obama administration sanctions everyone except Kim Jong Un

The boys at Treasury have been busy sanctioning nasty people lately … just not nasty North Korean people. In the last 30 days, they’ve imposed sanctions on new targets in Syria, the Central African Republic, South Sudan, and the Ukraine, and put a shiny new Executive Order on the President’s desk blocking the assets of human rights violators in Democratic Republic of Congo. Really? We do that sort of thing? Yes, we do that sort of thing — just not to Kim Jong Un.

(They’ve also substantially weakened U.S. sanctions on Burma, just as it’s becoming increasingly obvious that the Burmese government is going back on many of its promises of democratic reform, and that its generals are still engaging in arms trafficking with North Korea.)

Yet this still isn’t our greatest lost opportunity. Recently, Treasury and French parastatal bank BNP Paribas concluded a settlement under which BNP Paribas will pay an absolutely colossal amount — $8.9 billion, which is a record for sanctions violations. BNP Paribas’s M.O. was to strip data from transactions that had to be reported to Treasury, thus avoiding the burden of obtaining licenses to trade with sanctioned countries, or perhaps to evade a requirement to obtain a license that OFAC wouldn’t grant.

Today’s settlement resolves OFAC’s investigation into BNPP’s systemic practice of concealing, removing, omitting, or obscuring references to information about U.S.-sanctioned parties in 3,897 financial and trade transactions routed to or through banks in the United States between 2005 and 2012 in apparent violation of the Sudanese Sanctions Regulations, 31 C.F.R. part 538; the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560; the Cuban Assets Control Regulations, 31 C.F.R. part 515; and the Burmese Sanctions Regulations, 31 C.F.R. part 537. [Treasury Dep’t Press Release]

Notice anyone missing from that list? In case you wonder why, it’s because of the lack of comprehensive financial sanctions against North Korea — the kind of sanctions that are in place and self-evidently effective against these other targets. (No, sanctioning the Foreign Trade Bank is not comprehensive. It in no way compares to our sanctions against Cuba, Syria, or Iran.)

North Korea alone is free to receive foreign investments and all sorts of cash payments, no questions asked, through the dollar-based financial system that uses U.S. banks, and without an OFAC license. This, despite the fact that U.N. Security Council resolutions clearly demand that investors ask questions, and that governments implement and enforce financial transparency.

BNP Paribas wasn’t fined for breaking North Korea sanctions regulations because absent proof that the transactions furthered illicit activity or proliferation, there’s nothing to break. But that’s the catch — there are special licensing requirements on Iran and Syria because that’s how we’re most likely to detect proliferation and money laundering. Instead, our North Korea sanctions are weaker than any of these other national programs. And that makes no sense at all from a strategic, humanitarian, or enforcement perspective.

“Today’s settlement is OFAC’s largest-ever and reaffirms OFAC’s determination to aggressively enforce U.S. sanctions rules and regulations,” said OFAC Director Adam J. Szubin.  [....]

The specific payment practices the bank utilized in order to process sanctions-related payments to or through the United States included omitting references to sanctioned parties; replacing the names of sanctioned parties with BNPP’s name or a code word; and structuring payments in a manner that did not identify the involvement of sanctioned parties in payments sent to U.S. financial institutions.  While these payment practices occurred throughout multiple branches and subsidiaries of the bank, BNPP’s subsidiary in Geneva and branch in Paris facilitated or conducted the overwhelming majority of the apparent violations.  

I don’t dispute the awfulness of the civil war in the DRC, but do its human rights violations equal this in terms of their scale and their drearily methodical state sponsorship? And even if so, why the DRC and not North Korea? The DRC isn’t a strategic threat to U.S. interests. Syria and Iran are, of course, but North Korea is suspected of nuclear cooperation with Iran, has a proven history of chemical weapons and nuclear cooperation with Syria, has attacked on U.S. treaty allies, and has sold arms to Hamasbollah.

On the other hand, none of these nations is suspected of state-sponsored drug trafficking, counterfeiting of U.S. currency and intellectual property, illegal gambling, or money laundering on a comparable scale. Those things represent a direct threat to the financial system on which the global economy depends. So what reason exists to sanction any of those regimes that isn’t just as good a reason to sanction North Korea, too?