With the pace of news of North Korea sanctions news lately, my bookmarks folder is starting to look like what the paramedics found at the Cat Lady’s house after the neighbors noticed a foul odor. Today, I want to catch up with our efforts to deny Pyongyang a haven for its money laundering network, with a focus on Southeast Asia. To review the administration’s progress since January, you may want to start here and here. Ambassador Nikki Haley also gave this summary in a recent speech at the U.N.:
In addition to our work here in the Security Council, many nations have taken their own strong actions against North Korea’s threat to peace. Just this year, as North Korea’s behavior has become more intolerable, over 20 countries from every corner of the globe have restricted or ended their diplomatic relations. Mexico, Peru, Italy, Spain, and Kuwait have expelled North Korea’s ambassadors from their countries. Portugal and the United Arab Emirates have suspended diplomatic relations. The Philippines and Taiwan have suspended all trade with North Korea. Singapore, formerly North Korea’s seventh largest trading partner, has cut all trade ties. Uganda has halted all military and security ties. The European Union, Australia, South Korea, and Japan have made additional sacrifices for peace and security by going well beyond what the Security Council requires. [link]
After which, she castigates a certain unnamed country for violating the coal ban — if you were here, you’d hear me sneezing, “ah-CHI-na!” and you’d say, “Gesundheit.” By now, I’d think we’ve given any remaining Chinese buyers of that coal fair warning.
– If you start anywhere, start with this report by Sheena Chestnut Greitens on efforts by the Obama and Trump administrations to convince South Asian and Southeast Asian nations to cut ties with Pyongyang. The record is mixed, but Trump has clearly had more success here than Obama. Burma has also kicked out a North Korean diplomat, and Malaysia is reviewing its diplomatic relations with Pyongyang.
– This commendably detailed report by (believe it or not) Buzzfeed examines why, in light of the Kim Jong-nam assassination, Malaysia still has not cut its diplomatic or commercial ties with North Korea. I previously wrote about Malaysia’s lax sanctions implementation and lack of anti-money laundering compliance here.
– India continues to say it’s making efforts to restrict trade with North Korea.
– Vietnam has expelled the local head of Wonyang Shipping, a subsidiary of Ocean Maritime Management, the U.N.-designated North Korean arms smuggler. It has also denied visas for more than 20 North Korean hackers PUST graduates “IT workers.”
– Angola, which has been implicated in several reports of the U.N. Panel of Experts for its arms trade with North Korea, including patrol boat engines, says it has deported 50 North Korean workers, who follow “dozens” of others who left the day before. Their employer was named as “Mansudae,” a likely reference to the U.N.-designated Mansudae Overseas Projects Group.
It may be that for our diplomats, the easy work has already been done. We’re now working on persuading states whose ties to Pyongyang are more persistent. I’m all for asking nicely once, and sometimes twice. I have to think we’ve asked (to name an obvious example) Malaysia nicely enough times. If I were calling the shots, I’d put Glocom, Pan Systems, and MKP Partners on the SDN List now.
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Update: See also this report from that other organization called ISIS, naming the countries that continue to violate sanctions.
Here at OFK, we’ve chronicled a curious fact that few professional foreign policy scholars have noticed: China is opposed to unilateral sanctions, except when it isn’t. Last week — barely a week after President Trump returned from Beijing — he gave Xi Jinping something to oppose.
OFAC designated Dandong Kehua Economy & Trade Co., Ltd., Dandong Xianghe Trading Co., Ltd., and Dandong Hongda Trade Co. Ltd. pursuant to E.O. 13810. Between January 1, 2013 and August 31, 2017, these three companies cumulatively exported approximately $650 million worth of goods to North Korea and cumulatively imported more than $100 million worth of goods from North Korea. These goods have included notebook computers, anthracite coal, iron, iron ore, lead ore, zinc ore, silver ore, lead, and ferrous products.
OFAC designated Sun Sidong and his company, Dandong Dongyuan Industrial Co., Ltd. (Dongyuan), pursuant to E.O. 13810. Sun and Dongyuan were responsible for exporting over $28 million worth of goods to North Korea over several years, including motor vehicles, electrical machinery, radio navigational items, aluminum, iron, pipes, and items associated with nuclear reactors. Dongyuan has also been associated with front companies for weapons of mass destruction-related North Korean organizations. [Treasury Dep’t Press Release]
All told, last week’s designations include four Chinese companies, one Chinese individual, seven North Korean shipping or trading companies, two North Korean government agencies, and 20 North Korean ships. Most of the designations target North Korea’s shipping industry, and OFAC, the Office of Foreign Assets Control, even included photographs of North Korean ships doing ship-to-ship transfers of oil, in violation of UNSCR 2375, paragraph 11. If I had to guess, I’d guess that those photographs were taken by a spy satellite.
Treasury did not name the other ship or its nationality; however, in testimony at the House Foreign Affairs Committee in September, Treasury Assistant Secretary Marshall Billingslea showed other photographs “provided by the intelligence community” and named the ships, the flag states, and their destination ports (in China and Russia, of course).
The designation of the North Korean entities suggests that Treasury is pursuing a phased strategy. In the first phase, Treasury blacklists North Korean entities to put third-country companies, insurers, and banks on notice to avoid doing any business involving them. Treasury is still years behind the U.N. Panel of Experts, however, in naming the various persons and entities known to be involved in violating North Korea sanctions. Although a person designated by OFAC can sue to challenge the designation, the courts would apply a deferential standard and uphold any designation supported by “substantial evidence.” In most cases, the U.N. Panel’s careful and thorough work, including its annexes, would be more than sufficient to meet that standard.
Take, for example, the case of one of Treasury’s designations, the North Korean Maritime Administration. The U.N. Panel of Experts had recommended its designation in its most recent report, in September, for helping U.N.-designated North Korean arms smuggler Ocean Maritime Management evade sanctions. I’ve pasted the relevant text from the POE’s report below the “continue reading” link.
The next phase will require Treasury to hit some third-country targets to sever that business and warn others of the consequences of breaking that boycott. In the case of the Sun Sidong network, we’ve reached that second phase. Sun’s network first came to our attention last August, when a leaked U.N. report revealed that the Egyptian authorities had found a large shipment of PG-7 rocket-propelled grenades aboard a Chinese-flagged merchant ship, the Jie Shun, at the southern end of the Suez Canal. At the time, I’d guessed the rockets were headed for Syria, but the Washington Post later reported that the customer was none other than Egypt itself.
By June of this year, the Center for Advanced Defense Studies had pursued the POE’s clues and traced the ownership and control of the Jie Shun back to a Chinese national named Sun Sidong.
#SunSidong formerly owned the Jie Shun, a ship seized during a multimillion arms transfer from North Korea to Egypt, highlighting how “licit North Korean businesses are being used to facilitate North Korean illicit activity” (@JobyWarrick) https://t.co/WGlDscjFSn
It then released a remarkable report that not only exposed Sun’s network, it effectively mapped out most of North Korea’s money laundering network in China. C4ADS found that this network was “centralized, limited, and vulnerable” to sanctions. Sun and his companies account for a large portion of that network.
For example, one of its subsidiaries, Dandong Zhicheng Metallic Materials Company, was until recently the single largest purchaser of North Korean coal.
“These companies will have a tough time continuing operations as even Chinese banks will increase scrutiny of their transactions, if not completely cut them off,” Anthony Ruggiero, a Senior Fellow at the Foundation for the Defense of Democracies, told NK News.
“These actions continue the narrative on the problem China has in Dandong and Dalian, something Treasury highlighted in its advisory where it noted the activities of Chinese banks and companies working with North Korea.” [NK News, Leo Byrne]
Last week’s designations are not the feds’ first strike on the Sun Sidong network. In August, the Justice Department filed a civil forfeiture complaint against DZMM. Last month, the Wall Street Journalreported that Sun was under investigation by the FBI, so it may not be the last strike, either.
One other company, the Korea South-South Cooperation Corporation, was designated for slave labor exports to “China, Russia, Cambodia, and Poland.” Technically speaking, UNSCR 2375 permits member states to allow labor contracts with North Korea to expire, but in this case, Treasury is telling the parties to those transactions to keep them out of the dollar system.
Although the designations came one day after President Trump announced that North Korea would be returned to the list of state sponsors of terrorism, the designations are not directly related to North Korea’s recent sponsorship of terrorism. It would not surprise me, however, to see future designations of North Korean nationals under Executive Order 13224. The President has indicated that we’ll see more designations soon.
President Donald Trump, in announcing Monday his administration’s decision to designate North Korea as state sponsor of terrorism, indicated that additional sanctions measures were on the way. “It will be the highest level of sanctions by the time it’s finished over a two-week period,” Mr. Trump said. [WSJ, Felicia Schwartz]
The designations also tell us a few things about the role of China in enforcing these sanctions. First, although I’d feared that Trump would get hoodwinked by Xi Jinping in Beijing and ease off on secondary sanctions, it’s clear that he hasn’t eased up entirely. It’s also clear that the visit by a Chinese emissary to Pyongyang, which was much ballyhooed on Twitter (including by the President himself) achieved exactly as much as I’d expected (bupkes). By now, all wizened Korea-watchers either know or should know that the words “great expectations,” “diplomat,” and “Pyongyang” can only be assembled into transitory delusions.
We soon learned that when Xi Jinping’s messenger showed up, His Porcine Majesty was conveniently out of town looking at things. No doubt, Xi is unhappy with both Donald Trump and Kim Jong-un now. But he’d have no reason to be unhappy with us now if he enforced the sanctions his government voted for at the U.N.
The Chinese government unexpectedly arrested the head of a major company operating cargo ships linking North Korea and China, which the United States had designated as an entity subject to its independent sanctions, a joint investigation by The Dong-A Ilbo and Channel A found on Sunday. Beijing is reportedly conducting far-reaching investigation of all companies engaged in trade with North Korea, as well as Chinese firms and individuals Washington included in the list of entities subject to its independent sanctions since this past summer, and is taking disciplinary action if illegal acts are detected.
According to informed sources on North Korea, the Chinese government arrested a man identified by his last name Jin, head of Dalian Global Unity Shipping, and is probing him in a location other than Dalian. Jin, a Korean Chinese, is an entrepreneur widely known in the field who is almost monopolizing shipping service linking Dalian and North Korea. Since his arrest, the operation of all the vessels linking Dalian and North Korea has been suspended. The measure is reportedly putting heavy pressure on North Korea, with the North’s export to China having been halted. [Dong-a Ilbo]
Dalian Global Unity isn’t part of the current round of designations; it was added to the SDN List back in June.
Finally, OFAC designated Dalian Global Unity Shipping Co., Ltd. (Dalian Global Unity) pursuant to E.O. 13722 for operating in the transportation industry in the North Korean economy. Dalian Global Unity is reported to transport 700,000 tons of freight annually, including coal and steel products, between China and North Korea. According to the 2013 report by the UN Panel of Experts on North Korea, Dalian Global Unity was actively involved in eight cases of luxury goods smuggling incidents and is suspected of involvement in at least one other case. Middlemen from Dalian Global Unity gave specific instructions about how shipments and transactions could evade the UN-mandated luxury goods ban. [U.S. Treasury Dep’t]
Remember the ten-week rule: never celebrate any apparent Chinese compliance with North Korea sanctions until it has been in effect for at least ten weeks.
Namibia (or as some refer to it locally, Nambia) has long been one of Africa’s worst violators of UN sanctions against North Korea, including by hosting an arms factory run by Mansudae Overseas Projects Group, in violation of an arms embargo that has been in effect since the adoption of UNSCR 1718 in 2006. It has also been a major consumer of North Korean slave labor (the export of which was only recently truncated by UNSCR 2375) and statues (also a recent ban, under UNSCR 2321). Mansudae itself was subsequently designated in UNSCR 2371. Because this commerce invariably caused dollars to change hands, this also meant that North Korean money launderers based in South Africa transited to and from Windhoek and made use of Namibian banks and a South African insurance company.
To add to the corruption of cherished institutions, I was even distressed to see some of Mansudae’s construction make a brief cameo in an episode of “The Grand Tour.”
The exposure of these illicit relationships began with the U.N. Panel of Experts’ report in March 2016. Because Namibia is functionally a one-party state that nonetheless has a vigorously free press, my own first post on its violations of the sanctions and potential consequences under U.S. law went viral in Namibia (see update). This was followed by some outstanding investigative reporting by Namibian journalist John Grobler for NK News, and sharp criticism in the Namibian press. The Namibian government initially pretended as if it was winding up those relationships, but in retrospect, it was probably just stalling for time until things settled down.
Now, CNN has added its own outstanding investigation to our information about North Korea and Namibia. Click the image to watch its video report.
One interesting detail in CNN’s report is that Namibia is a recipient of U.S. foreign assistance. Unfortunately for Namibia, under section 203 of the NKSPEA, as amended by section 313 of the KIMS Act, it now becomes ineligible for certain categories of U.S. assistance. Second and more acutely, now that there can be no doubt that its violations were knowing, continued violations subject the Namibian Defense Ministry to the mandatory asset freezes of NKSPEA section 104(a)(9).
The Namibian government clearly wants us to believe that it has terminated its relationships with North Korea. The speedy disappearance of the North Korean workers and its claims to CNN are unconvincing in this regard. They are also unconvincing to Hugh Griffiths of the U.N. Panel, who takes the extraordinary step of appearing in CNN’s broadcast to say so. U.N. sanctions don’t enforce themselves. It’s time for Namibia to come clean with the U.N. Panel, or to be made an example of.
If journalism can be reduced to its most fundamental purpose, that purpose is to tell the reader important things he does not know. Be mindful of this purpose as we review one example of the slapdash reporting one tends to see whenever North Korea intrudes into the headlines.
As the Trump administration scrambles to respond to North Korea’s nuclear ambitions, it is trying to coax the country’s smaller trading partners, from Sudan to the Philippines, to ramp up the pressure on Kim Jong Un’s regime. Last week, the Trump administration announced that it would cut $96 million in aid and delay $195 million in military funding to Egypt, citing human rights concerns — and, according to reports, over the country’s robust relationship with North Korea.
One of the largest recipients of US aid, Egypt has also had a longstanding relationship with the isolated regime in Pyongyang, particularly trading in weapons. It’s unclear, though, what aspects of Egypt-North Korea relations the administration is displeased with, and whether it includes commerce not prohibited by sanctions. [Buzzfeed, Megha Rajagopalan & Maged Atef]
Not clear which aspect, you wonder? Might Buzzfeed have found some relevance in Pyongyang’s history of selling ballistic missiles to Egypt, no doubt to fund other missile programs that threaten the U.S. directly? Or that in 2015, the Obama administration sanctioned an Egyptian trading company for its ties to KOMID, North Korea’s principal arms exporter?
Buzzfeed’s reporters do finally get around to mentioning — near the very bottom of their piece, by which time wiser readers will have moved on — that “North Korea has even helped Egyptian scientists develop missile systems.” They do not mention that this is a long and ongoing relationship, that it flagrantly violates a U.N. arms embargo that has been in place for eleven years, that this embargo has been reaffirmed and strengthened by at least half a dozen resolutions since then, or that Egypt’s violation of it has been mentioned repeatedly by the U.N. Panel of Experts. Given the reporters’ emission of an inky cloud of confusion about what commerce is or isn’t prohibited by sanctions, wouldn’t more competent journalism have taken a moment to find the resolutions, read them, and explain them to its readers?
“The question is, if this North Korean issue is so important for the US, why didn’t they ever mention it with us before?” said Emad Gad, a member of the Egyptian parliament’s foreign affairs committee. “The Egypt-North Korea relationship is an old one, so why are we suddenly hearing they have problems with our relations with North Korea?”
Hey, I’m no human polygraph, but I know what bullshit smells like. A 30-second Google search yields thisNew York Times article (I know) noting that “[s]uccessive American administrations have privately raised the issue of North Korea in talks with Cairo, but with little success.” Suddenly?
Egypt makes up a very small part of the value of North Korea’s total trade — but it attracted headlines in 2008 when Orascom, an Egyptian telecom firm, set up the first North Korean 3G network. And Egypt is a well-known buyer of North Korean missiles and other weapons.
Again, Buzzfeed is out of its depth, leaving out revelations by better reporters that Orascom’s venture in North Korea was a likely violation of U.S. law, a fiasco for its shareholders, and a career-discriminating event for its CEO, Naguib Sawiris. All of which also goes unmentioned.
In Cairo, the development was met with confusion, and in some quarters, frustration.
“The North Korean-American issue is a conflict between the US and its allies against North Korea — not the whole world against North Korea,” said Gen. Hamdi Bakhit, a member of parliament who sits on the powerful Defense and National Security Committee. “China, for example, has a balanced relationship with both the US and North Korea … America is just fishing for a mistake to pressure Egypt.”
All of which Buzzfeed takes at face value, uncritically, without further inquiry or elucidation of its readers that a government’s mouthpiece has just lied to them like Anthony Weiner talking to a vice squad detective. Yes, we are but a simple junta leading a government that rules over almost 100 million people! We sing, we dance, we smoke our hookahs, and we craftily expunge all traces of shadowy extremist sects from every slum in Cairo, and that is all! We cannot be bothered to read U.N. Security Council resolutions or U.N. Panel of Experts’ reports, or file an implementation report that even fills a single sheet of paper.
Meaning, the Egyptian government knows damn well where to find these resolutions, what they mean, and what they prohibit. Which is more than I can say for Buzzfeed’s reporters.
Look, I understand that many journalists despise Donald Trump. I can understand why. It isn’t hard to find conservative pundits who share that sentiment. It isn’t hard to find journalists who would clearly despise a President Kasich almost as much for the sole reason that he’s a Republican. But something is terribly wrong with anyone whose moral lens is so monochromatic that she defaults to a certain sympathy for anyone whom Trump is against, even when that anyone is a sanctions-busting military junta. Or Kim Jong-Un.
Two months ago, the Center for Advanced Defense Studies (C4ADS) released its groundbreaking report, “Risky Business,” which used open-source business records to trace the 5,233 companies that (according to C4ADS) comprise nearly the entirety of North Korea’s “limited, centralized, and vulnerable” financial networks in China. At the time, I speculated that we hadn’t heard the last word from the FBI, the Treasury Department, and Justice Department, and yesterday, my suspicions were confirmed.
First, Treasury designated a series of North Korean, Chinese, and Russian nationals for dealing with sanctioned entities through the dollar system, in violation of the International Emergency Economic Powers Act. The effect of the designations is to freeze any assets of those entities that are in the United States, prevent them from using the dollar system for future transactions, and prevent U.S. persons from providing them with any goods, services, or technology.
“Treasury will continue to increase pressure on North Korea by targeting those who support the advancement of nuclear and ballistic missile programs, and isolating them from the American financial system,” said Treasury Secretary Steven T. Mnuchin. “It is unacceptable for individuals and companies in China, Russia, and elsewhere to enable North Korea to generate income used to develop weapons of mass destruction and destabilize the region. We are taking actions consistent with UN sanctions to show that there are consequences for defying sanctions and providing support to North Korea, and to deter this activity in the future.” [Treasury Dep’t Press Release]
Among yesterday’s notable targets:
* China-based Dandong Rich Earth Trading Co., Ltd., for buying vanadium from sanctioned Korea Kumsan Trading Corporation, a front for the General Bureau of Atomic Energy.
* Russia-based Gefest-M LLC and its director, Ruben Kirakosyan, for procuring metals for sanctioned Korea Tangun Trading Corporation, a front for the Second Academy of Natural Sciences, which is involved in North Korea’s WMD and missile programs.
* China- and Hong Kong-based Mingzheng International Trading Limited (“Mingzheng”), the subject of this previous Justice Department forfeiture case, which acts as a front company for the Foreign Trade Bank (FTB) of North Korea. Treasury designated the FTB in 2013 for proliferation financing. The U.N. recently designated it in UNSCR 2371.
* Three more Chinese companies that are “collectively responsible for importing nearly half a billion dollars’ worth of North Korean coal between 2013 and 2016,” including Dandong Zhicheng Metallic Materials Co., Ltd. (“Zhicheng”), JinHou International Holding Co., Ltd., and Dandong Tianfu Trade Co., Ltd. Dandong Zhicheng was exposed by C4ADS as part of the Sun Sidong network in June. This is the single largest purchaser of North Korean coal. That’s going to leave a mark.
* Three Russians and two Singapore-based companies involved in providing oil to North Korea.
Transatlantic Partners Pte. Ltd. (“Transatlantic”), Mikhail Pisklin, and Andrey Serbin were designated pursuant to E.O. 13722 for operating in the energy industry in the North Korean economy. Pisklin, through Transatlantic, concluded a contract to purchase fuel oil with Daesong Credit Development Bank, a North Korean bank designated in 2016. Serbin is a representative of Transatlantic who worked with Irina Huish of Velmur Management Pte. Ltd. (“Velmur”) to purchase gasoil for delivery to North Korea. Velmur was designated for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, Transatlantic. Velmur also sold gasoil to North Korea. OFAC also designated Velmur’s executive director, Irina Huish, for acting or purporting to act for or on behalf of, directly or indirectly, Velmur, and she has also worked with Transatlantic to circumvent sanctions. Both of these companies have attempted to use the U.S. financial system to send millions of dollars in payments on behalf of North Korea-related transactions.
Lest anyone accuse Treasury of singling China out, the designation of Singapore-based entities should send a strong message to a state that has largely overlooked the enforcement of North Korea sanctions and consequently become a haven for Pyongyang’s money laundering. I was also pleased to see Treasury go after KOMID’s slave labor racket and arms factory in Namibia, which I’ve previously written about here, here, and here, although I maintain that the NKSPEA also requires the President to sanction the Namibian entities that have knowingly dealt with sanctioned North Korean entities like KOMID. I hope Angola will be next.
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Just over an hour after Treasury released those designations, the Justice Department filed two civil forfeiture complaints against $11 million belonging to Velmur, Transatlantic, and Dandong Zhicheng. I downloaded both complaints from PACER, for the good of humanity, so you don’t have to.
This complaint alleges that Velmur and Transatlantic Partners Pte. Ltd. (Transatlantic) laundered United States dollars on behalf of sanctioned North Korean banks that were seeking to procure petroleum products from JSC Independent Petroleum Company (IPC), a designated entity. The complaint also seeks a civil monetary penalty against Velmur and Transatlantic for prior sanctions and money laundering violations related to this scheme.
According to the complaint, designated North Korean banks use front companies, including Transatlantic, to make U.S. dollar payments to Velmur. The complaint relates to funds that were transferred through four different companies and remitted to Velmur to wire funds to JSC Independent Petroleum Company (IPC), a Russian petroleum products supplier. On June 1, 2017, the Department of the Treasury’s Office of Foreign Asset Controls (OFAC) designated IPC. The designation noted that IPC had a contract to provide oil to North Korea and reportedly shipped over $1 million worth of petroleum products to North Korea. [U.S. Attorney’s Office]
Don’t focus on the fact that the putative claimants were selling fuel. Focus on the fact that they were dealing with a sanctioned North Korean entity through the dollar system, which is a felony. (U.N. sanctions only ban exports of aviation and rocket fuel, and U.S. fuel export sanctions are discretionary and have humanitarian exceptions.)
The government is seeking to forfeit $6,999,925 that was wired to Velmur in May 2017. The U.S. dollar payments, which cleared through the U.S., are alleged to violate U.S. law, because the entities were surreptitiously making them on behalf of the designated North Korean Banks, whose designation precluded such U.S. dollar transactions. The government also is seeking imposition of a monetary penalty commensurate with the millions of dollars allegedly laundered by Velmur and Transatlantic. [U.S. Attorney’s Office]
The government is seeking to forfeit $4,083,935 that Dandong Chengtai wired on June 21, 2017 to Maison Trading, using their Chinese bank accounts. The investigation revealed that Maison Trading is a front company operated by a Dandong Chengtai employee. These U.S. dollar payments, which cleared through the United States, are alleged to violate U.S. law, because the recent North Korean sanctions law specifically barred U.S. dollar transactions involving North Korean coal and the proceeds of these transactions were for the benefit of the North Korea Worker’s Party, whose designation precluded such U.S. dollar transactions.
This case relates to a previously unsealed opinion from Chief Judge Beryl A. Howell of the U.S. District Court for the District of Columbia, which found that probable cause existed to seize funds belonging to Dandong Chengtai. [U.S. Attorney’s Office]
As noted here. And lest we forget to give credit where it’s due …
The FBI’s Phoenix Field Office is investigating the case involving Velmur Management Pte Ltd. and Transatlantic Partners Pte., Ltd. The FBI’s Chicago Field Office is investigating the case involving Dandong Chengtai Trading Co. Ltd. Both investigations are being supported by the FBI Counterproliferation Center.
Assistant U.S Attorneys Arvind K. Lal, Zia M. Faruqui, Christopher B. Brown, Deborah Curtis, Ari Redbord, and Brian P. Hudak, all of the U.S. Attorney’s Office for the District of Columbia, are prosecuting both cases. Paralegal Specialist Toni Anne Donato and Legal Assistant Jessica McCormick are providing assistance. [U.S. Attorney’s Office]
Finally, let’s not forget the important work of C4ADS. Today, it will release an update to “Risky Business,” revealing that in addition to having funds in U.S. banks, the Chinese national who runs Dandong Zhicheng, Sun Sidong, owns real estate in the United States. Check C4ADS’s web site for the update.
When I read C4ADS’s reports, I’m often reminded of the line from “Lawrence of Arabia” when Mr. Dryden (delivered by the wonderfully dry and underrated British actor Claude Rains) learns that Lawrence has conquered the Turkish base at Aqaba with an army of Arab tribesmen: “Before he did it, I’d have said it couldn’t be done.” Indeed, for years, scholars at famous think tanks assured us it couldn’t be done. First, they told us that sanctions against North Korea were maxed out. Then, they told us that Pyongyang’s networks were needles in a field of haystacks, and that the field itself was obscured and beyond our sight. And yet, without so much as a single security clearance between them, two brilliant young analysts at C4ADS mined data from open sources and traced the networks. It may be on the brink of proving all the “experts” wrong.
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Update: C4ADS writes in to say that the update was delayed, and will be released in a few days.
Last year, Ed Royce, the Chairman of the House Foreign Affairs Committee, and Cory Gardner, Chairman of the Senate Asia Subcommittee, led the charge to cut Pyongyang’s access to the hard currency that sustains it by drafting and passing the North Korea Sanctions and Policy Enhancement Act. We’ve known all along that nothing short of presenting Kim Jong-Un with an existential choice — disarm and reform, or perish — would create the conditions for a negotiated disarmament of North Korea, assuming that’s still possible. And we’ve always known that it would take several years for even aggressively enforced sanctions to present Pyongyang with that choice.
One nuclear test and multiple missile tests later, neither internationalcompliance with U.N. resolutions nor (until very recently) U.S. enforcement of the NKSPEA has been enough to either change Kim Jong-Un’s mind or weaken his hold on power. Congress now seeks to raise the pressure on Pyongyang by closing loopholes in existing sanctions, attacking its developing sources of income (textiles, fisheries, and labor exports), catching U.S. law up with new U.N. sanctions, and most importantly, increasing penalties for foreign banks and governments that (for various reasons) haven’t complied with the U.N. resolutions.
Ed Royce continues to lead this effort with the KIMS Act, which passed the House overwhelmingly in May, and which has now been merged into Title III of the Russia, Iran and North Korea Sanctions Act of 2017, or RINKSA. But the foreign affairs committees can only go so far in attacking Pyongyang’s cash flow through financial regulation before the parliamentarians in Congress give primary jurisdiction over a bill to the financial services committees. Some of the most important remaining sanctions loopholes are within the banking committees’ jurisdiction.
Introducing S.1591, the BRINK Act
An unlikely champion has stepped into this void in the form of Senator Chris Van Hollen of Maryland, a liberal Democrat who sits on the Senate Banking Committee. I say “unlikely,” because historically, it hasn’t been liberal Democrats who’ve led Congress’s efforts to raise the pressure on Pyongyang. This would be a good time to abandon any assumption that Democrats are soft on North Korea. Now, Van Hollen and Republican Senator Pat Toomey of Pennsylvania have introduced S.1591, the Banking Restrictions Involving North Korea Act, or BRINK Act, of 2017. The text of the bill, which you can read here, hasn’t been posted on GovTrack or Congress.gov, although the bill itself was introduced several days ago. At the outset, I’ll just get this bit of full disclosure out of the way. I’ve had some discussions with Senator Van Hollen’s staff about this bill, and ….
The BRINK Act is a tough and sophisticated piece of legislation. It will be a strong complement to both the NKSPEA and the RINKSA. This post will discuss its key provisions, starting with the definitions. A very important new one that appears in multiple places in the bill is “North Korean covered property:”
That definition potentially covers just about every transaction the North Korean government profits from. The key question, of course, is whether the U.S. can reach any given transaction in NKCP — either because a U.S. person (or a foreign subsidiary) is a party to the transaction, or because part of that transaction occurs in the United States (most likely, because a financial transaction is cleared through a U.S. correspondent bank, or because a product seeks to enter U.S. commerce).
Another significant definition is “knowingly,” which includes circumstances in which a party to the transaction “should have known” that it was prohibited.
Section 101 of the BRINK Act creates a blacklist of Chinese and other foreign banks that are failing their due diligence obligations to prevent North Korea from accessing the financial system, or are helping North Korea evade sanctions by facilitating offshore dollar clearing, or dealing with North Korea in precious metals or other stores of value. It then provides a list of sanctions that restrict the access of those banks to the U.S. financial market, add additional civil penalties to the criminal penalties under 31 U.S.C. 5322, or (at worst) block their assets here.
Like all of the sanctions under the BRINK Act, this sanction can be suspended if North Korea makes progress toward disarmament and accounting for American POW/MIAs, and can be lifted when North Korea completes that disarmament and accounting.
Section 102 requires any transactions in North Korean covered property within U.S. jurisdiction (involving a U.S. person or occurring in whole or in part in the United States) to be licensed by the Treasury Department’s Office of Foreign Assets Control. As we’ve learned from recent actions by the Justice Department, North Korea’s banks, smugglers, and money launderers — and their Chinese bankers — tend to evade OFAC licensing requirements, despite their preference for dealing in U.S. dollars. Under this provision, any unlicensed transactions in NKCP are punishable by a $5 million fine and 20 years in prison. More importantly, the proceeds of unlicensed transactions, and property “involved in” unlicensed transactions, will be subject to forfeiture. In most cases, that’s the only form of “punishment” we have the power to impose on the targets of these activities.
Section 103 authorizes sanctions against providers of specialized financial messaging services to North Korean financial institutions, a topic I previously covered here, here, and here.
Section 104 authorizes new sanctions against foreign governments that fail to comply with U.N. sanctions, such as those that require member states to freeze the property and close the offices of designated North Korean entities (KOMID, Korea Kwangson Bank, the Reconnaissance General Bureau, Bureau 39, etc.), to expel representatives of North Korean banks and North Korean diplomats who engage in arms trafficking, and to deregister North Korean ships. For governments identified as noncompliant, the U.S. can limit exports of goods or technology to those countries, withhold foreign aid, and instruct our diplomats to vote against them getting IMF, World Bank, and other international loans. This provision may well put teeth into sections 313 and 317 of the RINKSA (discussed below) and broadens the sanctions authorities of section 203 of the NKSPEA.
Section 105 authorizes grants for governmental and non-governmental organizations that currently provide the U.S. government with much of its actionable intelligence on North Korea money laundering — the U.N. Panel of Experts, and private groups like the Center for Advanced Defense Studies and Sayari Analytics. (Again, this complements a provision in the RINKSA — specifically, section 323, which provides rewards for informants who provide information leading to the arrest of persons responsible for North Korean money laundering or cyber attacks).
Section 106 requires a report on North Korea’s use of beneficial ownership rules to mask its interests in property (previously discussed here).
Section 107 directs the President to team up with the World Bank’s stolen assets recovery initiative to go out and find the hidden, ill-gotten gains of Kim Jong-Un and his minions, wherever in the world they can be found, block them, and release them for humanitarian use.
Section 108 will undoubtedly create headlines in South Korea — it urges South Korea not to reopen Kaesong until North Korea completely, verifiably, and irreversibly dismantles its nuclear, chemical, biological, and radiological weapons systems and any systems for delivering them.
Sections 201 through 204 call on and encourage assets and pension fund managers to divest from companies that have investments in North Korea, and immunize those fund managers from suit for any such divestment.
The KIMS Act becomes Title III of the RINKSA
For a while, it looked like all that would survive of the KIMS Act in the Senate was an untitled bill called S.1562, which removed most of the KIMS Act’s toughest provisions except for secondary sanctions on North Korea’s labor exports. But last week, S.1562 was referred, ironically enough, to the Banking Committee, taking it out of the hands of Foreign Relations. More importantly, the White House is also signaling its support for a newer bill, the Russia, Iran, and North Korea Sanctions Act. The RINKSA incorporates nearly all of the KIMS Act into Title III (full text here; scroll down to page 144).
Bob Corker, the Chairman of the Senate Foreign Relations Committee, has expressed some concern about how easy it will be to pass a bill that big this year. I don’t have the knowledge to say whether this was a good tactical move or not, so I’ll defer to the congressional leadership on that point. (Some of us are keenly aware that Congress still has to reauthorize the North Korean Human Rights Act this year, or it will expire.) Instead, I’ll describe the provisions of Title III in a bit more detail than I described the KIMS Act before.
Section 311 amends the key provision of the NKSPEA, section 104, to expand both the mandatory sanctions of section 104(a) and the discretionary sanctions of NKSPEA 104(b). Mandatory sanctions would now apply to purchases of precious metals from North Korea, selling aviation or rocket fuel to North Korea, providing bunkering services for any U.N.- or U.S.-designated ship, reflagging North Korean ships, or providing correspondent services to any North Korean bank (Title III, section 312, also codifies a prohibition on providing indirect correspondent account services to North Korean banks).
Section 311 also expands the President’s discretionary authority to designate and sanction persons who violate U.N. sanctions, and U.S. regulations and executive orders, that apply to North Korea. These new, discretionary authorities also authorize the President to designate persons who purchase more coal and iron ore than U.N. limits allow, who purchase textiles or food products from North Korea, who transfer bulk cash or other stores of value to North Korea, and who export crude oil to North Korea (humanitarian exports of gasoline, diesel, and heavy fuel oil are exempt). Other new sanctions authorities apply to North Korea’s online gambling, sale of fishing rights, labor exports, and banking, transportation, and energy sectors.
Some of these areas are already subject to the potential for asset freezes under Executive Order 13722, but designations under section 104(a) or 104(b) of the NKSPEA can have additional and more severe consequences.
Sections 313 and 317 are secondary sanctions provisions applicable to governments that aren’t complying with U.N. sanctions. Section 313 amends and strengthens NKSPEA 203 sanctions against governments that engage in arms deals with North Korea, by denying them most foreign assistance. Section 317 creates a blacklist of noncompliant governments, which would dovetail nicely with the sanctions provisions of section 104 of the BRINK Act.
Section 314 expands the President’s authority to increase customs inspections for cargo coming from ports that fail to inspect all cargo going to or coming from North Korea, as required by UNSCR 2270. This provision is a secondary shipping sanction. It presents a very real risk that cargo coming to the U.S. from noncompliant ports may be held up longer in Customs, which could cause shippers to take their business elsewhere. As with all secondary sanctions, it forces third-country entities to choose between doing business with the U.S., or with North Korea. It also provides a list of suspect ports in China, Russia, Iran, and Syria that would be first in line to blacklisted for additional inspections.
Section 315 is another secondary shipping sanction, and a very tough one indeed — ships flagged by countries that reflag North Korean ships (a violation of UNSCR 2270 and 2321) could be denied access to U.S. ports and waterways. Vessels that have visited North Korea recently, for other than strictly humanitarian purposes, could also be banned.
Section 316 orders a report on WMD cooperation between North Korea and Iran.
Section 318 orders a report on whether SWIFT and other providers of specialized financial messaging continue to service North Korean banks, including those designated by the U.N.
Section 321 is a set of powerful sanctions against employers of North Korean labor and the sellers of products made with North Korean labor. It subjects those employers to potential sanctions under the Trafficking Victims Protection Act or the freezing of their assets. Governments that allow the use of North Korean labor could also see their TVPA status drop. A rebuttable presumption would apply to any goods made with North Korean materials or labor, excluding from U.S. commerce under section 307 of the Tariff Act.
Section 323 provides for the government to pay rewards to informers — whether these be defectors or NGOs — that provide information leading to the arrest of North Korean money launderers or persons responsible for cyber attacks.
Both of these bills attempt to attack North Korea’s third-country enablers. Legislation of this kind is necessarily creative and complex because it’s not always obvious how the U.S. can reach North Korea’s income while minimizing harm to legitimate commerce and to the North Korean people. If the target only does business with North Korea, then our next option is to target the bankers, shippers, and insurers that deal with the primary target and force them to choose between access to the U.S. or the North Korean economy. The most common ways we can influence the conduct of these enablers are (1) prohibiting U.S. persons and their subsidiaries from dealing with the target; (2) denying the target access to U.S. financial markets, trade, foreign assistance, and technology. Clearly, the U.S. has a stronger case when it enforces the terms of a U.N. Security Council resolution than when it acts alone.
While it may be too difficult to merge RINKSA Title III and the BRINK Act at this point in the congressional calendar, the two bills would go together like chocolate and peanut butter. Minor inconsistencies between the two will likely be resolved by amendments to the BRINK Act. I’ll defer to others how best to enact them, but each bill serves important purposes in making sanctions work, and in presenting Kim Jong-Un with that existential choice.
Since the High Court of Singapore reversed part of the conviction of Chinpo Shipping for its role in financing the 2013 Chong Chon Gang arms shipment just over two weeks ago, and despite the crush of other (still unfinished) commitments that have eaten up my blogging time, I’ve wanted to set a few minutes aside to post some thoughts on the decision. (If you haven’t already looked up “chinpo” at Urban Dictionary, you really shouldn’t.)
Let’s start with what the decision wasn’t: a persuasive precedent for a narrow reading of U.N. sanctions:
May 2017: judicial reasoning in the Chinpo Shipping case found that the correct interpretation of UN sanctions against the DPRK is narrower than is often supposed, suggesting that even if current UN sanctions were to be implemented fully by all countries, a lot of trade with the DPRK could still continue lawfully; [Tristan Webb, NK Pro]
Contra Webb’s long-winded and thinly veiled celebration of the decision as a defeat for Donald Trump, “maximum pressure,” and U.N. sanctions, this decision turns out to have been much less than that. Rather, it was a flawed decision interpreting a badly written regulation that was two resolutions out of date at the time, and would be four resolutions out of date now had Singapore not already replaced it with a newer and tougher regulation that would likely have avoided the High Court’s embarrassing decision entirely. This decision is unlikely to be precedent in Singapore, much less in other countries.
The decision should, however, embarrass the 1718 Committee into carrying out its responsibility to “circulate a comprehensive compilation” of the Security Council’s North Korea sanctions (see paragraph 44), and spur the U.S. to lead a global effort to draft model sanctions legislation through the UNSCR 1540 process, the Proliferation Security Initiative, or the Financial Action Task Force.
This is my conclusion after having taken the extreme step of actually reading the decision, which I had to do for someone else on Saturday morning anyway, as one of those commitments I mentioned. (Special thanks here to Andrea Berger for posting it and helping me find it. Read her post, too.) Although I’m not a Singaporean lawyer, the laws of Singapore and the United States both descend from the English legal tradition, and to an American lawyer, the concepts will seem familiar.
Lost amid the commentary is that fact that the latter part of the High Court’s decision affirmed Chinpo’s conviction and fine for breaking the Money Changing and Remittance Business Act, by remitting more than $40 million for various North Korean entities through its Bank of China account without a license. As the High Court made clear, those remittances went well beyond the volume of Chinpo’s nominal shipping business, and Chinpo was really acting as a shadow bank. (That the Bank of China’s lawyers aren’t combing through terabytes of information right now, in response to Treasury Department subpoenas about flagrant Know-Your-Customer violations and possible money laundering, may be the greatest crime of all.)
The High Court reversed the portion of Chinpo’s conviction for violating the Singapore’s circa-2010 regulation implementing the U.N.’s North Korea sanctions, because the prosecution failed to prove that Chinpo had reason to know that its remittances directly benefited North Korea’s nuclear program. That part of the result is both absurd and partially understandable. It’s absurd because the U.N. sanctions themselves required no such standards of proof in 2013, when they occurred. The Chinpo wire transfers financed the smuggling of weapons, in violation of an arms embargo in effect against North Korea under resolutions 1718 (paragraph 8) and 1874 (paragraphs 9 and 10). Now, here is what the Singaporean prosecutors had to work with in 2013 — a poorly drafted, ridiculously outdated, and incomplete rule:
12.No person in Singapore and no citizen of Singapore outside Singapore shall —
(a) provide any financial services; or
(b) transfer financial assets or resources, or other assets or resources,
that may reasonably be used to contribute to the nuclear-related, ballistic missile-related, or other weapons of mass destruction-related programs or activities of the Democratic People’s Republic of Korea.
Yes, that’s it. Not only does the regulation fail completely to prohibit financing of North Korea’s arms trade, it fails to incorporate the UNSCR 1718 arms embargo at all. There’s just no excuse for an advanced nation to have failed in this way, given that the embargo has been in effect since 2006. Which is why the decision was also partially understandable; after all, the court couldn’t very well allow Chinpo to be convicted for something the law didn’t yet prohibit. This is not to excuse the High Court’s ridiculously narrow reading of the regulation, and (given the nature of North Korea) the insurmountable evidentiary burdens the court applied to what was meant to be a due diligence obligation.
So what we have here is a flawed decision based on a poorly drafted, outdated, and now-superseded regulation by a government that likely didn’t want to interfere too much with Singapore’s lucrative commercial ties to North Korea or offend Chinese interests. No doubt, after the Panel of Experts traced the Chong Chon Gang money trail back to Singapore, some Grand Poobah in the Singapore government told the prosecutors to charge Chinpo with something. That poorly drafted regulation is all the prosecutors really had. (Another serious, if more forgivable, error is that by the time of the Chong Chon Gang seizure, UNSCR 2087 and UNSCR 2094, with its much more stringent financial provisions — see paragraphs 10-16 — had been in effect for five months, but Singapore still hadn’t updated its regulation.)
Still, if this sort of thing can happen in a modern, advanced, rule-bound place like Singapore, why should we expect better results from Indonesia, Tanzania, or Angola?The U.N. Security Council has now passed seven lengthy, often impenetrably worded, and overlapping resolutions strung together with confusing cross-references. It’s time to help the states with the lowest capacity to enforce those resolutions understand, translate, codify, enact, and enforce them. Model legislation is an essential first step, and only the U.S. can really lead that effort.
The aftermath of Kim Jong-nam’s assassination, and the attention it has drawn to North Korea’s connections to Malaysia, continues to yield new revelations about Pyongyang’s illicit finances overseas. Reuters, having already exposed Glocom as a front for the Reconnaissance General Bureau, now adds to what the Wall Street Journal reported two weeks ago about the MKP Group.
To summarize Reuters’s extensive and detailed report on MKP: it was founded by a North Korean named Han Hun-il and a Malaysian named Yong Kok-yeap in 1996. According to its own promotional materials, MKP “operates in 20 countries in Asia, Africa and the Middle East, piling up contracts worth at least $350 million,” mostly for construction (such as building houses in Africa that Africans can’t afford). Reuters has since located a defector named Lee Chol-ho, a former employee of Han. Lee says Han is a former official in North Korea’s Reconnaissance General Bureau and has funneled cash to Pyongyang for years — through Jang Song-thaek until his execution in 2013, and more recently, to the Central Committee of the Workers’ Party. Although Reuters and Lee couldn’t say how Pyongyang used those earnings, we can safely assume it wasn’t to buy grain or baby formula.
MKP’s website — which appears to have been designed by Borat — lists a much earlier founding date of 1964, and a diverse set of products and services it provides, many of them either sanctioned by the U.N. (luxury yachts) or having dual-use applications (machine tools). I’ve posted numerous screenshots from MKP’s site here, for reasons that will become evident later.
Given MKP’s operations in Africa and its involvement in exporting art from North Korea (see “entertainment”), it probably also has links to the Mansudae Art Studio, whose subsidiary, Mansudae Overseas Project Group, exports those grandiose statues North Korea builds in Africa and the Middle East, most infamously this one in Senegal, where half the population reportedly lives below the poverty line. Mansudae Overseas Project Group also works in collaboration with U.N.- and U.S.-designated arms dealer KOMID in Namibia, and was itself designated by the U.S. Treasury Department last December for “exportation of workers from North Korea, including exportation to generate revenue for the Government of North Korea or the Workers’ Party of Korea,” under Executive Order 13722. The U.N. Security Council banned the export of statues by North Korea last November 30th, in Resolution 2321.
MKP is also involved in North Korea’s chain of clinics in Africa, using North Korean doctors, despite North Korea’s own chronic shortage of doctors to care for its people. A report by Radio Free Asia a year ago exposed that some of those clinics in Tanzania provided quack medicines to their patients. The Tanzanian government subsequently closed two of those clinics.
[* Actual clinics may not contain white people.]
It also lists several trading companies as subsidiaries (lower left sidebar).
Fortunately, when Reuters called, MKP’s reaction wasn’t at all suspicious.
Han, also known as Dr. Edward Hahn, hung up the phone and blocked a Reuters reporter on his messaging app when contacted for comment.
MKP did not respond to requests for comment on Lee’s assertions. The company issued a statement dated March 23 saying MKP had “no reason to hide the fact” that Han is North Korean. It denied owning ICB or any other North Korean bank and said nobody from the United Nations has contacted the company. [Reuters, James Pearson, Tom Allard and Rozanna Latiff]
For reference, here’s what the U.N. Panel said in its 2014 report about the relationship between MKP and ICB:
According to Reuters, “ICB is among several banks the U.N. is currently investigating for possible breaches of various U.N. Security Council resolutions.” U.N. resolutions ban joint ventures with North Korean banks. If the U.N. designates MKP or ICB, member states would be obliged to shut them down, freeze their assets, and expel all of their representatives. The Treasury Department could (and should) designate those joint ventures, and penalize any foreign banks that provide the joint ventures or North Korean banks with the correspondent services and thus help them access the financial system.
At this point, things get really ridiculous:
In its March 23 statement, MKP said its website had been “hacked” to insert ICB under its list of service companies and place a “doctored photograph” of “MKP personnel”, including Yong, visiting ICB’s office in Pyongyang.
A search of archive.org, a database of old websites, shows ICB has been listed on MKP’s website since 2009, including under its earlier name, Sungri Hi-Fund International Bank. As of April 10, ICB was still listed on the website.
Sharp-eyed readers will recall that in this post, dated February 27th, I posted this screenshot from the MKP Group’s website:
[Diamonds are forever. So are screenshots.]
As of this morning, you can still click the “services” tab of the MKP Group’s website and see this image. So evidently, the North Koreans would have us believe that MKP’s website was hacked a month before Reuters called, and yet its website — the website of a multi-million-dollar international conglomerate — remained functional and unrepaired for the entire time until March 23rd, and even today. MKP’s website also lists another bank as a part of its group:
Click here for a summary of what we know about North Korea’s use of Malaysia as a base of operations for smuggling and money laundering, here for a summary of U.N. financial sanctions against North Korea, and here for a list of North Korean banks that are or aren’t sanctioned by the U.N. and the U.S. Treasury Department.
This report reinforces what I’ve said before: the combination of good investigative reporting and good investigative work by the U.N. Panel can expose and destroy the financial networks that fund Pyongyang. These are not fly-by-night operations, but long-established and well-capitalized groups that have put down deep roots in states where corrupt officials and ex-officials allow the North Koreans to ingratiate themselves. Uproot those networks, expel their representatives, and freeze their assets, and Pyongyang will have lost hundreds of millions of dollars and decades of work. It’s anyone’s guess why our own government has abdicated the work of investigation and coercive diplomacy to reporters and the U.N. Panel. Imagine what could be accomplished if our government devoted the political will and the resources to using the tools that Congress has given it.
Over the weekend, Malaysian authorities painstakingly decontaminated a terminal of the Kuala Lumpur International Airport where North Korean agents — including a diplomat — carried out a lethal attack with the nerve agent VX, a substance so deadly that a tiny droplet can kill an adult. The authorities are clearly concerned that the use of a persistent chemical weapon of mass destruction in a crowded airport terminal will cause panic among Malaysian citizens and members of the traveling public, as well they should be. Pyongyang’s reckless act endangered thousands of innocent lives. It endangered every child who sat on the floor while her mother used the check-in machines. It endangered every baby who touched a contaminated surface and put her finger in her mouth, and every mother who used one of the sinks the attackers used to wash their hands. It endangered every worker who cleaned the restrooms or vacuumed the floors, every traveler who touched the handrails on the escalators going down to the taxi rank, every passenger who rode in one of those taxis after the attackers did, and every person who walked through that terminal and took her shoes off at her front doorstep.
The first object of Malaysians’ outrage is, and should be, the North Korean government. As of this hour, the North Korean embassy is still harboring two suspects, refusing to cooperate with Malaysian authorities, and spewing flagrant lies to deflect blame. Obviously, I can’t speak for the Malaysian government, but if I could, I’d be making plans to close the embassy, to expel everyone with diplomatic immunity, and arrest any suspect without it.
But if Pyongyang deserves the brunt of our outrage, a second object of outrage should be the Malaysian government itself, which had long been warned in U.N. reports that Pyongyang’s agents on its soil were violating U.N. sanctions and the laws of other nations, yet did little to curtail them. Report after report identified Malaysia as the home base of North Korean spies, smugglers, arms dealers, slave traders, money launderers, and procurers of tools to make missiles. In allowing this activity to go on for years, the Malaysian government not only allowed North Korea to endanger Malaysians, but to endanger the citizens of other countries — and indeed, the security of the entire world.
Just last week, for example, Reuters reported on the contents of a leaked excerpt of the 2017 report by the U.N. Panel of Experts overseeing compliance with U.N. sanctions against North Korea, including an embargo on the sale or purchase by North Korea or arms and related materiel. The report described the interdiction last year of a shipment of North Korean weapons in transit to Eritrea, including 45 boxes of battlefield radios manufactured by the Malaysia-based company Glocom. According to the report, Glocom is a front for the Reconnaissance General Bureau of the Korean Workers’ Party, an entity designated by the U.N. Security Council, and the agency suspected of carrying out the Kuala Lumpur airport attack. Glocom still operates through this website marketing its wares. It does not list Glocom’s corporate officers, so I’ll let the Malaysian authorities investigate whether there are any financial, logistical, material, or personnel links between Glocom and the attackers. Overall, that seems likely to be the case.
Reuters has a must-read story on Glocom filled with details about how it masked its ownership and control behind layers of front companies and shell companies, and tied itself to Malaysian man with influence in the country’s ruling party. They even made this org chart:
It notes that on one occasion in 2014, a female RGB agent named Ryang Su-nyo was caught at the Kuala Lumpur airport terminal while attempting to smuggle $450,000 in cash through customs (note again the North Korean preference for U.S. dollars). Ryang said she was transporting the money for the North Korean embassy, so the authorities decided not to press charges and gave the cash back. Here’s a newer website for Glocom. This wasn’t like any of the ham-handed, rinky-dink North Korean front companies I’ve seen before. This was a slick, sophisticated, and well-capitalized operation that raised funds for an agency with a long history of terrorism. If any of the money ran through the U.S. financial system, which seems likely, it would be worth exploring a material support charge.
Then, there is the case of a 2007 shipment of missile parts seized en route from North Korea to Syria. That shipment, which transited through Dalian, China and Port Kelang, Malaysia contained, among other items, “solid double-base propellant … usable for gas generators to power Scud missile turbopumps.” When the shipment was seized, the blocks of explosive propellant that had passed through those busy ports were removed “for safety reasons.” (2012 report, Para. 57.)
Malaysia has long been a hub and meeting venue for North Korean arms smuggling. A shipment of tank parts bound for the Republic of Congo, and which was seized in South Africa in 2010, was routed through Dalian, China and Port Kelang. (2010 report, Para. 63.) In June 2009, Japanese authorities arrested three individuals for attempting to illegally export a magnetometer to Myanmar through Malaysia, “allegedly under the direction of a company known to be associated with illicit procurement for Democratic People’s Republic of Korea nuclear and military programmes.” (2010 report, Para. 51.) In 2012, Japan notified the panel of 2008 and 2009 shipments through Malaysia of machinery useful for producing missile gyroscopes. (2012 report, Para. 91.)
Malaysians have seen the tragic results of anti-aircraft missiles falling into the wrong hands. In 2012, a British court convicted arms smuggler Michael Ranger of attempting to sell Azerbaijan “between 70 and 100 man-portable air defence systems”* from Hesong Trading Company, a subsidiary of the notorious Korea Mining Development Trading Corporation, or KOMID, Pyongyang’s principal arms-dealing front company. Ranger “was in regular e-mail correspondence with” O Hak-Chol, a North Korean diplomat and Hesong representative whom Mr. Ranger met in a number of third countries, including Malaysia. (2013 report, Paras. 90-95 & FN.61.) As recently as 2015, KOMID representatives continued to transit through Malaysia. (2016 report, Para. 177.)
As of 2015, long after the Security Council designated North Korean shipper Ocean Maritime Management (OMM) for arms smuggling and required member states to close its offices and expel its representatives, OMM still maintained an office in Kuala Lumpur. (2015 report, Para. 128.) Until early 2015, a Malaysia-based North Korean agent named Pak In-su acted as an agent for the Mirae Shipping Company, a front for OMM.
Pak In-su’s primary employer was Malaysian Coal and Minerals Corporation (2015 report, Para. 143), a company that is almost certainly linked to Malaysia’s use of North Korean labor in its coal mines. What little we know of working conditions for North Korean expatriate laborers in Malaysia, and what we know of the conditions elsewhere, suggests that those conditions are tantamount to slavery. At least one North Korean miner in Malaysia was killed in an explosion in 2014. In the end, the regime in Pyongyang probably keeps most of the workers’ wages.
The Committee for Human Rights in North Korea estimates that 300 North Korean laborers are working in Malaysia. Partially as a result of such labor practices, Malaysia was recently downgraded to Tier 3 under the Trafficking Victims Protection Act, which imposes penalties on legitimate Malaysian businesses that export to the United States. It also subjects Malaysia to sanctions risks, and the entire world to security risks. In a press release announcing its designation of the Mansudae Overseas Project group, for exportation of workers in violation of Executive Order 13722, the Treasury Department listed Malaysia as a market for Mansudae’s services, and said, “Some of the revenue generated by overseas laborers is used by the Munitions Industry Department, which was designated by the Department of State in August 2010 pursuant to E.O. 13382 for its support to North Korea’s WMD program.”
The procurement network that obtained parts and materials for North Korea’s missile programs has long had a strong presence in Malaysia. This presence has included entities that were designated by the U.N., including OMM, Mirae Shipping, and KOMID, and a U.N.-designated North Korean arms exporter known as Green Pine. In 2006 and 2010, the Korea Chonbok Trading Corporation, a front for Green Pine, purchased pressure transmitters from an unnamed European country for its long-range Unha-3 rockets. A payment invoice for the transactions lists one Ryong Jong-chol, a North Korean based in Malaysia, as the purchaser. (2015 report, Para. 195.) The payments, denominated in Euro, were routed through a Malaysian bank. According to the Panel, “Ryom was acting as the representative of Bank of East Land.” East Land was later designated by the U.S. Treasury Department (in 2011), the U.N. (in 2013), and the European Union (in 2013). (2016 report, Para. 186.) As of February 2016, the Malaysian government had still not responded to the Panel’s request for information about the transactions.
Malaysia’s tolerance of North Korea’s deceptive financial practices endangers Malaysian banks’ access to the global financial system. Malaysia is one of the few nations that still deals with North Korean banks, despite U.N. resolutions requiring “enhanced monitoring” of its financial activities (Para. 11), and warnings by the Financial Action Task Force to take “countermeasures” against North Korean money laundering and proliferation financing. In 2009, U.S. sanctions coordinator Philip Goldberg and Treasury official Daniel Glaser traveled to Malaysia and met with senior officials of the Malaysian government and central bank, regarding the implementation of U.N. financial sanctions under then-new UNSCR 1874. That visit followed reports that Malaysian banks were involved in transferring funds between North Korea and Burma for weapons-related transactions, in violation of a U.N. arms embargo. In 2013, Treasury Undersecretary David Cohen visited Malaysia to discuss its compliance with U.N. financial sanctions.
At least one major Malaysian Bank, Malayan Banking Berhad, was reported by the Panel in 2010 to maintain a correspondent relationship with, or to issue letters of credit for, North Korean banks. (2010 report, page 68.)It’s important to note, however, that the U.N. Security Council did not prohibit correspondent relationships with North Korean banks until 90 days after the adoption of U.N. Security Council Resolution 2270, on March 3, 2016. The Panel’s 2013 report listed the International Consortium Bank, a/k/a Hi-Fund International Bank as having been partially capitalized by and founded by the Malaysia Korea Partners Group of Companies (2013 report, page 132.)
ICB is a subsidiary of a North Korean front company called the MKP Group, which has the world’s most hilariously awful website, appears to have some ties to the Mansudae Overseas Project Group, also operates in Zambia, and really merits a post of its own one day. The existence of these banking relationships shows the importance of Malaysia as a secondary hub in Pyongyang’s financial network, which is often used for illicit purposes.
A recent investigation by Bangladeshi authorities into the smuggling of undeclared luxury goods, including LED televisions, tobacco, Rolls-Royces, and BMWs, has reportedly implicated the North Korean embassy in Malaysia. Under UNSCR 1718, North Korea is prohibited from importing luxury goods. In this case, the end destination for the goods isn’t clear, but whoever is behind the shipments conspired to evade Bangladesh import duties.
For the most part, the substantial network of North Korean arms smugglers, spies, and money launderers who operate in Malaysia merely endanger the citizens of other nations — most obviously in South Korea, but also in Syria and the Republic of Congo. In most cases, however, it’s impossible to predict who and where the next victims of North Korea’s activities will be. North Korea sells the world’s most dangerous weapons and technology to any buyer without regard to end users, victims, or consequences. As the VX attack at Kuala Lumpur illustrates, allowing North Korean agents to operate on one’s soil eventually endangers the host country’s citizens and interests, too. The question that the Malaysian people and government should be asking is whether the benefits of their financial and commercial ties to North Korea are really worth those risks.
~ ~ ~
* North Korea has been caught selling MANPADS before. One shipment of them was seized in Bangkok in 2010, on its way to Iran’s terrorist clients. In 2010, Yi Qing Chen was convicted of attempting to smuggle Chinese-made QM-2 man-portable surface-to-air missiles into the United States in 2005. In 2011, he was sentenced to 25 years in prison. The QM-2 is a Chinese copy of the Russian Igla-1, or SAM-18.
The 2017 report of the U.N. Panel of Experts isn’t due to be published for another month, but a Kyodo News reporter has already obtained and published leaked excerpts. The focus of Kyodo’s story is the now-familiar (and unquestionably accurate) castigation of member state governments for not putting enough will or resources into the enforcement of North Korea sanctions, but I’d like to start with this revelation:
“An interdiction of the vessel Jie Shun was the largest seizure of ammunition in DPRK sanctions history,” according to the document. A source informed Kyodo News the Egyptian port was not the general cargo ship’s final destination, despite its strategic location near a number of regional conflict hot spots. However, the report said that seizures like it demonstrate “the country’s use of concealment techniques as well as an emerging nexus between DPRK entities trading in arms and minerals.” [Kyodo News, Seana K. Magee]
The M/V Jie Shun, IMO 851780, is a 2,825-tonne general cargo vessel that flies a Cambodian flag. Built in Japan in 1986, it previously sailed under the names Velox, Armon, and Northern Queen.
Shipping trackers last spotted the Jie Shun at “Skohna” (probably Sokhna), an Egyptian port on the Red Sea near the southern terminus of the Suez Canal.
Despite what the trackers say, the Panel’s report says the ship wasn’t headed for any port in Egypt. Egypt has been a buyer of North Korean missiles and missile parts, but not of large quantities of North Korean munitions, at least to my knowledge. Nope, this time, my top three guesses are Syria, Syria, and Syria:
[What do I win?]
Liaoning Foreign Trade also operates one other ship, the Chinese-flagged M/V Fu Yun 228, IMO 8888654. The small bit of good news is that if trackers still show the Jie Shun as stuck in Egypt, Egyptian authorities must have seized the ship as the resolutions require it to. Inshallah, Red Sea divers will soon have a nice new artificial reef, or the Somali Coast Guard will soon have a new Q-Ship for stalking pirates.
It’s unquestionably true that up to this point, Pyongyang has invested more effort in hiding its dollars and ships behind front companies and shell companies than we have in finding them. That’s why Anthony Ruggiero, who spent years at the Treasury and State Departments administering sanctions, asked Congress this week to give the feds more resources for these investigations.
Mandate additional resources to address North Korea’s activities. The North Korea Sanctions and Policy Enhancement Act of 2016 is a comprehensive law that provides a myriad of tools for the Trump administration to address the North Korean threat. It is important that Congress continue to address additional areas through legislation in the same overwhelmingly bipartisan nature, signaling to North Korea and China that focus on this issue will continue. Throughout my testimony, I have detailed the challenge we face with an adversary that seems to be one step ahead of us. Our entire approach to the North Korea issue needs to change. One area Congress can address immediately is providing additional resources to the Treasury Department, Justice Department, Intelligence Community, and other government agencies to investigate violations of the NKSPEA. [Anthony Ruggiero, Testimony before the House Foreign Affairs Committee, Feb. 7, 2017]
There are other, more immediate steps we can take, beyond those I recommended here. First, we should add the Jie Shun, Liaoning Foreign Trade Foodstuffs Co., Ltd., and (for good measure) the Fu Yun 228 to the U.N. designation list and the Treasury Department’s list of Specially Designated Nationals. Second, we should also demand that China expel any North Koreans involved in this transaction, freeze any accounts associated with the transactions or the parties to it, and prosecute any Chinese nationals involved.
[As Anthony explains, just after the 5-minute mark.]
For now, however, this is just the latest example of how China continues to be a part of the problem rather than a part of the solution. Almost weekly, we see fresh evidence that China’s cost-benefit calculation hasn’t changed. It’s time to use more forceful methods to shift that calculation:
The Treasury and Justice Departments’ actions in late September 2016 showed a troubling pattern of Chinese persons assisting North Korean-designated persons, including through the U.S. financial system. These transactions lasted six years, up to September 2015, making it hard to believe the Chinese government regulators were unaware of this conduct. It is important that Congress and the American people understand the extent of China’s efforts, or lack thereof, to combat money laundering, sanctions violations, and proliferation financing. I recommend that new legislation include specific sections on North Korea’s network within China. It should also address the broader issue of Chinese support for, and harboring of, North Korean nationals involved in prohibited conduct. In particular, the report could also focus on whether the financial institutions involved should have been designated or subjected to secondary sanctions. [Ruggiero testimony]
My next recommendation depends on whether the Cambodian government has retaken control of its shipping registry, as it promised to do last August, and whether it has de-registered the forty-plus North Korean ships it had reflagged, but is required by U.N. Security Council resolutions to de-register. For years, Cambodia’s shipping registry has been notorious for reflagging North Korean ships. What few of us knew until C4ADS informed us last year was that the International Ship Registry of Cambodia was “a joint venture between the Cambodian government and a South Korean company, the Cosmos Group.”
The seizure of the Jie Shun would have been around the same time as Cambodia promised to de-register rogue ships, and two months after South Korea very politely asked Cambodian dictator Hun Sen to enforce U.N. sanctions against Pyongyang. Good diplomacy always starts with a polite request, and also, it’s always backed by the prospect of ghastly and unspeakable consequences. That dual approach worked superbly the last time we tried it, in 2005, when Treasury officials Stuart Levey and Daniel Glaser went on their world Kim Jong-il Unplugged tour. If Cambodia didn’t act, it would make a damn good example for the likes of Tanzania, Sierra Leone, and other states that haven’t gotten the message about reflagging North Korean ships. And in the case of Cambodia, the Cosmos Group’s role gives us a willing South Korean partner with jurisdiction and a shared interest in shutting this dirty business down ppali-ppali.
The U.S. has an obligation to investigate how the financial transactions behind the shipment were denominated and processed — specifically, whether they were processed through the U.S. financial system. (Unfortunately, the seizure came before UNSCR 2321 banned the insurance of North Korean ships.) If the evidence shows that either the North Koreans or their Chinese partners misused our financial system to break the law, we should freeze and forfeit assets, issue indictments, and consider civil penalties or other appropriate enforcement actions against the banks involved.
Lastly, let’s not forget that under UNSCR 2270, China is supposed to be inspecting all of this North Korean cargo. The NKSPEA also provides a new legal tool for cracking down on ports that shirk that responsibility.
SEC. 205. ENHANCED INSPECTION AUTHORITIES.
(a) Report Required.—Not later than 180 days after the date of the enactment of this Act, and annually thereafter, the President shall submit to the appropriate congressional committees a report that identifies foreign ports and airports at which inspections of ships, aircraft, and conveyances originating in North Korea, carrying North Korean property, or operated by the Government of North Korea are not sufficient to effectively prevent the facilitation of any of the activities described in section 104(a).
(b) Enhanced Customs Inspection Requirements.—The Secretary of Homeland Security may require enhanced inspections of any goods entering the United States that have been transported through a port or airport identified by the President under subsection (a).
That means that if Dalian doesn’t comply with its requirements to inspect North Korean cargo, U.S. Customs and Border Protection might require more intrusive inspections of cargo coming from Dalian. Think of it as the shipping equivalent of a 311 action.
~ ~ ~
Update: A reader writes that it’s just as possible that the weapons were headed for Hamas or Hezbollah. Yes, I suppose those are both plausible possibilities. North Korea is suspected of having sold arms to both groups in the past. Now that Hezbollah has a large contingent fighting in Syria, the easiest way to supply it would be by landing the ship at the Syrian ports of Tartous or Latakia. Supplying Hamas is a bit trickier, but would probably work something like this.
~ ~ ~
Update 2: I want to take on the argument, suggested in the Kyodo report, that North Korea’s money laundering and smuggling networks are so well-hidden inside China that we couldn’t possibly uncover them. Yeah, how can we do that? We put resources on the problem, for once. We use the same methods we used to expose the equally sophisticated money launderers who worked for Iran, Al Qaeda, and the Cali Cartel. We do what C4ADS did, when two smart researchers with no classified access whatsoever exposed a sophisticated, well-hidden network of North Korean money launderers and smugglers operating from China. Just like the Justice and Treasury departments did when they added their law enforcement authorities to the mix and came up with an indictment and a civil forfeiture count that reached 5 individuals, dozens of front and shell companies, and 12 different Chinese banks. We do it like the U.N. Panel of Experts has done, year after year after year after year after year after year. If we’d simply investigate and/or designate the dozens of Chinese and other third-country entities exposed by the Panel’s open-source reports and their confidential annexes, we’d tear huge holes in that network. We do it by trying, for once, and by not being afraid to break some china along the way.
Finally, let’s not forget the role of human intelligence, which shows us why we don’t have to expose the entire network at once to damage the integrity of the whole thing. The number of North diplomats and money launderers who defected last year probably exceeded the numbers seen in any previous year. Every time a fund manager brings his laptop or some bank account numbers to U.S. or South Korean intelligence, we gain another invaluable clue about the dimensions of that network and who operates it. Apparently, we’ve done some damage, too.
“As sanctions against North Korea have strengthened, trading companies are turning to products that are not included in the sanctions list. The recent activity comes from a decision by the Ministry of Foreign Trade demanding that trading companies double their contributions,” a source in Pyongyang told Daily NK on February 1.
The North Korean authorities are increasing the amount of loyalty contributions to compensate for dwindling exports of weaponry, which had previously been a significant source of revenue. As a result, the companies have no choice but to explore alternative items for export. [Daily NK]
Every time we freeze or seize money in one part of the network, we make other parts of the network fearful that they’ll miss their kick-up quotas. There are some encouraging signs that sanctions can trigger defections, which in turn raise the burden on remaining parts of the network and provide intelligence to help us freeze even more money. Eventually, it all becomes a death spiral:
The undercurrents of desperation amongst the trading companies is largely due to Kim Jong Un’s use of fearpolitik. Some officials returning from abroad for the end-of-the-year review, he said, were dismissed for not completing their assignments, sparking fierce competition to complete the trade assignments set at the beginning of each new year.
“Some traders are complaining, ‘If you pull a rubber band too much, it will snap. This is why there are growing number of defections among dispatched workers,'” he added.
The executives in charge of North Korea’s international trading companies are expected to come under intense pressure. It remains to be seen whether this will spark an increase in high-level defections to South Korea or other countries this year. [Daily NK]
This also has ripple effects on the banks, who are our most valuable sources of financial intelligence, via the Know-Your-Customer rules, and the Suspicious Activity Reports and Currency Transaction reports they’re supposed to file. If Treasury puts out the word that we’re going to enforce those requirements strictly against North Korea — which is a 311 jurisdiction, after all — banks may step up their compliance out of fear of being exposed by defectors, and of paying the massive fines like those we imposed on banks that violated other sanctions regimes.
Like its neighbor, Namibia, Angola aligned with the Soviet block during the Cold War. The Angolan government and the Namibian rebel movement, the South West Africa Peoples’ Organization or SWAPO, received military assistance from Cuba, which had up to 60,000 soldiers near Angola’s border with Namibia during a vicious set of guerrilla wars in the 1990s. The Soviet Union is gone, but historic alliances can be persistent things, especially when those alliances also come with financial ties. This has certainly been the case with North Korea’s tiesto Namibia, which has been reluctant to shut down a North Korea arms factory on its territory, despite the fact that that factory is a clear violation of UNSCR 2270.
In April, I cited the 2016 Panel of Experts report and raised suspicions that Angola’s military cooperation was a violation of UNSCR 2270. Since then, Andrea Berger has done us all the service of pointing out where U.N. member states’ compliance reports are published online. Not surprisingly, Angola’s report raises more questions than answers. First, Angola admits that it is hosting two North Korean nationals, Kim Hyok-chan and Kim Kwang-hoon, who are under investigation by the U.N. Panel of Experts monitoring compliance with the sanctions.
However, it must be noted that Kim Hyok Chan, a DPRK citizen born on 6 September 1970, carrier of diplomatic passport No. PD563410191, is on the list of individuals under investigation by the Panel of Experts established pursuant to resolution 1874 (2009) and designated for targeted sanctions such as a travel ban and asset freeze. This individual holds multiple-entry visa No. 60000/MRX/16, valid until 2 February 2017, from the Angola Ministry of External Relations. The individual is a diplomat of the DPRK and entered the national territory on 14 February 2016 from Addis Ababa. [….]
Kim Kwanghoon, a DPRK citizen born on 9 June 1981 and carrier of passport No. M66430933, has an ordinary visa with the number 100866086/16, valid until 6 May 2016, and left the country on 5 May 2016, bound for Dubai, United Arab Emirates. The individual works for the Ofek Company. [Angola compliance report]
Neither man appears on the U.N.’s consolidated sanctions list, and neither is mentioned by name in the POE’s 2016 or 2015 reports. If there’s a list of persons under investigation published by the U.N., I’m not aware of it. Nor would it seem wise to publish a list of persons under investigation. I wonder if the Angolans just said more than they should have (oops). Then, Angola then takes the position that it’s under no obligation to expel either man.
Concerning the expelling of diplomats or representatives of the government of the DPRK or nationals of other countries suspected of helping to circumvent the sanctions regime, it was not necessary to expel any DPRK diplomat from the country, as they did not represent a threat to national security and were not outright affected by any of the provisions of resolution 2270 (2016). [Angola compliance report]
So, move along! Nothing to see here! Not quite. The resolutions have several provisions that require the expulsion of North Korean or third-country nationals. Not all of them necessarily require an individual by-name designation. Here’s a paragraph from UNSCR 2270:
“13.Decides that if a Member State determines that a DPRK diplomat, governmental representative, or other DPRK national acting in a governmental capacity, is working on behalf or at the direction of a designated individual or entity, or of an individual or entities assisting in the evasion of sanctions or violating the provisions of resolutions 1718 (2006), 1874 (2009), 2087 (2013), 2094 (2013) or this resolution, then the Member State shall expel the individual from its territory for the purpose of repatriation to the DPRK consistent with applicable national and international law …. [UNSCR 2270]
So, if the Angolan government knows that Kim Hyok-chan or Kim Kwang-hoon is working on behalf of a designated entity, such as Green Pine (U.N. designated since 2012), Saeingpil (a U.N. designated alias of Green Pine), or KOMID (U.N. designated), the Angolans have to expel them, whether the individual people are designated by name or not. The apparent intent of the resolutions’ drafters was to allow either designation of entities (and by implication, their employees) or alternatively, the designation of individual bad actors whose affiliations aren’t clear or aren’t proven.
But is there any evidence that either man is working for a designated entity? In the case of Kim Kwang-hoon and his employer, Ofek, I found no additional information online. Ofek isn’t designated. Kim Hyok-chan, however, is another story. Let’s start with the 2016 Panel of Experts report.
108.The Panel investigated two incidents involving Green Pine (see S/2012/287): two deliveries in July 2011 of items for military patrol boats to Angola and an air shipment in February 2011 of submarine parts inspected in Taipei (see annex 1 and S/2015/131, paras. 81-83). The consignments were shipped from Vienna by an Austrian national, Josef Schwartz, through his company, Schwartz Motorbootservice & Handel GmbH. He had traded with the Democratic People’s Republic of Korea on multiple occasions in the past, including violations and attempted violations of the luxury goods ban. The Panel confirmed that he had assisted Green Pine in evading the arms embargo. [UN POE report, 2016]
That finding apparently has its origins in this interesting report on Saeingpil in the Washington Free Beacon, which alleges that Kim Hyok-chan works for Saeingpil.
The assistance includes marine engines and replacement parts for North Korean patrol boats sold to the Angolan military within the past six years.
Additionally, North Korean military trainers are providing arms and security support to Angolan presidential guards, according to recently obtained information on the transfers.
Similar military support to Uganda and Tanzania was ruled to violate U.N. sanctions by a United Nations panel of experts on North Korea.
According to the sources with access to details of the Angolan military transfers, a North Korean company, Saengpil Associated Co., currently is in the process of shipping engines and replacement parts for some of the 18 patrol boats that were built for the Angolans since 2011.
Saengpil is part of North Korea’s Green Pine Associated Corp., which has been sanctioned in the past by the United Nations. Both entities are part of the Reconnaissance General Bureau, the North Korean covert action and intelligence organization.
The Saengpil representative behind the military transfers was identified as Kim Hyok-chan who has been working in Angola since 2008 and has been the lead official in charge of the arms deals between the two countries. Kim also is a second secretary at the North Korean embassy in Luanda, the Angolan capital.
North Korean agreements for the patrol boats date to August 2009, when Angolan technicians were trained on repair and maintenance. Construction of the patrol boats, described as PB 100s, began in March 2011. Renewal of the accord for repair and maintenance was concluded in January 2013. [Washington Free Beacon]
Nowhere does the Angolan report say whether its government investigated whether Kim is or is not tied to Saeingpil. You have to wonder if it ever occurred to the Angolans to, you know, ask him, or maybe review his immigration or banking records. If Kim works for one of those designated entities, Angola is required to expel him, regardless of whether he’s designated by name. Its non-response on that issue suggests that it’s playing fast-and-loose with the resolutions.
The report goes on:
Concerning Green Pine Pi’l Trading Corporation, also known as Saeng Pi’l Associated Company, and Beijing New Technology Trading Company, Limited, inquiries made did not uncover any new information, and the information provided in previous notes still prevails. [Angola compliance report]
My only reaction to this is, what the hell does that even mean? If Green Pine or Saeingpil has an office in Angola, the Angolan government is required to close it, end of story. Here’s the relevant provision from UNSCR 2270:
“15.Underscores that, as a consequence of implementing the obligations imposed in paragraph 8 (d) of resolution 1718 (2006) and paragraphs 8 and 11 of resolution 2094 (2013), all Member States shall close the representative offices of designated entities and prohibit such entities, as well as individuals or entities acting for or on their behalf, directly or indirectly, from participating in joint ventures or any other business arrangements, and underscores that if a representative of such an office is a DPRK national, then States are required to expel the individual from their territories for the purpose of repatriation to the DPRK consistent with applicable national and international law, pursuant to and consistent with paragraph 10 of resolution 2094 (2013); [UNSCR 2270]
Next, Angola — which was so recently busted for making arms deals with Green Pine, and which hosts 1,000 North Korean workers, claims that it’s unaware of any North Korean bank accounts that it has to freeze.
Concerning the freezing of any funds, financial assets and economic resources of the DPRK that are deposited in foreign banks, as well as funds managed by entities linked to the Government or the North Korean Worker’s Party in Angola, the relevant institutions, including the ministries of Defence and the Interior and the National Bank of Angola, are surveying the situation regarding bank accounts and migratory status of citizens from the Democratic People’s Republic of Korea, as well as of DPRK collaborators working in the country. [Angola compliance report]
Most recently, Angola was in the news for hosting North Korea’s Vice Foreign Minister, who “defended Pyongyang’s dual pursuit of nuclear and economic development during talks with his Angolan counterpart.” This doesn’t inspire great confidence.
Finally, I expect to see some more interesting reporting about Angola’s links to North Korea in the coming weeks, but I’ll let someone else tell you that story.
In March, this blog reported on the revelation by the U.N. Panel of Experts that the African nation of Namibia, a desert country in the southwest corner of the continent, had hired North Koreans, including representatives of U.N.-designated KOMID, to build an arms factory near Windhoek. At the time, Deputy Prime Minister Netumbo Nandi-Ndaitwah came to her government’s defense, admitting that her government was the site of a North Korean-run arms factory, but denying that the arrangement violated U.N. sanctions.
Today, NK News reports that Ms. N-N arrived in Pyongyang last Friday for a state visit, where she posed for photographs with Kim Yong-nam.
[via NK News]
Now, I can’t say whether the purpose of the visit itself is inappropriate unless I know what those present will discuss. After all, not all diplomatic interactions with North Korea are prohibited. I suppose the purpose of the visit could be to “sever ties and wrap things up,” as Daniel Pinkston suggests, but the level of the interactions and the coincident publicity don’t give me much confidence in that theory.
As noted above, Ms. Nandi-Ndaitwah is well aware of the North Korean arms factory in her country, but has denied that it violates U.N. sanctions. The U.N. Panel of Experts has correctly concluded that it’s a violation.
106. The construction of any munitions factory or related military facilities is considered to be services or assistance relating to the provision, manufacture or maintenance of arms and related materiel and therefore prohibited under the resolutions.
Here are the relevant provisions of UNSCR 2270:
“6. Decides that the measures in paragraph 8 (a) of resolution 1718 (2006) shall also apply to all arms and related materiel, including small arms and light weapons and their related materiel, as well as to financial transactions, technical training, advice, services or assistance related to the provision, manufacture, maintenance or use of such arms and related materiel;
“9. Recalls that paragraph 9 of resolution 1874 (2009) requires States to prohibit the procurement from the DPRK of technical training, advice, services or assistance related to the provision, manufacture, maintenance or use of arms and related materiel, and clarifies that this paragraph prohibits States from engaging in the hosting of trainers, advisors, or other officials for the purpose of military-, paramilitary- or police-related training;
Investigative journalist John Grobler later did an outstanding report on the factory for NK News, revealing the extent of the factory’s operations. Ms. Nandi-Ndaitwah has argued, however, that because the arms factory deal predates U.N. sanctions it’s permitted. Nonsense. UNSCR 2270 even has a force majeure clause in paragraph 47, clarifying that no claim shall lie for the termination of preexisting contracts that violate the sanctions. The resolutions clearly have retroactive effect.
The 2016 POE report found that the North Korean company running the arms factory is KOMID, which is designated by the U.N. and the U.S. Treasury Department — either “in cooperation with, or using the alias of, Mansudae Overseas Project Group companies.” The Namibian government is obligated to expel all KOMID representatives and freeze all KOMID property immediately:
13. Decides that if a Member State determines that a DPRK diplomat, governmental representative, or other DPRK national acting in a governmental capacity, is working on behalf or at the direction of a designated individual or entity, or of an individual or entities assisting in the evasion of sanctions or violating the provisions of resolutions 1718 (2006), 1874 (2009), 2087 (2013), 2094 (2013) or this resolution, then the Member State shall expel the individual from its territory for the purpose of repatriation to the DPRK consistent with applicable national and international law. . . .
“32. Decides that the asset freeze imposed by paragraph 8 (d) of resolution 1718 (2006) shall apply to all the funds, other financial assets and economic resources outside of the DPRK that are owned or controlled, directly or indirectly, by entities of the Government of the DPRK or the Worker’s Party of Korea, or by individuals or entities acting on their behalf or at their direction, or by entities owned or controlled by them, that the State determines are associated with the DPRK’s nuclear or ballistic missile programs or other activities prohibited by resolutions 1718 (2006), 1874 (2009), 2087 (2013), 2094 (2013) or this resolution, decides further that all States except the DPRK shall ensure that any funds, financial assets or economic resources are prevented from being made available by their nationals or by any individuals or entities within their territories, to or for the benefit of such individuals or entities, or individuals or entities acting on their behalf or at their direction, or entities owned or controlled by them, and decides that these measures shall not apply with respect to funds, other financial assets and economic resources that are required to carry out activities of the DPRK’s missions to the United Nations and its specialized agencies and related organizations or other diplomatic and consular missions of the DPRK, and to any funds, other financial assets and economic resources that the Committee determines in advance on a case-by-case basis are required for the delivery of humanitarian assistance, denuclearization or any other purpose consistent with the objectives of this resolution.
Either Ms. Nandi-Ndaitwah hasn’t read the resolutions or has chosen to defy them. If strong diplomatic appeals still haven’t secured commitments to bring that violation to an end, the State and Treasury Departments should act swiftly to sanction the North Korean and Namibian entities involved under section 104(a) of the North Korea Sanctions and Policy Enhancement Act. Anything less would signal to North Korea’s arms clients elsewhere in Africa that the U.N. Security Council’s resolutions are mere suggestions. This time, an example must be made.
Just last week, I wrote that South Korea’s diplomatic efforts to secure compliance with U.N. Security Council Resolution 2270 were putting ours to shame. Seoul is now offering fresh evidence of this by doing what I’ve said for weeks that our own diplomats should be doing — going on tour in Africa to pressure defense ministries to stop buying from Pyongyang.
Seoul’s direct approach to two countries with close military ties to Pyongyang highlights its push to stem North Korea’s cash flows from overseas after its nuclear test. Military exports have for decades been a major source of funds for North Korea. Earlier this year, the U.S. also accused North Korea and Iran of working jointly on a missile engine. [….]
Ms. Park will be accompanied in Uganda by South Korea’s vice defense minister to increase military cooperation with Seoul, according to a South Korean Defense Ministry spokesman. Officials in Seoul have made clear that North Korea is on the agenda for the Uganda visit.
“In light of the fact that Uganda is a strategic foothold in East Africa for North Korea, President Park’s visit will provide an important opportunity to strengthen cooperation…with regard to the resolution of the North Korean nuclear issue,” Kim Kyou-hyun, senior presidential secretary for foreign affairs and national security, said earlier this week. [WSJ, Alastair Gale]
President Park will also visit Kenya and Ethiopia, where Arirang News says she will bring offers of aid from an expanding assistance budget. But three visits won’t be enough unless this is only the first tour of many. Other suspected African arms clients of North Korea include Angola, The Democratic Republic of Congo, The Republic of Congo, Egypt, Ethiopia, Eritrea, Namibia, and Zimbabwe.
Meanwhile, North Korea’s Kim Yong-nam is currently in Equatorial Guinea, and has a more ambitious itinerary than President Park.
Pyongyang’s Korean Central News Agency (KCNA) reported that Kim on Friday had “friendly talks” with national leaders from Chad, Gabon, Central Africa, Congo and Mali. A day before, Kim met the president of Burundi and the former president of Mozambique. [NK News, Choi Ha-young]
That would be Mozambique, the only country with an AK-47 on its flag. The Democratic Republic of Congo is the latest addition to the list of probable North Korean arms clients, following a “confidential” report to the U.N. Security Council, prepared by six independent experts monitoring U.N. sanctions against the D.R. Congo.
The U.N. experts also reported that several Congolese officers told them North Korea has supplied Congolese troops and police with pistols and sent 30 instructors to provide training for the presidential guard and special forces.
There is a U.N. arms embargo on North Korea that prevents Pyongyang from importing or exporting weapons and training. An arms embargo on Congo requires states to notify the Security Council sanctions committee of any arms sales or training.
The experts said they found that several Congolese army officers, as well as several police deployed abroad in a U.N. mission, appeared to have North Korean pistols.
The Congolese officers said the pistols were delivered by North Korea to the Congolese port of Matadi in early 2014. “The group also found that the same type of pistols was available for sale on the black market in Kinshasa,” the report said.
The experts said they had asked Pyongyang and Congo for information but had not yet received a response. Congolese and North Korean officials had no immediate comment. [Reuters]
This is too big a job for South Korea to do alone. Not only must the U.S. State Department get into the game, it should try to recruit partners among close allies, such as Japan, France, and the U.K., to help persuade African states to buy their implements of death somewhere else. You’d think that in light of President Obama’s popularity in Africa and his origins on that continent, he’d be an especially effective advocate of our interests.
But let’s also give credit where it’s due. President Obama personally raised the enforcement of North Korea sanctions in a recent visit to Vietnam, another long-standing arms client of Pyongyang. More of this, please.
Previous posts on North Korea’s Africa arms trade here.
A report last month by the U.N. Panel of Experts found that Namibia has been involved in joint projects with KOMID, a designated North Korean entity, to build an arms factory in the African nation. The finding drew a defiant response from the Namibian government, but as a defense to a sanctions violation, it was a blue answer to a red question. In response, I wrote this post — which attracted much attention in Windhoek — rebutting Namibia’s argument and explaining the potential legal consequences the Namibian Defense Ministry would face if its defiance continues. I also tweeted links to reports that Namibia may also have solduranium to North Korea.
This week, it’s Namibia’s neighbor to the north, Angola, that’s sharing unwanted headlines with North Korea. First, Radio Free Asia reports that “[a]round 10 North Korean workers dispatched to Angola have died of yellow fever” during an outbreak that has killed 178 people.
It said some 1,000 North Korean workers are in Angola, including construction workers and medical staff, the report said, referring to the workforce North Korea dispatches overseas to earn money.
The recent deaths of the North Koreans calls into question the quality of North Korea’s yellow fever vaccine and the veracity of North Korea’s claims to have inoculated its workers sent to the African country, according to the report.
Those who became sick have asked to be repatriated, but the North Korean government has opted to not comply out of fear that they could cause the disease to spread at home, the media company said. [Yonhap]
Second, the Angolan government may also be defying UNSCR 2270’s ban on security cooperation with North Korea. Like Namibia, Angola was named in the most recent report of the Panel of Experts. The panel found that Angola bought “items for military patrol boats” from a (subsequently) U.N.-designated North Korean trading company, Green Pine, with the help of our old friend, Josef “Boaty McBoatface” Schwartz.
Then, last week, the official Angolan news agency Angop published this cryptic report, defending the country’s unspecified sharing of “experiences in public security” with North Korea. Meaning?
On the occasion, the board of the Angolan Ministry of the Interior thanked the contribution of the people and government of North Korea have made to Angola, since the early period of the African country’s struggle for national liberation.
The friendship and co-operation relations between the governments of Angola and the Democratic People’s Republic of Korea are based on a politico-diplomatic framework, as well as on the General Agreement signed in May, 1977, a time that Angola’s first president, Dr António Agostinho Neto made an official visit to North Korea.
The Democratic People’s Republic of Korea was among the first states to recognize the independence of Angola (11 Nov, 1975), which the Asian country officially acknowledged on 16 November 1975, a date that marked the start of official relations between the two states, immediately followed by the opening of the Asian country’s diplomatic mission in Luanda (Angola’s capital). [Angop]
The Angolan government may be under the illusion that this kind of argument helps its situation. In fact, it only attracts more attention from troublemakers like me by highlighting the Angolan government’s spurious reading of the sanctions. Like Bill Newcomb, I’ll reserve final judgment about whether Luanda’s security dealings with Pyongyang violate UNSCR 2270 until I know exactly what those dealings are. Still, it’s hard to imagine any form of security cooperation with Pyongyang that wouldn’t violate it.
For the Angolan government to answer that it enjoyed comradely relations with the North Koreans is irrelevant. The sanctions don’t require Luanda to sever diplomatic relations with Pyongyang; they do require it to cease its military cooperation, arms trafficking, commerce in dual-use items, and dealings with designated entities. A reader could reasonably infer that Angop’s report was a response to the panel’s revelations about Angola’s purchases from Green Pine. And why would Angola still feel the need to defend its dealings with North Korea if they’re all in the past? At the very least, it merits further investigation by the Panel of Experts. (This isn’t the full extent of Angola’s questionable commerce with North Korea, which would violate UNSCR 2270 if proven, but I’ll keep the rest to myself.)
Of course, one lesson we’ve learned over the last ten years is that U.N. sanctions don’t enforce themselves. The world’s less responsible actors will continue to engage in opportunistic (and prohibited) trade with North Korea until they confront the risk of consequences. In 2005, the U.S. Treasury Department presented banks around the world with that choice by designating Banco Delta Asia, and by sending Treasury officials around the world to clarify those consequences for banks that didn’t immediately get the message.
It’s time for a similar approach to North Korea’s arms clients in Africa, whose patronage is probably a significant source of income for Pyongyang, and continues to fuel conflict in Africa. The radical idea I’m calling for here is for our State Department to practice some diplomacy. If State is serious about enforcing sanctions against North Korea, it should promptly arrange a tour of Africa, to warn the appropriate ministries in Luanda, Harare, Kampala, Windhoek, Asmara, Addis Ababa, and Cairo that in addition to the unenforceable U.N. sanctions, the NKSPEA attaches serious mandatory sanctions to military cooperation with North Korea — including the blocking and forfeiture of assets, loss of aid, and visa bans.
Not only could such an approach enhance the credibility of the U.N. and cut off a key source of income for Pyongyang, it could also yield valuable information about North Korea’s arms trafficking, either from newly cooperative African governments, or from North Korean arms dealers who come under pressure from sanctions and are consequently induced to defect.