- Until February of 2016, U.N. sanctions against North Korea were strong on paper but poorly enforced, and U.S. sanctions against North Korea were (contrary to the assumptions of many journalists and academics) comparatively weak — weaker than our sanctions against Belarus and Zimbabwe.
- Sanctions against North Korea strengthened considerably in 2016 with the passage in February of the North Korea Sanctions and Policy Enhancement Act, and the U.N. Security Council’s approval of Resolution 2270 (both of them are explained in greater detail below). They were further strengthened when President Trump signed the Korean Interdiction and Modernization of Sanctions Act and Executive Order 13810, and when the U.N. Security Council approved resolutions 2371 and 2375. Even so, implementation of the new authorities has been uneven and has only just begun.
- Here are the Treasury Department’s FAQs (as of September 2017) and overview of North Korea sanctions (as of November 2016).
- There is certainly more that could be done to close sanctions loopholes, but the most important priority now is to enforce the U.N. and U.S. sanctions that already exist, through a combination of law enforcement and diplomacy.
- North Korea continues to do most of its business through offshore dollar accounts that flow through the U.S. financial system. These dollars pay North Korea’s army and security forces, buy materials and parts for its military and WMD programs, and maintain the luxurious lifestyle of Kim Jong-un and his ruling elite.
- Most of those North Korean accounts are in Chinese banks; others are in Europe. It’s often said that China is the key to sanctions enforcement. U.N. reports prove that China has violated sanctions for years — so flagrantly that the violations could only be the result of Chinese government policy. The NKSPEA mandates secondary sanctions on third-country (including Chinese) banks and companies that violate U.N. sanctions and U.S. law. It forces them to choose between access to the U.S. economy and the North Korean economy.
- The U.S. has jurisdiction over dollar transactions between non-U.S. persons and banks. The Justice Department explained this in a recent North Korea-related civil forfeiture complaint. For an explanation of how this works in practice, see this, and focus on the correspondent banks, which are usually in the United States and subject to Treasury Department regulation.
- This isn’t a partisan issue. Although the administration has hesitated to fully enforce the NKSPEA, there is strong bi-partisan support for this approach in both houses of Congress. As of October 2016, the Obama administration was under intense pressure to impose secondary sanctions on Chinese banks that launder Kim Jong-un’s money.
- For sanctions to work, they need aggressive enforcement, the support of good diplomacy, and time. They should be implemented to target the finances that sustain the regime while minimizing humanitarian effects on the people. They must be part of a broader strategy that has specific and concrete objectives.
- require North Korea to cease all activity related to the development of ballistic missiles, or its nuclear, chemical, or biological weapons programs, and to completely dismantle those programs;
- prohibit the transfer of goods or technology to or from North Korea that are related to, or could contribute to, North Korea’s WMD programs;
- prohibit scientific cooperation with, or the provision of training to, North Korean nationals in a broad range of fields that may relate to WMD and military uses;
Arms Export & Import Embargo:
- prohibit the transfer of weapons to or by North Korea, and the transfer to North Korea of items (trucks, helicopters, vessels) that may have dual-use applications;
- restrict North Korean shipping and financial transactions to prevent further violations of U.N. sanctions;
- prohibit member states from reflagging, insuring, or crewing North Korean ships, or leasing or chartering ships to North Korea unless approved by a U.N. sanctions committee;
- require member states to freeze any funds or property, including ships, that are controlled by U.N.-designated persons, or that are used to facilitate violations of the sanctions;
- prohibit the transfer of any funds that could contribute to North Korea’s WMD programs or to or from any person designated by the U.N. sanctions committee;
- limit North Korean diplomatic and consular facilities and personnel to one bank account each;
- require member states to ban correspondent relationships between their banks and North Korean banks;
- require the closure of all foreign subsidiaries, representative offices, and bank accounts in North Korea;
- prohibit public or private support for trade with North Korea, including guarantees, insurance, and export credits;
Shipping & Transportation:
- require the inspection of all cargo entering, leaving, or transiting through North Korea, including personal baggage and checked luggage;
- require member states to prohibit vessels designated for violating these resolutions from entering their ports;
- require member states to ban their nationals from owning, leasing, or operating vessels
flagged by North Korea, except as approved by the 1718 Committee;
- ban ship-to-ship transfers by vessels that have recently visited North Korea;
- Authorize interdiction of North Korean shipping in limited cases —
- if a state has reasonable grounds to believe the vessel is carrying prohibited cargo, calls upon the member state vessel (naval or coast guard) to inspect it at sea, if the flag state consents;
- or the flag state shall direct the ship to a nearby port for inspection;
- or the member state shall report the vessel to the 1718 Committee, which must consider designating the vessel.
- ban the sale or transfer by the Government of North Korea of most mineral products, including coal, iron, iron ore, gold, titanium ore, vanadium ore, rare earth minerals, copper, nickel, silver, lead, lead ore, and zinc;
- prohibit the transfer to North Korea of rocket, aviation, or jet fuel;
- ban natural gas exports to North Korea, and limit oil exports to North Korea;
- ban exports by North Korea of textiles, statues, and seafood;
- ban new work authorizations by member states for North Korean workers;
- ban joint ventures with North Korea and its companies;
Human Rights & Humanitarian:
- “express concern” about Pyongyang’s labor exports, “the grave hardship that the people in the DPRK are subjected to,” and Pyongyang’s pursuit of “nuclear weapons and ballistic missiles instead of the welfare of its people while people in the DPRK have great unmet needs;”
- prohibit the transfer of luxury goods to North Korea;
- require member states to expel persons involved in violating U.N. sanctions against North Korea and persons working for or on behalf of North Korean financial institutions;
- establish a Panel of Experts to investigate potential violations of, and implementation of, U.N. sanctions. (See U.N. POE reports from 2010, 2012, 2013, 2014, 2015 & 2016.)
U.S. Sanctions Laws
- Iran, North Korea & Syria Nonproliferation Act, Pub. L. No. 106-178, Mar. 14, 2000 (codified at 50 U.S.C. 1701 note). Provides for very limited trade and other sanctions (such as debarment from U.S. government contracts) against persons designated for assisting North Korea’s WMD development.
- North Korea Sanctions & Policy Enhancement Act of 2016, Pub. L. No. 114-122, 130 Stat. 93, Feb. 18, 2016 (codified at 22 U.S.C. Ch. 99). This is the first comprehensive, North Korea-specific sanctions law. Key provisions:
- Sec. 102 – mandatory investigations
- Sec. 104 – persons and conduct subject to designation
- Sec. 201 – urging the President to designate North Korea as a jurisdiction of primary money laundering concern, under section 311 of the Patriot Act (On June 1, 2016, the Secretary of the Treasury designated North Korea as a jurisdiction of primary money laundering concern. On November 4, 2016, the Secretary issued a final rule prohibiting financial institutions operating in the United States from providing correspondent account services to North Korean financial institutions, effectively severing North Korea’s banks off from the global financial system.)
- Sec. 202 – urging the President to improve diplomatic efforts to implement and enforce U.N. sanctions
- Sec. 204 – denying government contracts to companies designated under section 104
- Sec. 205 – providing for more intrusive inspections of cargo coming from ports that fail to inspect cargo to and from North Korea, as required by U.N. Security Council resolutions
- Sec. 206 – denying entry to the United States by persons designated under section 104, and shareholders of companies designated under section 104
- Sec. 208 – humanitarian and other exemptions and waivers
- Secs. 209 & 210 – cybersecurity reporting and sanctions provisions
- Sec. 301 – requiring the President to submit a plan to provide “unrestricted, unmonitored, and inexpensive electronic mass communications … to the people of North Korea”
- Sec. 302 – Strategy to promote North Korean human rights.
- Sec. 303 – report on North Korean prison camps.
- Sec. 304 – report on, and sanctions for, serious human rights abuses or censorship.
- Sec. 401 & 402 – conditions for suspending and terminating sanctions, respectively.
- Korean Interdiction & Modernization of Sanctions Act of 2017, Pub. L. No. 115-44, Title III. The second comprehensive, North Korea-specific sanctions law. Key provisions:
- “(10) buys gold, titanium ore, vanadium ore, copper, silver, nickel, zinc, or rare earth minerals from North Korea;
- “(11) sells rocket, aviation, or jet fuel (except for use by a civilian passenger aircraft outside North Korea, exclusively for consumption during its flight to North Korea or its return flight);
- “(12) facilitates a significant transaction or transactions to operate or maintain, a vessel or aircraft that is designated by the U.N. or the Treasury Department;
- “(13) facilitates the registration of, or maintains insurance or a registration for, a vessel owned or controlled by the Government of North Korea.
- “(D) buys coal, iron, or iron ore from North Korea, in excess of the limitations provided in applicable United Nations Security Council resolutions;
- “(E) buys textiles from North Korea;
- “(F) facilitates a significant transfer of funds or property of the Government of North Korea that materially contributes to any violation of an applicable United Nations Security Council resolution;
- “(G) transfers bulk cash, precious metals, gemstones, or other stores of value to or from North Korea;
- “(H) sells crude oil, condensates, refined petroleum, other types of petroleum or petroleum byproducts, liquified natural gas, or other natural gas resources to North Korea (except for heavy fuel oil, gasoline, or diesel fuel for humanitarian use;
- “(I) facilitates North Korea’s online commercial activities, including online gambling;
- “(J) buys fishing rights from North Korea;
- “(K) buys food or agricultural products from North Korea (whose people go hungry while Kim Jong-Un exports what they grow for hard currency);
- “(L) facilitates the exportation of workers from North Korea;
- “(M) engages in transactions involving North Korea’s transportation, mining, energy, or financial services industries;
- “(N) facilitates the operation of any branch, subsidiary, or office of a North Korean financial institution.”
Some of those provisions (the coal cap) mirror U.N. sanctions, while others (food and textile exports) anticipated them. Other key provisions:
- Section 314 authorizes enhanced U.S. customs inspections of shipments from ports that fail to inspect North Korean cargo, as required by UNSCR 2270.
- Section 315 sanctions shipping registries that reflag North Korean ships, in violation of UNSCR 2321, by potentially banning ships flying their flags of convenience from U.S. waters.
- Section 321 sanctions North Korea’s trade in slave labor —
- allows the President to freeze the assets of companies that employ North Korean forced labor, and to sanction governments that permit the use of North Korean forced labor under the Trafficking Victims Protection Act;
- presumes that goods made with North Korean labor or materials are banned from U.S. ports as products of forced labor, pursuant to the Tariff Act of 1930.
U.S. Sanctions Executive Orders: Generally —
- These executive orders are promulgated under the authority of the International Emergency Economic Powers Act, 50 U.S.C. 1705 et seq., violations of which are punishable under sec. 206, by 20 years in prison, a $1 million fine, and a $200,000 civil penalty).
- Sanctions executive orders are enforced by the Treasury Department’s Office of Foreign Assets Control, or OFAC.
- Designation under one of these EOs blocks the property of the person designated. Generally, this affects dollar-denominated transactions and accounts, which rely on correspondent banking through U.S. financial institutions to transfer funds from a buyer to a seller.
- Persons designated under these executive orders are added to the Treasury Department’s List of Specially Designated Nationals, or SDN List. This index tells you which E.O. was used to designate a target on the SDN List.
- Although the EOs may appear to have broad, sweeping language, only the specific persons designated and added to the SDN List are blocked.
- Banks are required to block SDN-listed persons and implement Know-Your-Customer compliance programs to prevent blocked persons from circumventing sanctions or laundering money. Nearly all governments have KYC laws.
- The Treasury Department’s Financial Crimes Enforcement Network, or FINCEN, works with the banking industry to oversee and enforce anti-money laundering (AML) guidelines and procedures.
- Banks that fail to put sufficient compliance programs into effect may face criminal penalties running into the billions of dollars in egregious cases, civil penalties under other Title 31 provisions, and the complete suspension of their access to the dollar-based financial system under section 311 of the Patriot Act.
The executive orders that apply or could potentially apply to North Korea include —
- 13224 (2001) – for persons designating for engaging in, or providing material support for, terrorism. No North Korean persons are designated under this EO. I have published evidence of the North Korean government’s recent and repeated sponsorship of acts of terrorism.
- 13382 (2005) – for persons involved in or supporting WMD development and proliferation. Roughly 60 North Korean targets are designated under this EO.
- 13466 (2008) – a placeholder, maintaining the block on assets previously blocked, signed by President Bush when he lifted Trading With the Enemy sanctions against North Korea after the 2007 agreed framework
- 13551 (2010) – North Korea-specific sanctions for proliferation, arms dealing, and money laundering.
- 13581 (2011) – Transnational criminal organizations. No North Korean targets are designated under this EO.
- 13570 (2011) – Requiring an OFAC license to import goods or services from North Korea, directly or indirectly.
- 13687 (2015) – Blocking persons designated as officials of the North Korean government or ruling party, or for assisting or supporting them. Potentially broad, but little-used in practice.
- 13694 (2015) – Cyber sanctions. No North Korean persons are designated under this EO.
- 13722 (2016) – North Korea-specific sanctions for persons designated as involved in or facilitating human rights abuses, censorship, arms dealing, WMD proliferation, labor exports, cyberattacks, or certain mineral exports. Bans new investment in North Korea and authorizes sectoral sanctions against North Korea’s mining, energy, transportation, and banking industries. Partially implements the NKSPEA, and expands on it in certain respects.
- 13810 (2017) – authorizes sanctions against —
- persons operating in the construction, energy, financial services, fishing, information technology, manufacturing, medical, mining, textiles, or transportation industries in North Korea;
- anyone who owns, controls, or operates any seaport, airport, or land port of entry in North Korea;
- anyone who has engaged in at least one significant importation from or exportation to North Korea of any goods, services, or technology;
- any North Korean person, including a North Korean person that has engaged in commercial activity that generates revenue for the Government of North Korea or the Workers’ Party of Korea;
- any ships or aircraft that have been in North Korea in the last 180 days can’t land in the United States;
- freezes any funds controlled by a “North Korean person,” or in which a North Korean person as an interest, or the funds of any person who finances, approves, facilitates, or guarantees a transaction that would be frozen under this provision;
- potentially bans any person who knowingly conducts or facilitates a transaction in property blocked under a North Korea-related executive order, or who knowingly conducts or facilitates a significant transaction in trade with North Korea, from the U.S. financial system.
U.S. sanctions regulations & general licenses
- 31 C.F.R. Part 510 – OFAC regulations synthesize, codify, and implement sanctions programs against a specific target or category of targets. As of October 2016, these relatively weak regulations were overdue to be updated, to reflect the enactment of the NKSPEA and the promulgation of Executive Order 13722.
- General licenses create exemptions to the sanctions regulations for certain humanitarian, cultural, and other purposes.
Other significant U.S. statutes
- Title 12 – Trading With the Enemy Act (TWEA sanctions against North Korea were lifted in 2008)
- Title 18 – Criminal Code
- 18 U.S.C. 981 – civil forfeiture
- 18 U.S.C. 982 – criminal forfeiture
- 18 U.S.C. 1030 – computer fraud and abuse
- 18 U.S.C. 1956 – money laundering
- 18 U.S.C. 1957 – transactions in criminally derived property
- 18 U.S.C. Chapter 113B – definition of international terrorism, prohibitions on financing of and material support for terrorism
- Title 19 – Customs
- Title 22 – Foreign Relations
- Title 31, Chapter 53 – Monetary Transactions – includes the Bank Secrecy Act, transaction reporting requirements, the prohibition on bulk cash smuggling, the prohibition on unlicensed money transmitting businesses, and section 311 of the Patriot Act.
- Title 50 – War & National Defense
Third-country sanctions authorities
- U.N. member state implementation reports
- Japan: Updates: 1/2013 | 4/2013 | 4/2013 | 8/2013 | 3/2015 | 12/2016
- Hong Kong: Sanctions regulation, 2014 | SDN List, 2013
- Singapore: Background | FAQ | Sanctions Programs | Sanctions Regulation, 2016
- Australia: Summary & links to sanctions regulations | SDN List, 2016 | Offenses & Penalties
- New Zealand: 2006 regulations (2013 reprint) | Luxury goods list
- European Union: SDN List, 2016 | Sanctions summary & regulations ( 1 | 2 | 3 | 4 )
- Switzerland: English Summary | German Summary & SDN List Links | German Regulation, 5/2016 (text)