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

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

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

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

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

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

The South Korean action suggest a model for an effective ad hoc global alliance to make sanctions enforcement more effective, and that China cannot effectively hobble with a veto threat. By itself, South Korea is not a hub of international finance and does not have a convertible currency, but if enough states–and the EU in particular–were to agree on a coordinated blacklist of companies trading with North Korea, that list could become a powerful tool to make the U.N. Security Council resolutions work as intended. The existing institution that’s best equipped to coordinate these efforts is the Financial Action Task Force, which has already published guidelines to prevent the financing of proliferation. The FATF has broad international acceptance and recognition, including from the UNSC.

Governments may be reluctant to use an instrument as blunt as a blacklist against some of North Korea’s larger bankers and trading partners. For those banks and companies, there should be a second, separate Watch List requiring higher levels of compliance and due diligence before transactions can be approved. This would increase the pressure on generally reputable banks to scrutinize (or avoid) transactions with North Korea to protect their reputations.

A challenge for South Korea will be to create a list of sanctioned companies, similar to the Treasury Department’s list of specially designated nationals, commonly known as the SDN List, and getting South Korean banks and businesses to check that list before conducting transactions. In the United States, building a culture of compliance with sanctions regimes took years, and required a willingness to prosecute offenders and set examples. South Korea will also have to create a culture of compliance to make this action effective. If the next South Korean President comes from the left-of-center New Politics Alliance for Democracy, that will present a challenge to the creation of that culture. Historically, the NPAD has been unwilling to impose adverse consequences on North Korea for its conduct.

Japan, which is seeking new ways to pressure North Korea, could also increase its regional influence by adding its economic weight to this informal alliance.