On August 22, 2017, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) sanctioned 16 third-country individuals and entities for supporting the North Korean regime. OFAC designated parties in China, Russia, Hong Kong, Namibia, and Singapore as Specially Designated Nationals (SDNs) for the following activities: (1) assisting already-designated persons who support North Korea's nuclear and ballistic missile programs, (2) dealing in the North Korean energy trade, (3) facilitating exportation of workers, and (4) enabling sanctioned North Korean entities to access the U.S. and international financial systems. U.S. persons are forbidden from transacting business with SDNs, and U.S. entities such as banks that are in possession of assets belonging to SDNs must freeze them.
These designations are the latest round of U.S. and international sanctions targeting North Korea. The U.S. Congress recently passed – and President Trump signed – legislation authorizing additional secondary sanctions relating to North Korea in the Countering America’s Adversaries Through Sanctions Act, on which we previously reported. The United Nations Security Council also imposed sanctions under UNSC Resolution 2371 on August 5, 2017 in response to the North Korean ICBM tests in July. The UN sanctions impose a ban on certain North Korean natural resource exports and impose sanctions against individuals and entities doing business with North Korea.
Tensions between the United States and North Korea have risen in the past few weeks over North Korea’s increasingly advanced nuclear and ballistic missile programs. Although China has officially been supportive of increased U.S. and UN sanctions on North Korea and hostile to North Korean military actions, many Chinese energy and financial companies continue to do business with the isolated country. These designations represent a commitment by the United States to isolate North Korea’s economy from its limited trading partners and the international financial system. OFAC is expanding its use of secondary sanctions against third-country parties (as it did most notably under the Iran sanctions program) in order to pressure North Korea where unilateral sanctions have failed to affect North Korea’s conduct.
Treasury Secretary Mnuchin said in a press release accompanying the sanctions that “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.”