Trump administration increases economic pressure on North Korea
On 29 June 2017, the U.S. Department of the Treasury took multiple actions against Chinese entities and individuals accused of undermining existing US and UN sanctions against North Korea. The official announcement specifically stated that these actions were taken in response to North Korea’s continued evasion of international sanctions, development of weapons of mass destruction (WMD) and violations of United Nations (UN) Security Council resolutions, including the most recent Resolution 2356 passed on 2 June 2017. These measures underscore the current administration’s toughening stance on North Korea, particularly in light of the recent case of Otto Warmbier.
Treasury Secretary Steven Mnuchin introduced these actions by stating that “While we will continue to seek international cooperation on North Korea, the United States is sending an emphatic message across the globe that we will not hesitate to take action against persons, companies, and financial institutions who enable this regime.” It is no surprise that this message is directed at Chinese entities because it is widely accepted that the effectiveness of the existing US and UN sanctions largely depends on the cooperation of the Chinese authorities and Chinese companies, which serve as intermediaries for North Korea’s overseas trade. While in the past the US has taken a cautious approach to targeting Chinese companies and individuals, these new measures, along with the recent settlement with ZTE, appear to signal a shift in the US tactics for dealing with North Korea.
First, Treasury’s Financial Crimes Enforcement Network (FinCEN) announced a finding that Bank of Dandong acts as a conduit for illicit multi-million dollar North Korean financial activity and is, therefore, a primary money laundering concern. Bank of Dandong is a regional Chinese bank headquartered in the city of Dandong on the border with North Korea and is an SOE. FinCEN proposed to sever the bank from the U.S. financial sector by prohibiting the opening or maintaining of a correspondent account in the United States for or on its behalf. The proposal is subject to a 60-day comment period, after which it will come into force. This measure is a warning shot targeting North Korea’s financial transactions conducted through China.
Second, the Treasury’s Office of Foreign Assets Control (OFAC) added two Chinese individuals and one Chinese company to the list of Specifically Designated Nationals (SDN). These are some of the first Chinese citizens and companies added to the OFAC sanctions lists targeting North Korea. These designations are aimed to increase pressure on Chinese companies and individuals in an attempt to ensure the sanctions’ effective impact on North Korea’s financial transactions as well as its external trade partners.