On December 8th, 2015, the Treasury Department’s Office of Foreign Assets Control (OFAC) took aim at the North Korean government’s attempts to procure weapons of mass destruction (WMDs) and related materials for production, presumably for the assembly of a strategic rocket force. Six North Korean nationals and three North Korean shipping companies have been added to the Specially Designated Nationals List (SDN List). The individuals named in this action all represent North Korean banks through various overseas branch offices.
Foreign Trade Bank
Foreign Trade Bank (FTB), North Korea’s primary foreign exchange bank, has been on the SDN List since March 2013. Kim Kyong Nam, just added to the SDN List, is FTB’s representative in Khabarovsk, Russia, purportedly acting on FTB’s behalf (directly or indirectly), in furtherance of North Korean proliferation activity. FTB’s actions were designated as “facilitating transactions on behalf of actors linked to its proliferation network,” and have been outlawed since 2005, pursuant to Executive Order 13382. This order gives the Secretary of the Treasury, in consultation with the Secretary of State and the Attorney General, a broad ambit to add any foreign person to the SDN List who has “provided or attempted to provide financial, material, technological or other support for, or goods or services in support of” the proliferation of WMDs. Apart from being an obvious agent of the FTB, there is no publically available evidence linking Nam to specific transactions of weapons proliferation. However, the vast scope of Executive Order 13382 allows for the designation of individuals under the SDN List if they merely provide support to a designated North Korean bank overseas.
Tanchon Commercial Bank
Five other individuals have been linked to Tanchon Commercial Bank, described by the U.N. Security Council as the “main DPRK financial entity for sales of conventional arms, ballistic missiles, and goods related to the assembly and manufacture of such weapons.” Tanchon operates as the financial arm of the Korea Mining Development Trading Corporation (KOMID), which facilitates North Korean arms exports. Ko Tae Hun, a Tanchon commercial bank agent, Song Choe and Jung Kim, Tanchon’s representatives in Vietnam, and Bom Jang and Jon Myong-Guk, Tanchon’s agents in Syria, have also been added to the SDN List. External information about these individuals, apart from their commercial affiliations, is virtually non-existent. OFAC designated these individuals as commercial emissaries of the North Korean government, two of which (Ko and Myong-Guk) allegedly facilitate the cross-border flow of KOMID funds. Since KOMID and Tanchon are regarded as state actors for the North Korean government and North Korea is a targeted foreign country under various OFAC sanctions, the burden of proof for removing the above individuals’ names from the SDN List is quite high. Removal of their names from the SDN List would require extensive documentation, demonstrating a substantive reason for removal. Additionally, in order for a successful removal to occur, it would need to be shown that the individual or individuals involved have effectively ceased ties with North Korean banks and affiliated companies.
Ocean Maritime Management Company
OFAC also added Ocean Maritime Management Company (OMM) to the SDN List. OMM, a North Korean shipping company operating under various aliases and front companies, organized an illegal shipment of arms and two MiG-21 jet fighters disguised under thousands of tons of Cuban sugar. This plot was uncovered and foiled last July in the Panama Canal. Three other subsidiaries: Haejin, Pyongjin, and Yongjin, all operate under OMM’s corporate umbrella, and have also been blacklisted. Following the arms shipment debacle, OMM undertook a massive corporate reshuffle, renaming 13 out of 14 ships, and establishing new holding companies by using single ship owners and vessel management companies. The UN Panel on North Korea recommended sanctions against 34 OMM related entities (shell corporations), that allegedly aided the cross border flow of WMDs and other essential materiel. Under Executive Order 13351, OFAC must demonstrate that OMM owned, controlled, acted or purported to act directly or indirectly to import or export arms into North Korea. This requirement is clearly fulfilled based on the arms shipment described above. Alternatively, Executive Order 13687 states that a mere agency controlled by the North Korean government, of which OMM is clearly one, would justify adding their name to the SDN List.
In order to unblock a vessel, or in this case a corporation of vessels, from the SDN List, the person owning the majority interest could propose to OFAC the sale of the vessel. Any proceeds from the sale would be placed in a blocked interest bearing account, and would ultimately be deducted from the costs incurred due to blockage/sale costs associated with the transaction. It seems doubtful that OMM would attempt to sell their ships at this time due to the relative ease with which they have operated in the past. However, business dealings will likely be severely curtailed, as OMM will not be able to access any property within U.S. jurisdictions, or transact with designated U.S. persons in possession of their property, undoubtedly affecting their commercial viability.
The author of this article is Winfield Glascock, a licensed solicitor in New South Wales, Australia.
Disclaimer: Blog posts should not be relied upon as legal advice and are only provided for informational purposes. Information contained in blog posts may also become outdated with the passage of time as laws change and U.S. foreign policy and national security objectives evolve.