United States: The Day Of North Korea Sanctions: The UN Imposes The Toughest North Korea Sanctions Yet While OFAC And State Designate More North Korean Entities

After weeks of negotiations and a Putin-backed delay, the UN Security Council unanimously adopted resolution 2270 on March 2, 2016, imposing new sanctions against North Korea. According to U.S. Secretary of State John Kerry, the resolution imposes the strongest set of UN sanctions in over two decades. This article provides a summary of the new UN North Korea sanctions followed by an overview of the most recent developments in North Korea sanctions under US law.

New UN North Korea Sanctions

The new sanctions require:

  • An asset freeze on all funds and other economic resources owned or controlled by the North Korean government or the Worker's Party of Korea, if associated with its nuclear or ballistic missile program or other prohibited activities
  • A ban on the opening and operation of North Korean banks abroad
  • A ban on foreign financial institutions opening new offices in North Korea under all circumstances, unless first approved by the Sanctions Committee, and a requirement for UN Member States to order the closing of existing branches if there is credible information indicating the associated financial services are contributing to North Korea's illicit activities
  • Designation of 16 new individuals and 12 entities (including North Korea's Ministry of Atomic Energy and the Reconnaissance Energy Bureau)
  • A ban all public and private financial trade support to North Korea if there are reasonable grounds to believe there is a link to proliferation
  • Sectoral sanctions on North Korean trade in natural resources banning the export of all gold, titanium ore, vanadium ore and rare earth metals and banning the supply of all types of aviation fuel, including rocket fuel
  • A ban on the export of coal, iron, and iron ore used for North Korea's nuclear or ballistic missile programs
  • Inspection of all cargo going to and from North Korea, not just those suspected of containing prohibited items
  • Expanding the arms embargo to include small arms and light weapons
  • A ban leasing or chartering vessels or airplanes, providing crew services to North Korea, and registering vessels
  • Expanding the list of luxury goods (prohibited for export to North Korea) to include luxury watches, aquatic recreational vehicles, snowmobiles worth more than $2,000, lead crystal items and recreational sports equipment
  • A sweeping ban on the transfer of any item if a UN Member State has reason to believe the item can contribute to the development and capabilities of the North Korean armed forces, except for food and medicine

China, a permanent member of the Security Council, joined the unanimous vote despite prior reluctance to strengthen UN sanctions against North Korea. It remains yet to be seen how China will enforce the sanctions.

U.S. North Korea Sanctions

Separately, the United States took action earlier against North Korea. We speculate that this action helped align the UNSC members toward the unanimous vote on UNSCR 2270. On February 18, 2016, President Barack Obama signed into law the North Korea Sanctions and Policy Enhancement Act of 2016. The bill had easily passed through both Houses of Congress on the heels of the most recent nuclear test and rocket launch by North Korea.

Then on March 2, the U.S. Department of Treasury, Office of Foreign Assets Control (OFAC) named two entities and 10 individuals to its list of Specially Designated Nationals and Blocked Persons. On the same day, the State Department designated three entities and two individuals for activities related to weapons of mass destruction (WMD).

Over the next few months, OFAC is expected to issue new North Korea regulations to implement other provisions of the new statute.

The Act

The new statute provides for both mandatory and discretionary designations. These sanctions are directed at activities by U.S. Persons, which includes any United States citizen, permanent resident alien, any entity organized under the laws of the United States or any jurisdiction within the United States (foreign branches of U.S. companies, that means you too), and any person in the United States.

In addition, any transaction by any non-U.S. persons supporting any of the designated entities or prohibited activities must be carefully scrutinized, especially if the transactions involve the U.S. financial system in any way.

Mandatory Designations

The Act requires the designation and freezing of all assets subject to U.S. jurisdiction of any person that engages in any of the following activities relating to North Korea:

  • Nuclear and ballistic missile proliferation
  • Dealings in North Korean metals and products tied to WMD activities, the Korean Workers' Party, armed forces, intelligence, or the operation of political prison camps
  • "Significant financial transactions" related to weapons of mass destruction
  • Undermining cybersecurity
  • Internal repression
  • Forced labor
  • Censorship
  • Human rights violations

In addition, the Act requires the President to decide on the designation of North Korea as a Primary Money Laundering Concern in the coming months.

As a result, companies must ensure that no company activity supports the activities of entities designated under the above act provisions. Compliance programs, including those related to anti-money laundering, should be reevaluated as the sanctions are not simple reiterations of previous measures. These mandatory designations will make it all the more necessary that companies maintain reasonable and proportionate due diligence and screening procedures to prevent facilitating the enumerated activities.

Discretionary Designations

Before we reach the current regulation regime, we will leave you with the remaining provisions of the Act that have not yet been implemented. While no one holds the OFAC crystal ball, these provisions may rear their head and are worth considering in advance of promulgation.

1. Blocking sanctions

The Act explicitly codified the blocking of assets of the Government of North Korea, the Workers' Party of Korea, and North Korean Specially Designated Nationals (SDNs). While this sanction is essentially already in effect under the various executive orders, the explicit restrictions would prohibit the use of the U.S. financial system in connection with any transaction with the Government of North Korea, the Workers' Party of Korea, or SDNs of North Korea.

2. UN Security Council resolutions

The Act also authorizes designation as an SDN of any person who supports a person designated pursuant to an applicable UN Security Council resolution. The potential implications of this Act provision deserve attention as the recent resolution imposed the toughest set of sanctions yet.

3. Bribery

If you thought the FCPA was the sole concern out of U.S. soil relating to bribery of foreign officials, think again. The Act also authorizes designation of any person who knowingly contributes to bribery of a North Korean official, or to misappropriation, theft, or embezzlement of public funds by, or for the benefit of, a North Korean official.

4. Sanctions grab bag

The Act also authorizes the President to prohibit any person already designated under the above three categories from transactions in foreign exchange or credit or payments subject to U.S. jurisdiction, procurement, and/or travel by the designated person's officers and shareholders.

Refresher: Pre-Existing OFAC Regulations

The new Act builds upon the pre-existing U.S. sanctions against North Korea. For further background, see Trading Up: Newly Implemented North Korea and Libya Sanctions.

Blocking sanctions

The regulations provide for the continued the blocking of property and interests in property of certain persons with respect to North Korea that had been blocked pursuant to the Trading with the Enemy Act (TWEA) as of June 2000.Further, the regulations block property and interests in property of persons listed in the Annex to E.O. 13551 and of individuals and entities determined by Treasury in consultation with the State Department to have engaged in activities related to:

  • The import, export, or reexport of arms or related materiel from North Korea
  • The import, export, or reexport of luxury goods to North Korea
  • Money laundering, counterfeiting of goods or currency, bulk cash smuggling, narcotics trafficking, or other illicit economic activity supporting the Government of North Korea or its senior officials
  • Providing support for or goods or services of any of the above-listed activities or any person whose property and interests in property are blocked pursuant to E.O. 13551
  • Owning, controlling, or acting on behalf of any person whose property and interests in property are blocked pursuant to E.O. 13551

Vessels

The regulations prohibit U.S. persons from registering, owning, leasing, operating, insuring or otherwise providing support to North Korean vessels.

Imports to North Korea

Lastly in terms of prohibitions, the regulations prohibit imports of goods, services, and technology (including those used as components of finished products of, or substantially transformed in, a third country) from North Korea without an OFAC licenses or applicable exemption.

Authorizations

The preexisting regulations also provided authorization for the provision of certain legal services, emergency medical services, and entries in certain accounts for normal service charges by U.S. financial institutions.

The Takeaway

Interactions with North Korea are an increasingly dangerous minefield of sanctions. The new North Korea sanctions add to an already restrictive program. As a result, we recommend additional review and specialized controls as the new sanctions reach new heights (or depths, depending your level of preparation).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
13 Sep 2018, Other, Los Angeles, United States

Liisa will be giving opening remarks and presenting, "Big Data and Online Behavioral Advertising (OBA): An Advertiser’s Perspective Origins of big data and how to legally acquire data."

26 Sep 2018, Seminar, San Francisco, United States

Please join us for Sheppard Mullin's Labor & Employment Law Update & Happy Hour Seminar Series.

28 Sep 2018, Other, Los Angeles, United States

Leaders today don't just have to worry about nefarious cybercriminals getting "inside" their firewalls; there's an entire ecosystem of SAAS partners, third party vendors and suppliers, and all the hardware from switches to POS terminals that need to be monitored.

Similar Articles
Relevancy Powered by MondaqAI
Cadwalader, Wickersham & Taft LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Cadwalader, Wickersham & Taft LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions