New sanctions against North Korea

By Chang Se-moon

Within the past six months, there have been three new proposals in the U.S. Congress that were aimed to levy additional sanctions against North Korea. The three proposed laws are:

(1) S. 1747, the North Korea Sanctions Enforcement Act of 2015, as introduced in the Senate by Senator Menendez on July 9, 2015;

(2) S. 2144, the North Korea Sanctions and Policy Enhancement Act of 2015, introduced in the Senate by Senator Gardner on October 6, 2015; and

(3) H.R. 757, the North Korea Sanctions Enforcement Act of 2015, introduced in the House by Representative Royce on February 5, 2015.

Among the three, H.R. 757was passed in the House on January 12, 2016 by a vote of 418-2, and was placed on Feb. 2, 2016 on the Senate Legislative Calendar. On Feb. 10, 2016, the Senate passed its version of H.R. 757 by a 96-0 vote. Because the Senate made changes, its version of H.R. 757 was sent back to the House. On February 12, the House approved the Senate version of H.R. 757 under a House procedure called “suspension of the rules” which is typically used to pass non-controversial bills. Votes under suspension require a two-thirds majority. The vote was 408 in favor, 2 opposed, and 23 non-voting. H.R. 57 thus became law with the President’s signature.

Work toward the final Act has been rushed in the U.S. Congress because of the two recent events: the Jan. 6, 2016 alleged test of a hydrogen bomb according to North Korea ― a nuclear bomb according to South Korea ― and the Feb. 7 test-firing of a long-range missile called Kwangmyongsong-4 with a range of about 10,000 kilometers; far enough to reach the west coast of the United States and, thus, scare lawmakers in the U.S. Congress.

Key sanctions are included in Section 104 and Section 201 of H.R. 757. Targeted sanctions in Section 104 are to ban any transactions in foreign exchange and any transfers of credit or payments between North Korea and financial institutions that are subject to the jurisdiction of the United States. It would not be easy to implement these sanctions since target banks are located mostly in China and Europe.

Section 201 states that “If the Secretary of the Treasury determines under this subsection that reasonable grounds exist for finding that North Korea is a jurisdiction of primary money laundering concern, the Secretary of the Treasury, in consultation with the Federal functional regulators, shall impose one or more of the special measures,” described in Title 31 of the United States Code, much like the Banco Delta Asia case of 2005.

Put differently, if a bank is found to be a part of “money laundering” for North Korea, U.S. banks may limit any relations with the bank, forcing it to cut ties with North Korea. This will severely restrict Pyongyang’s access to the bank. Again, since some of these target banks are in China, the success of these sanctions on global financial institutions is far from being certain. The Banco Delta Asia case, however, does indicate that the financial pressure contained in H.R. 757 might have some impact. Let me explain.

The October 2002 discovery of North Korea’s nuclear program, and its subsequent announcement that it was renewing its nuclear weapons program, broke the terms of the 1994 Agreed Framework, and led to a broad tightening on illegal financial transactions. This culminated in Banco Delta Asia’s termination of business dealings with North Korea as of February 16, 2006. Banco Delta Asia had long been suspected of handling North Korea’s illicit activities overseas, such as laundering counterfeit U.S. dollars, sales of illegal drugs, and more. Banco Delta Asia is located in Macao, which is a Special Administrative District of China.

On January 30, 2007, “a U.S. delegation led by Deputy Assistant Treasury Secretary Daniel Glaser met at the U.S. Embassy in Beijing with North Korean officials to discuss the $24 million and related allegations,” such as North Korea’s counterfeiting and money laundering activities. The $24 million is the amount that North Korea held at the Banco Delta Asia and that was frozen by the bank under pressure from the United States in September 2005. North Korea demanded resolution of this frozen fund as a condition to participating in future negotiations.

On February 8, 2007, the six-nation talks resumed in Beijing, Pyongyang agreed to shut down its Yongbyon plant by April 14, 2007, while Washington promised to resolve the dispute over the North Korean funds frozen at Banco Delta Asia. Fund transferwas completed on June 14, 2007.

We all know that the positive outcome from the Banco Delta Asia precedent did not last long. It is puzzling to see how South Korea, which is so much superior to North Korea economically and technologically, is so much weaker than North Korea militarily. It is about time for all leaders in South Korea to wake up and prepare meaningful national defense away from relying on outside forces.

Semoon Chang is the director of the Gulf Coast Center for Impact Studies. He can be reached at changsemoon@yahoo.com.