Archive for the ‘North Korea Sanctions’ Category


Mar

1

Assassination In Malaysia Leads To Calls to Redesignate DPRK As A Terrorist State


Posted by at 9:14 pm on March 1, 2017
Category: BISDDTCNorth Korea Sanctions

Kim Jong Un Smoking via KCNA [Fair Use]The assassination by the Norks of Kim Jong Un’s brother in a Malaysian airport with the help of gullible stooges and some VX nerve agent has reignited the debate as to whether the State Department should redesignate the DPRK as a state sponsor of terrorism. The DPRK was first put in the list after it bombed a Korean Air Flight in 1987, killing 115 people. The country was removed in 2008 in return for shutting down its plutonium plant and permitting inspections.

In order to designate a country as a state sponsor of terrorism, a determination must be made that the country “repeatedly provided support for acts of international terrorism.” See, e.g., section 6(j) of the (zombie) Export Administration Act. None of the statutes that invoke that phrase define “acts of international terrorism,” although section 40(d) of the Arms Export Control Act states that the term includes activities that “aid or abet the efforts of an individual or group to use … chemical, biological, or radiological weapons.” I suppose that might cover the murder of an individual with a chemical weapon in an airport, although terrorism seems more readily to mean an act that indiscriminately targets multiple civilians in order to instill fear in a population or community.

Advocates of redesignation have argued that the cyber attack on Sony (in connection with its distribution of the hilarious and decidedly anti-Nork film The Interview) and other assassinations abroad demonstrate repeated acts of terrorism. But again, it’s hard to argue that these acts, while reprehensible, are designed to instill fear in a community.

In any event, the redesignation would be most symbolic. Once designated, U.S. law prohibits arms sales, which are already prohibited. Licenses would be required for certain specified goods, but section 746.4 of the EAR already requires licenses for all items subject to the EAR other than food and medicine. Being designated as a state sponsor of terrorism means that under the Trade Sanctions and Export Reform Act of 2000 a one-year license is required for exports to that country of agricultural commodities, medicine or medical devices, but North Korea is explicitly exempted from this by section 7205(a)(2)

Given that the redesignation of the loathsome Norks would be mostly symbolic, it seems to be a bad idea to torture the definition of “international terrorism” to include computer hacking and individual murders to get there.

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Copyright © 2017 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Dec

15

Sanctions Paranoia Strikes Again: YouTube Shutters Nork Channel


Posted by at 10:19 pm on December 15, 2016
Category: North Korea SanctionsOFAC

KimThe Washington Post reports that YouTube has removed Korean Central Television’s channel, fearing that it needed to do so to avoid breaching U.S. sanctions on North Korea. The removed channel was a Nork propaganda outlet that broadcast both unintentional comedies, such as outings by the super-sized dictator, Kim Jong Un, as well as Nork fake news broadcasts. Researchers and Nork watchers found the channel to be an invaluable resource in keeping track of what is going on North Korea, even if much of these broadcasts needed to be taken not with a grain of salt but with an entire salt mine.

Although Google is mum about why the channel was killed, the Post quotes a supposed explanation from somebody named Josh Stanton, a  blogger who appears to work for the U.S. government in his spare time.  Josh said that the reason was “YouTube and Google probably realized there was a problem with money changing hands.” Er, no, Josh.

The issue with respect to the Nork YouTube channel arises from Executive Order 13722, issued in March 2016, which prohibits exports of services to North Korea. Prior to that there were restrictions, enforced by BIS, on exports of goods to North Korea, and restrictions, enforced by OFAC, on dealing with blocked North Koreans. Providing distribution of Korean Central Television’s broadcasts over YouTube would clearly be the export of a service to North Korea in violation of Executive Order 13722.

But, and this is a big but, there is the information exception, enacted by the Berman amendment and ignored by Mr. Stanton and the Washington Post. The information exception prevents the President from prohibiting the “importation from any country … whether commercial or otherwise, regardless of format or medium of transmission, of any information.” See 50 U.S.C. § 1702(b)(3)(emphasis supplied). The italicized language is pretty much game over for the arguments by Mr. Stanton and the Post that ad money was the problem.

What would be a problem is if there were any indications (and there are not) that Google and YouTube were editing or marketing the content. OFAC has been quite clear that it does not think that such services are covered by the information exception (although it does allow those services, through various general licenses, for private individuals in sanctioned countries). If the Norks upload their nonsense and YouTube permits it to be downloaded, there is no violation of the sanctions even if somehow ad revenue makes its way back to North Korea (which itself seems doubtful).

While waiting (don’t hold your breath) for the return of Korean Central Television to YouTube, you might want to watch this riveting North Korean news broadcast showing the Dear Leader visiting an amusement park, a kitchen (with hamburgers! which he doesn’t eat!!) and a zoo.

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Copyright © 2016 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Nov

17

Guilty As Charged


Posted by at 8:59 pm on November 17, 2016
Category: BISChinaNorth Korea Sanctions

Fat Man and Little Boy via KCNA [Fair Use]Oh dear. Apparently His Rotundity, the Dear Leader of North Korea, is annoyed that people that he can’t throw into internment camps and execute are mentioning that his aspirations to become a triathelete have been sabotaged by third and fourth helpings of yangnyeom tongdak. The chief offenders appear to be Internauts in China that refer to Kim Jong Un as Jin San Pang which, apparently, translates as — snicker, snicker — Kim Fatty the Third.

This blog, following the long-standing tradition of ridiculing the appearance of national enemies, has been on the forefront of suggesting that the Nork Dictator might benefit by a few less cigarettes and a few more jogs around the Chosŏn’gŭl: 55호 관저, his main palace. But we haven’t gone quite as far as Jin San Pang. Even with our post titled Fat Man Sanctioned Over Little Boy

Jin San Pang, aka His Obesity Kim Jong Un, has asked China to censor the use of Jin San Pang on Chinese websites. In the grand tradition of the Chinese government, they have both completely censored the offensive, if accurate, nickname Jin San Pang, at the same time that they have denied censoring the name and expressed shock and profound disappointment that anyone would dare to suggest that they would tamper with free speech on the Internet.

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Copyright © 2016 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Jun

3

Nork Money Laundering Designation Targets Chinese Banks


Posted by at 10:24 am on June 3, 2016
Category: FinCENNorth Korea SanctionsOFAC

Kim

On May 25, the U.S. Treasury Department issued a finding designating North Korea as a  jurisdiction of “primary money laundering concern.”  On the same date, Treasury, through FinCEN, issued a notice of proposed rulemaking (“NPRM”) setting forth the measures that it proposes be implemented as a result of the finding.  Although the finding was immediately effective, the proposed rules will not become effective until some time after the 60-day comment period expires.

The designation comes shortly after evidence that North Korea hacked the SWIFT system to steal money from foreign banks and after an increase in activity by North Korea relating to nuclear and missile proliferation. The finding, however, is based instead on the  requirements set forth in section 311 of the Patriot Act as predicates for such a finding — namely that entities in North Korea were engaged in proliferation of WMD, that North Korea has no controls on money laundering, that North Korea does not have a mutual legal assistance treaty with the United States, and that there is a high level of corruption in the North Korean government.

Once such a  finding is made, section 311 permits Treasury to impose one of five special measures, and in this instance Treasury, as detailed in the NPRM, selected the so-called Special Measure Five to impose. Under that special measure, Treasury “may prohibit, or impose conditions upon, the opening or maintaining in the United States of a correspondent account or payable-through account” by foreign banks that involve the designated jurisdiction. The proposed rules implementing Special Measure Five would prohibit U.S. financial institutions from opening or maintaining a correspondent account for a foreign bank if the foreign bank was engaged in transactions on behalf of North Korea. They also impose certain due diligence obligations on U.S. banks to ferret out North Korean activities by foreign correspondent accounts.

These rules, when adopted, will go beyond current restrictions imposed by the Office of Foreign Assets Control (“OFAC”). Under current OFAC rules, banking transactions with blocked entities in North Korea as well as those that would involve the unlicensed import of North Korean goods into the United States are prohibited. But under the new FinCEN rules, foreign banks could be cut off from the U.S. financial system for engaging in transactions with any entity in North Korea, whether blocked or not.

Chinese banks are clearly the target here. China is North Korea’s biggest customer, and many of those transactions are believed to be denominated in the U.S. Dollars that North Korea needs to buy goods from around the world. These transactions will clearly become much riskier for Chinese banks when the rules go into effect. Although it is certain that Chinese banks have in the past concealed from U.S. banks the extent to which their correspondent accounts are used in connection with purchases from, or sales to, North Korea, it seems unlikely they will continue to run the risk that these activities will be uncovered now that the stakes (namely continued participation in the U.S. financial system) are higher and now that U.S. banks will be more closely scrutinizing the correspondent accounts of Chinese banks.

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Copyright © 2016 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Mar

29

There’s Nork Gold in Them Thar Gadgets!


Posted by at 11:01 pm on March 29, 2016
Category: North Korea SanctionsOFAC

North Korean Commemorative Coin via KCNA at https://flic.kr/p/e8xtQk [Fair Use]

A Reuters story is hyperventilating over the new sanctions on North Korea and their impact on the discovery in 2014 reported by the Wall Street Journal that there might be North Korean gold in the U.S. supply chain. In reviewing conflict minerals issues, some companies discovered that electronic components purchased by them might have contained gold refined by the Central Bank of the Democratic People’s Republic of Korea. So do the new sanctions make this problem worse?

To begin with, imports from North Korea have required licenses since Executive Order 13570 in 2011 and are not affected or changed by the new sanctions. But if I purchase an electronic component from China that uses North Korean gold, have I imported that North Korean gold into the United States when I import the electronic component? The WSJ article linked above quotes an “attorney at Nixon Peabody LLP, who specializes in sanctions,” as saying this: “It’s a problem, even if the raw materials are coming very indirectly through suppliers.”

This is far from clear. Neither the Executive Order nor the implementing North Korea Sanctions Regulations define what constitutes an import from North Korea. There is no reverse de minimis rule that covers imports of items with any particular level of North Korean content, say, one atom, one molecule, 10 percent or 25 percent. In the absence of any specific rule, it seems reasonable that if the North Korean gold has been substantially transformed into another product outside the United States, import of the transformed item is not the import of any good from North Korea within the meaning of E.O. 13570.

Perhaps the most relevant provision in the new sanctions imposed by Executive Order 13722 is section 2(a)(i) which permits OFAC to block any person that OFAC determines

to have sold, supplied, transferred, or purchased, directly or indirectly, to or from North Korea or any person acting for or on behalf of the Government of North Korea or the Workers’ Party of Korea, metal, graphite, coal, or software, where any revenue or goods received may benefit the Government of North Korea or the Workers’ Party of Korea, including North Korea’s nuclear or ballistic missile programs.

Although that seems to pose some peril, in my example, for the Chinese company buying Nork gold for its electronic components, it is far from clear that it covers, or would be used to block, a U.S. company that buys the electronic component incorporating the Nork gold. This seems even clearer given that section 1702(a)(1)(B) of the International Emergency Economic Powers Act, under which Executive Order 13722, only provides blocking authority for “property in which any foreign country or a national thereof has any interest” and would not permit the blocking of U.S. company (and all its property) simply because it imported some items incorporating some North Korean content.

Of course, given that the foreign manufacturer using North Korean gold risks blocking, U.S. importers would be well advised to remove Nork gold from their supply chain, both because of the risk to their supply chain and the commercial optics of dealing with a foreign manufacturer that winds up being blocked under the new sanctions.

Photo Credit: KCNA

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Copyright © 2016 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)