June 29, 2017: OFAC designates 3 Chinese targets under DPRK sanctions

Yesterday, as part of its North Korean sanctions program, OFAC designated the following 2 persons: 

LI, Hong Ri (Chinese Simplified: 李红日) (a.k.a. LI, Hongri; a.k.a. RI, Hong-il), China; DOB 05 Jul 1964; nationality China; Gender Male (individual) [DPRK3] (Linked To: RI, Song-hyok). 
 
SUN, Wei (Chinese Simplified: 孙伟), 224-4 Shifu Da Lu, RM 1305, Heping District, Sheyang City, Liaoning Province, China; 200-69 Yinhe East Road, Tianfu County, Benxi Manchurian Autonomous Region, Liaoning Province, China; DOB 01 Jul 1982; Gender Male; National ID No. 210521198207010412 (China) expires 13 Aug 2029 (individual) [NPWMD] (Linked To: FOREIGN TRADE BANK OF THE DEMOCRATIC PEOPLE’S REPUBLIC OF KOREA).

and one entity:

DALIAN GLOBAL UNITY SHIPPING CO., LTD. (Chinese Simplified: 大连宁联船务有限公司) (a.k.a. DALIAN GLOBAL UNITY SHIPPING AGENCY), Dalian, China; Pyongyang, Korea, North; Chongjin, Korea, North; Najin, Korea, North; Hungnam, Korea, North [DPRK3].

And Treasury issued this press release:

 Treasury Acts to Increase Economic Pressure on North Korea and Protect the U.S. Financial System


6/29/2017

Actions target a Chinese bank and others supporting North Korean sanctions evasion
 
WASHINGTON – The U.S. Department of the Treasury took multiple actions today in response to North Korea’s continued evasion of international sanctions, development of weapons of mass destruction (WMD) and the means of their delivery, and violations of United Nations (UN) Security Council resolutions.  Treasury’s Financial Crimes Enforcement Network (FinCEN) announced a finding that Bank of Dandong, a Chinese bank that acts as a conduit for illicit North Korean financial activity, is a foreign bank of primary money laundering concern, and FinCEN has proposed to sever the bank from the U.S. financial system.  In addition, Treasury’s Office of Foreign Assets Control (OFAC) designated two Chinese individuals and one Chinese company in response to North Korea’s ongoing WMD development and continued violations of UN Security Council resolutions.  
 
“The Department of the Treasury is committed to protecting the U.S. financial system from North Korean abuse and maximizing pressure on the Government of North Korea until it abandons its nuclear and ballistic missile programs,” said Treasury Secretary Steven T. Mnuchin. “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.” 
 
PROPOSED FINCEN SECTION 311 MEASURE
 
FinCEN is taking steps to prevent China-based Bank of Dandong from continuing to serve as a gateway for North Korea to access the U.S. and international financial systems despite U.S. and UN sanctions.  As described in a Notice of Proposed Rulemaking (NPRM) issued pursuant to Section 311 of the USA PATRIOT Act, Bank of Dandong acts as a conduit for North Korea to access the U.S. and international financial systems, including by facilitating millions of dollars of transactions for companies involved in North Korea’s WMD and ballistic missile programs.  Bank of Dandong also facilitates financial activity for North Korean entities designated by the United States and listed by the United Nations for proliferation of WMDs, as well as for front companies acting on their behalf.  
 
To protect U.S. banks from this illicit North Korean activity, FinCEN is proposing to prohibit U.S. financial institutions from maintaining correspondent accounts for, or on behalf of, Bank of Dandong.  Under the proposed rule, covered financial institutions would also be required to apply special due diligence to their foreign correspondent accounts that is reasonably designed to guard against their use to process transactions involving Bank of Dandong.  This would help ensure that Bank of Dandong cannot continue accessing the U.S. financial system indirectly through non-U.S. banks. 
 
The NPRM as submitted to the Federal Register, with a 60-day comment period, is currently available here.
 
OFAC SANCTIONS
 
Today’s OFAC sanctions designations were made pursuant to Executive Order (E.O.) 13382, which targets WMD proliferators and their supporters, and E.O. 13722, which targets, in part, North Korea’s transportation and financial services industries.  As a result of this action, any property or interests in property of the designated persons in the possession or control of U.S. persons or within the United States must be blocked, and U.S. persons are generally prohibited from doing business with them.
 
OFAC designated Chinese citizen Sun Wei.  Sun Wei has been closely aligned with the U.S.-designated Foreign Trade Bank (FTB) in establishing and running a cover company on behalf of FTB.  FTB is North Korea’s primary foreign exchange bank, and it was designated in 2013 for facilitating transactions on behalf of North Korea’s WMD proliferation network.  
 
OFAC also designated Li Hong Ri, a Chinese citizen who cooperates with Beijing-based, U.S.-designated Ri Song Hyok.  Li Hong Ri established several front companies used by Ri Song Hyok.  Ri Song Hyok is a Beijing-based official for U.S.-designated Koryo Bank and U.S.-designated Koryo Credit Development Bank and has reportedly established front companies to procure items and conduct financial transactions on behalf of North Korea. 
 
Finally, OFAC designated Dalian Global Unity Shipping Co., Ltd. (Dalian Global Unity) pursuant to E.O. 13722 for operating in the transportation industry in the North Korean economy.  Dalian Global Unity is reported to transport 700,000 tons of freight annually, including coal and steel products, between China and North Korea.  According to the 2013 report by the UN Panel of Experts on North Korea, Dalian Global Unity was actively involved in eight cases of luxury goods smuggling incidents and is suspected of involvement in at least one other case.  Middlemen from Dalian Global Unity gave specific instructions about how shipments and transactions could evade the UN-mandated luxury goods ban.

Note that FinCEN is proposing a Section 311 designation as part of this action. We won’t see it until late August, however.

Treasury Secretary Mnuchin also issued the following comments:

 Remarks by Treasury Secretary Steven T. Mnuchin on Actions Against the Government of North Korea


6/29/2017

As Prepared for Delivery at The White House Press Briefing
 
Today the Trump Administration is continuing its efforts against the Government of North Korea.  Despite multiple UN Security Council resolutions imposing international sanctions, the Government of North Korea continues its nuclear and ballistic missile programs. 
 
Treasury’s Financial Crimes Enforcement Network has found the Bank of Dandong to be a foreign financial institution of primary money laundering concern under Section 311 of the USA PATRIOT Act.  This bank has served as a gateway for North Korea to access the U.S. and international financial systems – facilitating millions of dollars of transactions for companies involved in North Korea’s nuclear and ballistic missile programs.  The United States will not stand for such actions. 
 
This proposed rule will require U.S. banks to ensure that the Bank of Dandong does not access the U.S. financial system directly or indirectly through other foreign banks.  This action reaffirms the Treasury Department’s commitment to ensure that North Korea is cut off from the U.S. financial system.
 
In addition, the Department of the Treasury’s Office of Foreign Assets Control has sanctioned two individuals and one entity for their continued support of North Korea’s activities.  
 
While today’s actions are directed at Chinese individuals and entities, we look forward to continuing to work closely with the Government of China to stop illicit financing involving North Korea.  We are in no way targeting China with these actions.  We will be meeting with China and other countries at the G-20 next week to further our efforts to cut off North Korea’s illicit activities.
 
North Korea’s provocative, destabilizing, and inhumane behavior will not be tolerated.  We are committed to targeting North Korea’s external enablers and maximizing economic pressure on the regime until it ceases its nuclear and ballistic missile programs. 

Links: 

OFAC Notice

Treasury Press Release

Treasury Secretary Remarks

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