OFAC expands N Korea SDN list with 34 designations (5 Chinese)

OFAC3.jpgOFAC has added 1 person (Chinese), 13 entities (4 Chinese and 9 North Korean), and 20 vessels (all North Korean) to its SDN list in order to “disrupt North Korea’s illicit funding of its unlawful nuclear and ballistic missile programs”.

OFAC has stated that the designations “target third-country persons with long-standing commercial ties to North Korea, as well as the transportation networks that facilitate North Korea’s revenue generation and operations”.

Eleven designations were issued pursuant to Executive Order 13810, which targets, among others, persons that operate in the North Korean transportation industry, as well as persons who have engaged in a significant importation from or exportation to North Korea. The remaining entities were sanctioned pursuant to Executive Order 13722, which targets, among others, persons involved in the exportation of workers from North Korea, including exportation to generate revenue for the Government of North Korea. See OFAC Notice here, and US Treasury press release here.

These designations come the day after President Donald Trump announced that the US would be placing North Korea back on its list of State Sponsors of Terrorism (North Korea was removed from the list in 2008).

Chinese bank cut off from US markets for illicit N Korean links

FinCEN.pngThe US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued a final rule under section 311 of the USA Patriot Act to sever Bank of Dandong from the US financial system (full list here).

Despite US and UN sanctions, the Chinese bank is said to have acted “as a conduit for North Korea to access the US and international financial systems”, including the facilitation of “millions of dollars of transactions for companies involved in North Korea’s weapons of mass destruction (WMD) and ballistic missile programs”.

As a result, FinCEN’s section 311 action against the bank imposes a prohibition on US financial institutions from opening or maintaining correspondent accounts for, or on behalf of, Bank of Dandong. Click here for the FinCEN press release.

China implements UN sanctions on North Korea; Taiwan bans all trade

China has announced that it will begin to implement the most recent round of UN sanctions on North Korea (see previous blog).  In a statement, China’s ministry of Commerce said that all exports of condensates and natural gas liquids to North Korea would be banned immediately, and from 1 October exports of refined petroleum products to North Korea would also be limited.  Imports of North Korean textiles will also be banned immediately, with an exception for contracts signed before 11 September where import procedures are completed before 10 December.

Separately, Taiwan has decided to ban all trade with North Korea in order to comply with the latest UN sanctions, although it is not a member of the UN itself.

China implements some recent UN DPRK sanctions

China has begun to implement the most recent wave of UN sanctions on North Korea, imposed by a resolution passed on 6 August (see previous blog).  Yesterday, its Commerce Ministry authorised the implementation of the new prohibitions on North Korean exports of coal, iron, iron ore, lead, lead ore, and seafood. Cargo already en route to China will be cleared as usual before the deadline for implementing the new sanctions passes on 6 September.

China has yet to begin implementation of other elements of the new sanctions, which include a ban on increasing the total number of work authorisations for North Koreans without approval from the Security Council committee and a ban on the opening of new joint ventures or expansion of existing joint ventures with North Korean firms or people.

ZTE agrees $1.2bn fine for US sanctions violations

ZTE (Zhongxing Telecommunications Equipment Corporation and ZTE Kangxun Telecommunications Ltd), a Chinese telecoms company, has agreed with OFAC, BIS and the DOJ in the USA to plead guilty to civil and criminal charges of violating US sanctions on Iran and North Korea, and pay a combined $1.2bn in fines ($300m of which is suspended).  It also agreed to a 7-year suspended denial of export privileges, and to dismiss 4 senior officials who were involved in the violations.

A 5-year-long investigation found that ZTE had conspired to evade US sanctions by incorporating US components into its equipment and illegally shipping it to Iran, and by making 283 shipments of telecoms equipment to North Korea.  ZTE is also said to have used “isolation companies” to conceal the use of controlled US-components, intentionally failed to mention them on customs declarations, employed people to specifically remove incriminating evidence from internal communications, and caused its lawyers to unintentionally lie to US officials.

ZTE was first penalised by US authorities in March 2016, when US companies were prohibited from selling to it without a specific licence, and non-US companies were prohibited from selling products to it which contained a significant percentage of US-made components (see previous blog).  The US Department of Commerce will recommend that the requirement for a licence to do business with ZTE be lifted if ZTE complies with the terms of its settlement agreement.

US renews temporary ZTE general licence

The US Bureau of Industry and Security has extended its temporary general licence for exports, reexports, and in-country transfers to Zhongxing Telecommunications Equipment (ZTE) until 28 November 2016.  The US imposed export restrictions on ZTE in March, in response to ZTE allegedly breaching US sanctions by illicitly re-exporting controlled items to sanctioned countries, and organising a series of shell companies for this purpose in relation to Iran (see previous blog).  BIS has indicated that it will continue to renew the temporary general licence provided ZTE continues to cooperate with the US government in resolving the issues that led to the violations.

The Department of Commerce’s notice is here.

China bans export of military-related goods to N Korea

China has banned the export to North Korea of items that could be used in the development of nuclear weapons, missiles, and other weapons of mass destruction.  China’s decision marks its implementation of another of the prohibitions set out in the UN’s wide-ranging new sanctions on North Korea introduced in March, which it jointly drafted with the US (see previous blog).  Since that time, China has also implemented the UN’s ban on imports of North Korean coal and iron ore, and on sales of aviation fuel to North Korea.

China’s Ministry of Commerce has said that 40 items are covered by the new prohibition, which is effective immediately, and includes cutting and laser-welding equipment, metal alloys, and materials that could be used in the production of chemical weapons.

US export restrictions on Chinese ZTE

The United States has imposed export restrictions on Chinese smartphone manufacturer ZTE, prohibiting US companies from selling to it without a specific licence, and foreign companies from selling products to it which contain a significant % of US-made components.  The US Commerce Department issued a statement saying this was in response to ZTE breaching US sanctions by illicitly re-exporting controlled items to sanctioned countries, and organising  a series of shell companies for this purpose in relation to Iran.  3 such shell companies have also been designated.

The Commerce Department has said that applications for export licences to ship to ZTE will generally be denied, though ZTE is not prohibited from continuing to sell its products in the US.