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.
A new unpublished UN report is said to have found that North Korea is using a network of front companies to “[flout] sanctions through trade in prohibited goods, with evasion techniques that are increasing in scale, scope, and sophistication”. The report also criticises Member States for lacking the “political will” to back up the tougher sanctions on North Korea that were introduced last year (see previous blog), failing to commit the resources necessary for their effective implementation.
The EU has implemented the sanctions on North Korea / DPRK that the UN Security Council imposed in November last year (see previous blog). These new sanctions include a cap on imports of coal from North Korea, a ban on imports of statues and several metals from North Korea, and a ban on exporting new helicopters and vessels to North Korea. They also tighten existing restrictions on North Korea, including by limiting North Korean diplomats to only one bank account in the EU, and requiring Member States to take further measures to prevent specialised nuclear or missile-related teaching being provided to North Koreans.
See Council Regulation 2017/330 amending Council Regulation 329/2007 and Council Decision 2017/345 amending Council Decision 2016/849.
The EU has de-listed 5 vessels from its sanctions on North Korea, implementing a UN decision to de-list them at the end of last year. The vessels were listed for being operated or managed by listed entity Ocean Maritime Management Company.
See Commission Implementing Regulation 2017/80 amending Council Regulation 329/2007 and Council Decision 2017/82 amending Council Decision 2016/849.
OFAC has designated 7 North Korean officials and 2 government-controlled entities for being involved in North Korea’s “ongoing and serious human rights abuses and censorship activities”. They include Kim Won Hong, who oversees the Ministry of State Security, which is said to engage in the torture and inhumane treatment of detainees in North Korea’s network of political prison camps, and Kim Yo Jong, Vice Director of North Korea’s Propaganda and Agitation department. The entities are the State Planning Commission and Ministry of Labour, which are said to allocate workers forcibly to specific sectors of the economy. The details are here.
The South Korean government has reportedly warned of a “stern” response and “stronger, watertight” sanctions on North Korea if it goes ahead with a planned intercontinental ballistic missile test. International sanctions on North Korea have been steadily tightened over the past year, in response to a succession of nuclear and ballistic missile tests in violation of international law. Last month, the UN imposed significant new restrictions on North Korean coal exports, among other commodities, in response to its nuclear test on 9 September 2016 (see previous blog).
The US Treasury has introduced a requirement that banks obtain a licence from OFAC before granting North Korean diplomats bank accounts, or extending credit to them or their families. This follows a UN Security Council Resolution in early December requiring Member States to limit North Korean diplomatic missions to one bank account each (see previous blog). The restrictions are intended to prevent the bank accounts of North Korean diplomats from being used to evade sanctions.
South Korea has introduced new export controls on items used in the construction and operation of submarines and submarine-launched ballistic missiles. The controls are intended to cut-off North Korea’s access to the items, and cover areas that are not under the control of a pre-existing multilateral export control system. South Korea has said that it plans to share the new control list with the 41 member states of the Wassenaar Arrangement at the group’s upcoming meeting this month.