13 March 2017

Hardly the hermit kingdom: New report reveals North Korea’s global reach

George A. Lopez

George A. Lopez

George A. Lopez is a former member of the UN Panel of Experts created to monitor the sanctions on North Korea and the Hesburgh Chair in Peace Studies, emeritus, at the University of Notre Dame.

It has been quite a month of activity for the Kim Jung-un regime, which continues to defy UN and US sanctions, ignore condemnations from around the world, and buck norms of international security at various levels.

On February 12, in line with expectations, Kim greeted new UN Secretary-General António Guterres and new US President Donald Trump with a ballistic missile test that clearly violated UN Security Council resolutions. The launch was condemned by the United Nations, the United States, and North Korea’s neighbors in East Asia, but on March 6 Kim test-fired four more missiles, three of which landed within Japan’s exclusive economic zone (that is, within 200 nautical miles of Japan’s coast). Amid all this, on February 13, Kim’s half brother Kim Jong-nam was fatally assaulted with a chemical weapon at Malaysia’s Kuala Lumpur International Airport—an assassination apparently ordered by the North Korean leader. The Kim Jong-nam incident may land North Korea once again on the US State Department’s list of “state sponsors of terrorism.”

As the Trump administration considers how to respond to North Korea’s actions, it can draw on recommendations in a significant document released two weeks ago—a report submitted to the UN Security Council by its Panel of Experts on North Korea. The document—a frank, fact-filled, 150-page investigative report—describes the global scope of North Korea’s techniques for evading and undercutting sanctions meant to stifle Pyongyang’s missile and nuclear programs. Kim Jung-un’s mastery at beating the sanctions system no doubt strengthens his resolve regarding his weapons programs and keeps resources flowing to make his ambitions reality. But the panel’s report provides dozens of strong recommendations for tightening sanctions and fully combatting the North Korean criminal enterprise. For the new US administration, these recommendations can serve as a timely blueprint for action.

Illicit, complicit. The report criticizes, in an unusually pointed way, weak and inconsistent implementation by UN member states of 2016 sanctions against North Korea. It provides extensive documentation that Pyongyang continues to exchange weapons experts and prohibited materials with a number of other nations.

The report reveals that Pyongyang, in an effort to undermine tightening UN financial sanctions, has established front companies in China as major hubs for trade and exchanges of currency. It has done so seemingly with Beijing’s knowledge and tacit support. A similar pattern of front companies—firms determined by the panel to be tied to North Korean intelligence agencies—has financed and attempted to conceal sales of sophisticated military communications equipment going through Malaysia. The panel’s report was written at least a month ago—so links between such activities in Malaysia and the murder of Kim Jong-nam now become a matter for further investigation.

The report contains particularly disturbing documentation about the ability of North Korean banks to maintain corresponding accounts and engage in joint ventures with various financial institutions and foreign companies, many of them based in China. The panel reaches no conclusions about this documentation. But the documentation lends support to those who claim that UN sanctions have failed because of Beijing’s weak commitment to and implementation of sanctions. Indeed, the sanctions violations that have occurred in China are numerous enough to complicate Beijing and Washington’s relationship—already strained under the Trump administration.

In addition, the report details North Korea’s development of new networks and means of moving both cash and gold across borders. The transactions are often arranged by North Korean “facilitators,” some of whom are named in the report; money movers also include North Korean diplomats doubling as business agents and non–Korean nationals recruited specifically for their skill in these matters. To sustain and diversify these interwoven, illicit activities, Pyongyang has found various partners willing to set up front companies to launder North Korean monies—all in violation of financial sanctions.

The panel also provides extensive information about successful interdictions of ships carrying concealed contraband trade. Such incidents include the August 2016 interdiction by Egypt of a vessel en route to the Suez Canal. It carried 30,000 PG-7 rocket-propelled grenades and North Korea’s largest ammunition shipment to date. All these goods are prohibited by sanctions—and were concealed under more than 2,000 tons of limonite [iron ore]. The exact destination of the combined shipment remains unclear.

Based on the new and extensive sanctions violations detailed in the report, the panel’s recommendations go beyond the weak, oft-heard call that nations must increase their vigilance in enforcing sanctions. It recommends that nations clarify their methods of implementing sanctions where trade in minerals is concerned; share more information regarding cases of sanctions evasion; and regularly update their lists of companies and ships that adopt aliases to avoid identification as they pursue illicit activities.

Just might work. North Korea is often called the “hermit kingdom” or a “two-bit dictatorship,” but the report correctly portrays the Kim Jong-un regime as operating a global financial network—intricate, integrated, hidden, and akin to a criminal empire. The regime uses this network both to bankroll its illicit weapons programs and to finance the corrupt patronage government in Pyongyang. Thus the traditional mantra that one must “follow the money” to increase sanctions’ bite is no longer adequate; a more complex operation is necessary to straitjacket North Korea’s ability to evade sanctions.

As mentioned, the report offers many strong recommendations for tightening sanctions and combatting the North Korean criminal enterprise—and these recommendations can, for the new US administration, serve as a blueprint for action. One path forward is through strong new directives from and actions by the Security Council. To be sure, the Council is still searching for strong ways to respond to two North Korean missile launches in a month. But the United States must take the lead in increasing member states’ capacity and willingness to shut down entities and practices involved in sanctions evasion.

A second approach is to use the full array of anti–money laundering and financial tools available to the international financial agencies and to the US Treasury Department. These tools can help dismember North Korea’s illicit networks and blacklist government and business officials who serve as couriers and front men. A significant step was taken last week when the SWIFT international money transfer system prohibited a number of banks named in the panel’s report from accessing its services.

The third item on the agenda involves frank, direct discussions with Beijing about reining in the illicit and complicit Chinese companies that undermine the sanctions regime.

This would amount to a new sanctions strategy. The game would change from punishing and persuading the North Korean government regarding its prohibited weapons programs—to strangling the extensive illicit networks of the Kim Jong-un regime. The goal, instead of just stifling Pyongyang’s imports of missile components, would be to paralyze the financial conduits that enable North Korea to make uninterrupted purchases of weapons parts.

The United States and its UN partners, with the panel’s recommendations as a roadmap, must embark on concentrated and consistent global action. Such action just might cause enough deterioration in the North Korean kleptocratic state for Kim Jung-un to consider what might be gained from sitting at the table for serious negotiations about his ambitions and capabilities.