OFAC Sanctions Chinese and Russian Entities and Individuals for Providing Support to North Korea

James Treanor Commentary by James Treanor

The U.S. Department of the Treasury ("Treasury") Office of Foreign Assets Control ("OFAC") designated 16 Russian and Chinese entities and individuals for supporting North Korea's development of weapons of mass destruction ("WMD"), violations of U.N. Security Council Resolutions, and attempted circumvention of U.S. sanctions.

Treasury asserted that U.S. persons now are prohibited from dealing with the designated persons and entities, and all properties and interests of the designees that are controlled by U.S. persons or within the United States will be blocked. The OFAC designations are intended to address "third-country" actors doing business with already-designated persons and entities that:

  1. support North Korean nuclear and ballistic missile programs;

  2. engage in the North Korean energy trade;

  3. participate in the exploitation of North Korean workers; and

  4. facilitate access to the U.S. and international financial systems for sanctioned North Korean entities.

Treasury Secretary Steven T. Mnuchin stated that Treasury will continue to focus on isolating supporters of the North Korean WMD program from the American financial system:

"It is unacceptable for individuals and companies in China, Russia, and elsewhere to enable North Korea to generate income used to develop weapons of mass destruction and destabilize the region. We are taking actions consistent with UN sanctions to show that there are consequences for defying sanctions and providing support to North Korea, and to deter this activity in the future."

The action by Treasury was made pursuant to Executive Orders 13382 (blocking WMD proliferation) and 13722 (blocking property and certain transactions concerning North Korea) and is consistent with United Nations Security Council Resolution 2371 (enacted on August 5, 2017).

Federal prosecutors also filed two complaints against Chinese companies for laundering U.S. dollars on behalf of sanctioned North Korean individuals. The complaints, which were filed in the U.S. District Court for the District of Columbia, are seeking over $11 million in combined forfeitures from the companies. U.S. Attorney Channing D. Phillips affirmed his determination to pursue enforcement against those who violate sanctions laws:

"These complaints show our determination to stop North Korean sanctioned banks and their foreign financial facilitators from aiding North Korea in illegally accessing the United States financial system to obtain goods and services in the global market place. According to the complaints, these front companies are supporting sanctioned North Korean entities, including North Korean military and North Korean weapons programs. Working with our law enforcement partners, we will vigorously enforce vital sanctions laws."

Commentary

James Treanor

The sanctioning of 16 Chinese and Russian individuals and entities is, in itself, unlikely to impact a large number of U.S. companies. However, if these sanctions are expanded to Chinese and Russian firms with a significant international presence, the consequences for global finance and commerce could be substantial. Geopolitical events will drive these decisions in Washington (and possibly in other capitals), and companies with dealings in China and Russia should continue to monitor the situation closely.

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