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OFAC’s new North Korea (sort of) designations

Today, the Treasury Department’s Office of Foreign Assets Control published a colossal list of amendments to the North Korea designations on its list of Specially Designated Nationals—its sanctions blacklist for the financial industry. The amendments are requirements under the new Otto Warmbier North Korea Nuclear Sanctions and Enforcement Act, the North Korea Sanctions and Policy Enhancement Act, and the regulations promulgated under those authorities. Today’s announcement is an encouraging sign that the administration is feeling more pressure to enforce these laws—something it largely stopped doing in May 2018.

The abortion of “maximum pressure” was presumably something Steve Mnuchin did to give Donald Trump’s Svengali-like powers a chance to do what the Svengali-like powers of Moon Jae-in, Barack Obama, Roh Moo-hyun, George W. Bush, Bill Clinton, and Kim Dae-jung could not do.

OFAC’s announcement does not characterize these as new designations, strictly speaking, so much as the naming and identification of aliases, individuals, and entities controlled by previously designated entities. And while this still does not meet the criterion for “maximum pressure”–one or more nine-digit penalties against the Chinese banks that have been laundering Kim Jong-un’s money for years now–it’s still an important, if belated, step. Recall that when OFAC designated three North Korean hacker groups last September, I referred to these as “sham designations.” After all, “Lazarus” and “Bluenoroff” don’t maintain bank accounts under those aliases, which were made up by foreign cybersecurity experts. Thus, the designations were operationally meaningless, and few banks are likely to have changed their behavior or closed any accounts because of them. The publication of names and Bitcoin wallets, on the other hand, might give bankers real pause:

Note well that at least some of North Korea’s hackers are Chinese nationals, further fueling suspicions that the Chinese government is enabling North Korean hacking—including the hacking of U.S. targets—from its soil.

The announcement also names many of the ships that are smuggling for Pyongyang, which might open them up to boarding, seizure, and civil forfeiture, similar to what we did to the Wise Honest.

Naming aliases and publishing personal data matters, because the financial industry uses compliance software to flag blocked persons through shared names, addresses, corporate officers, and passport numbers. It then runs a global game of “Six Degrees of Kevin Bacon.” These additions will help the banks identify the Jack Nicholsons and Robert Duvalls (Bacon Number, 1), which may eventually lead us to the Ed Asners, Ian McKellens, Peter O’Tooles, and Robert Duvalls (Bacon Number, 2). They will also make it more difficult for banks that deal with these parties to avoid penalties or prosecution. It’s harder to deny that your conduct was willful or negligent, after all, when your customer’s name was on the SDN List.

This is an important, if belated, step in the right direction. I have to wonder if the Biden campaign’s plans to paint Trump as soft on China—a criticism that certainly sticks to Steve Mnuchin—may have played into this announcement, which was in the works at OFAC for months. So while this still falls far short of maximum pressure, it will help to lengthen the half-life of medium pressure a while longer. But if the Trump administration is as eager to punish the Chinese Communist Party as it wants us to believe it is, the decoupling of the U.S. and Chinese economies is a historic opportunity to arrest Beijing’s support for Pyongyang’s proliferation, cybercrime, money laundering, and smuggling.

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