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North Korea OFAC Sanctions Overview
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) administers and enforces economic and trade sanctions against North Korea based on various legal authorities. OFAC’s North Korea sanctions program is complex and frequently changing, with new laws and regulations added over time. This article provides a helpful overview of the key aspects of OFAC’s North Korea sanctions for businesses and individuals looking to comply.
Contents
OFAC’s North Korea sanctions represent the implementation of multiple legal authorities[1]. Some of the main ones include:
- Executive Orders – Presidents have issued various EOs over the years imposing sanctions on North Korea, like EO 13466 in 2008 and EO 13722 in 2016.
- Statutes – Congress has passed laws like the North Korea Sanctions and Policy Enhancement Act of 2016 that require sanctions.
- United Nations Security Council Resolutions – OFAC is required to implement certain UN resolutions related to North Korea sanctions.
New EOs, laws, and UN resolutions related to North Korea come out frequently, so the legal authorities underlying the sanctions are always expanding.
Prohibitions
Under these authorities, OFAC prohibits a wide range of transactions and activities involving North Korea. Some of the main prohibitions include[1][4]:
- Exports/imports to/from North Korea
- Investment and financial transactions with North Korea
- Facilitation of arms sales or fuel supplies to North Korea
- Dealings with designated/blocked persons and entities
The prohibitions are far-reaching and complex. For example, they restrict dealings not only with the North Korean government, but also parties owned 50% or more by North Korean nationals. It’s critical to fully understand the nuances of what is not allowed.
Penalties
Violations of OFAC’s North Korea sanctions can lead to severe civil and criminal penalties[1], including:
- Civil fines up to the greater of $311,562 per violation or twice the transaction value
- Criminal fines up to $1 million and imprisonment up to 20 years per violation
- Loss of export privileges
Given the steep fines and risk of jail time, compliance is essential. In August 2022 for instance, OFAC announced a settlement with Deutsche Bank for $87 million to resolve sanctions violations related to transactions with North Korea.
Licenses
In some cases, an OFAC license can authorize activities that would otherwise be prohibited under the North Korea sanctions program[1]. Two potential options are:
- General licenses – Pre-approved authorizations published by OFAC for particular types of transactions.
- Specific licenses – Case-by-case approvals from OFAC for an entity’s proposed transaction.
For example, OFAC has issued general licenses related to certain personal remittances, legal services, and humanitarian activities involving North Korea. Companies should review the general licenses closely to see if they apply. If not, a specific license can be requested from OFAC by submitting an application.
Due Diligence
Conducting risk-based due diligence on customers, suppliers, and transactions is essential for identifying any North Korea sanctions concerns. Some best practices include[5]:
- Screening customer and vendor names against OFAC’s Specially Designated Nationals (SDN) list and other watchlists
- Reviewing transaction documentation for any North Korean ties
- Conducting supply chain due diligence to identify links to North Korea
- Monitoring transactions for red flags indicating evasion of sanctions
Sanctions compliance should be integrated into procurement, sales, and other business processes. OFAC looks for companies to have risk-based compliance programs when determining potential penalties.
Recent Trends and Developments
North Korea sanctions enforcement has been a top priority for OFAC recently. Some notable trends include:
- Increased targeting of non-U.S. entities dealing with North Korea, like the 2022 Deutsche Bank settlement mentioned above.
- Cracking down on attempted sanctions evasion by North Korea, including through cybertheft and cryptocurrency.
- Leveraging new authorities to block property of North Korean revenue-generating entities.
- Close cooperation with international partners like the UN and EU to align sanctions programs.
As a result, companies worldwide need to be vigilant about North Korea sanctions compliance. Resources like OFAC’s website and hotline can provide helpful support.
Conclusion
The North Korea sanctions program is complex, with many evolving legal authorities and prohibitions. However, given the severe penalties for violations, it is critical for companies to invest in understanding the requirements and managing risk. Robust due diligence, screening, and transaction monitoring are essential. It is also important to stay on top of new developments, as OFAC continues to aggressively target sanctions evasion involving North Korea.
While sanctions have imposed economic costs, their effectiveness remains debated. Some experts argue tighter enforcement could compel North Korea’s denuclearization. Others contend engagement and negotiations are needed, with sanctions relief used as leverage. In any case, sanctions are likely to remain a key aspect of U.S. policy toward North Korea for the foreseeable future.
Organizations should develop tailored compliance programs based on their North Korea risk exposure. Resources like OFAC’s website, FAQs, and opinions can provide helpful guidance. By making sanctions compliance a priority, companies can avoid severe fines and protect their interests.