Global Bid to Cripple North Korea's Illicit Trade

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Kim Jong Un (R) inspects a military artillery firing drill, Feb. 26, 2013.
Kim Jong Un (R) inspects a military artillery firing drill, Feb. 26, 2013.

Unprecedented international pressure is building up to cripple North Korea's illicit trade in arms, fake currency, and drugs as punishment for its defiant nuclear and missile tests.

At the United Nations on Tuesday, the United States and China agreed on a draft U.N. Security Council resolution which "for the first time ever" will target the illicit activities of North Korea's diplomats, banking relationships, and illicit transfers of bulk cash.

At the U.S. Congress, also on Tuesday, the House of Representatives held a hearing to examine how best to pressure North Korean leader Kim Jong Un and the ruling elite by systematically restricting their access to hard currency.

Lawmakers said a resolution would be framed and introduced based on experts' testimony at the hearing in a bid to curtail North Korea's illicit activities—ranging from counterfeiting U.S. one hundred dollar bills to methamphetamines trafficking and missile sales—underwriting the reclusive nation's weapons program.

"We must go after Kim Jong Un’s illicit activities like we went after organized crime in the United States: identify the network, interdict shipments, and disrupt the flow of money," Ed Royce, the Republican Chairman of the House Foreign Affairs Committee, said in his opening remarks at the hearing.

"This would sever a key subsidy for North Korea’s weapons of mass destruction program," he said.

Unlike other authoritarian regimes, North Korea’s main streams of revenue are predominantly illicit, with some experts saying illegal trade constitutes up to 40 percent of its overall trade.

U.N. vote

Susan Rice, the U.S. envoy to the United Nations, on Tuesday circulated the draft of a Security Council sanctions' resolution targeting North Korea's illicit activities to the other 14 members of the council.

A vote is expected on a resolution Thursday in what would be the first international punishment for North Korea for its third illicit nuclear test, held on Feb. 12.

"The resolution tabled today will take the U.N. sanctions imposed on North Korea to the next level, breaking new ground and imposing significant new legal obligations," Rice said, according to a transcript of her remarks provided by the U.S. mission to the U.N.

"For example, for the first time ever, this resolution targets the illicit activities of North Korean diplomatic personnel, North Korean banking relationships, illicit transfers of bulk cash, and new travel restrictions," she said after a closed-door meeting of the Security Council.

If passed, the measures "will significantly impede North Korea's ability to develop further its illicit nuclear and ballistic missile programs," she said.


Chinese Ambassador to the U.N. Li Baodong told Reuters news agency that "a strong signal must be sent out" that North Korea's defiant nuclear test "is against the will of the international community."

But China, North Korea's top ally and biggest aid provider, appeared careful not to overly irritate its neighbor.

"We support action taken by the council, but we think that action should be proportionate, should be balanced and focused on bringing down the tension and focusing on the diplomatic track," Li said.

North Korea's two previous nuclear tests, in 2006 and 2009, prompted the Security Council to impose sanctions that included a ban on the import of nuclear and missile technology, an arms embargo, and a ban on luxury goods imports.

But they have done little to rein in North Korea, which on Tuesday threatened to scrap an armistice that ended the 1950-53 civil war and also to sever a military "hotline" with the United States if South Korea and Washington pressed on with two-month-long war games.

"We will completely nullify the Korean armistice" from March 11, when the South Korean-U.S. exercise gets into full swing in the South, the North's KCNA news agency said, quoting the Korean People's Army (KPA) Supreme Command spokesman.

The two Koreas remain technically at war since the 1950-53 conflict ended in a truce rather than a peace treaty.

U.S. told to lead

At the congressional hearing, a North Korea expert said while the U.N. sanctions are more symbolic, the U.S. should take the lead in enforcing financial regulatory measures against North Korea's illicit activities.

"The U.S. Treasury Department should strengthen its sanctions against North Korean banks and businesses that finance the Kim regime’s palace economy," Lee Sung-Yoon, an expert at the Fletcher School of Law and Diplomacy at Tufts University told the hearing.

He called for the Treasury Department to declare the entire North Korean government to be a "Primary Money Laundering Concern," which is a legal term for entities that fail to implement adequate safeguards against money laundering.

Treasury could also apply measures to third-country business partners that finance Pyongyang’s economy, Lee said, calling on the U.S. to also ask allied governments to apply corresponding measures to third-country banks, businesses, and nationals doing business with North Korea.

"The key advantage of such measures is that they can be enforced without Chinese cooperation or even in the face of Chinese obstruction," he said.

In fact, Lee said that should President Barack Obama reinforce these measures through the use of executive orders and freeze the assets of Chinese and third-country entities suspected of helping North Korea’s proliferation activities, the accumulated pressure will most likely minimize Chinese obfuscation and even induce Beijing to cooperate with the U.S.

Nuclear proliferation

Joseph DeTrani, a former director of the U.S. National Counterproliferation Center who has been intimately involved with developments in North Korea, said the biggest threat globally, if North Korea retains its nuclear weapons, is nuclear proliferation.

He said that his "personal view" is that China should convene an emergency meeting with the U.S., North Korea, and South Korea to discuss the tension in the region and arrange for a return to six-party talks to end the North Korean nuclear crisis.

"It is possible that China could convene another emergency meeting with North Korea and the U.S. that also includes South Korea. Such a meeting possibly could determine if North Korea is serious about eventual denuclearization for economic assistance and security assurances...," he said.

Reported by Parameswaran Ponnudurai.





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