Tag Archive | "congress"

Target of New North Korea Sanctions Bill: Finances

By Phil Eskeland

(“That’s Where the Money Is.”[1])

Last week, the House of Representatives and the Senate overwhelming passed and sent to President Trump’s desk a new sanctions bill for his expected signature. The bill originally focused on Russia and Iran when it was first adopted by the Senate, but was expanded after bipartisan, bicameral negotiations to include sanctions provisions against North Korea as well.  With all the talk in Washington about the inability of different sides to work together, few issues unite more U.S. public policymakers on both sides of the political spectrum than getting tougher on North Korea.  Last May, the House of Representatives passed the Korea Interdiction and Modernization of Sanctions Act (H.R. 1644) by another overwhelming bipartisan vote of 419 to 1.  Essentially, this new sanctions bill – Countering America’s Adversaries through Sanctions Act (H.R. 3364) – takes almost every word from the House-passed North Korea sanctions bill to include it as part of Title III.

Much of the attention to this legislation has been directed at the first title of the bill affecting Russia.  The debate has primarily focused Congressional limitations on the flexibility given to the Executive Branch to implement the bill.  In the past, most sanctions-related legislation grants the President some discretion to waive or delay the imposition of sanctions, because the U.S. government may need flexibility in diplomacy and cannot wait for Congress to pass a bill to amend or end sanctions.  If there was any constraints on the Executive Branch, it was usually done when there was divided government (i.e., the Republican Congress passed the Helms-Burton Act in 1996, when Democrat President Bill Clinton was in office, that placed into statutory law many of the presidential Executive Orders affecting U.S. trade with Cuba, and thus cannot be unilaterally lifted or altered by the President without the consent of Congress).  It is interesting to observe a Republican Congress reasserting itself as a co-equal branch of government by imposing a series of constraints on the ability of a Republican president to unilaterally waive part of the sanctions against Russia.

However, any additional Congressional limitations on the President’s ability to waive or delay the imposition of these new sanctions do not affect the provisions of the bill dealing with North Korea, despite a last-minute effort by some Senate Republicans.  Nonetheless, the primary purpose of Title III of H.R. 3364 is to close loopholes and target new areas to deprive the North Korean regime of the money it needs to operate.  The fundamental philosophy behind the effort is to “cut off the Kim Jong Un regime’s access to hard cash” and “to restrict North Korea’s ability to engage in illicit trade.”

How does this bill accomplish these goals?  First, the legislation mandates sanctions against foreign persons who engage in five activities that have been identified as major revenue-generating activities for the North Korean regime – high-value metals or minerals, such as gold and “rare earths;” military-use fuel; vessel services; insurance for these vessels; and correspondent accounts, which are used in foreign currency exchanges to convert U.S. dollars into North Korean won.

Second, H.R. 3364 increases the discretionary authority of the U.S. government to impose sanctions on persons who engage in one or more of 11 different activities that generate revenue for North Korea, including those who import North Korean coal, iron, or iron ore above the limits set by the United Nations (U.N.) Security Council resolutions; who buys textiles or fishing rights from North Korea; who transfers bulk cash or precious metals or gemstones to North Korea; who facilitates the on-line commercial activities of North Korea, such as on-line gambling; who purchases agricultural products from North Korea; and who are engaged in the use of overseas North Korean laborers.

Third, there is a provision closing one loophole in the international financial system that would prohibit North Korea’s use of indirect correspondent accounts.  These accounts temporarily use U.S. dollars when converting one foreign currency into another, such as North Korean won.  The aim of this provision is to further cut off North Korea from the U.S. financial system and restrict the ability of the DPRK to conduct business with other nations.

Fourth, the legislation curtails certain types of foreign aid to countries that buy or sell North Korea military equipment in the effort to dry up another source of revenue to the regime.  Nations will have a choice: buy North Korean conventional weapons or receive U.S. foreign aid to help their people.

Fifth, H.R. 3364 augments sanctions that target revenue generated from North Korea overseas laborers who work under inhumane conditions.  It would ban the importation into the U.S. of any product made by these laborers.  The bill would also sanction foreign individuals who employ North Korean laborers.

The legislation also ensures that humanitarian aid destined for North Korea is not affected by heightened U.S. sanctions.  However, H.R. 3364 did not retain a provision in the original House version that contained an exemption for planning family reunification meetings with relatives in North Korea, including those from the Korean-American community meaning that family reunions will still be subject to sanctions.  In addition, the bill contains a reward for informants who report violations of financial sanctions on North Korea, in the hopes of increasing the government’s ability to enforce these sanctions.  Finally, it requires a report from the Administration within 90 days after the bill becomes law on the efficacy of putting North Korea back on the State Sponsors of Terrorism list. The debate over reinstating North Korea on the list was revitalized in light of the assassination of King Jong Nam, the exiled half-brother of the ruling leader of North Korea, at the Kuala Lumpur international airport in Malaysia using the VX nerve agent, a banned chemical weapon.

H.R. 3364 should not be seen as an end-goal, but as part of a continuing process of ratcheting up pressure on North Korea to denuclearize.  As this bill is implemented, North Korea will find new ways to evade sanctions.  Further legislation or action by other nations and the U.N. Security Council may be required to further clamp down on these loopholes.  However, the question remains unresolved if heightened sanctions from both the U.S. and the international community will produce the desired outcome – a nuclear-free Korean Peninsula – particularly before North Korea acquires the ability to launch a nuclear warhead on top of an intercontinental ballistic missile (ICBM) capable of reaching the mainland of the United States.   Sanctions are only as strong as its weakest link.  Thus, North Korea’s main trading partner, China, needs to do much more if it is to live up to its rhetoric that “they will strive for the complete, verifiable and irreversible denuclearization of the Korean Peninsula.”

Phil Eskeland is Executive Director for Operations and Policy at the Korea Economic Institute of America. The views expressed here are his own.

Image from Shawn Clover’s photostream on flickr Creative Commons.      
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[1] Response by bank robber Willie Sutton to the question as to why he robbed banks, January 20, 1951, edition of the Saturday Evening Post, “Someday, They’ll Get Slick Willie Sutton.”

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A Conversation with Charlie Rangel, Former Congressman and Korean War Veteran

KEI President Donald Manzullo, a former member of the House of Representatives, recently interviewed Charlie Rangel, a former Congressman from New York and a Korean War Veteran, for the KEI podcast. Rangel was one of three current and former members of Congress who KEI recently honored for their service in the Korean War. The two former members discussed Rangel’s experiences during the war, his journey after returning from Korea, and his time in Congress.

The following is a partial transcript of that conversation. The rest of the episode can be found here.

Donald Manzullo: Charlie, we thank you for your service. You wrote a book called “And I Haven’t Had a Bad Day Since,” after the battle of Kunu-Ri – tell us about that battle.

Charlie Rangel: We got to Korea in August of 1950, and one way or another fought our way up past Pyongyang, and the Yalu River separated North Korea from Manchuria. General MacArthur had actually cut off the North Koreans, victory was ours, home was in our minds, and in September, October we were waiting to be home for Thanksgiving and Christmas. We waited September, we waited October, we waited November. The weather changed, our clothes didn’t. We were just waiting for that ship to call, to get there.

And we had heard that one of our guys … was captured by the Chinese. I started a rumor, it never entered my mind that there were really Chinese there. And for three days the entire 8th Army, including my outfit – the Chinese had crossed the Yalu River, they were talking to us with loudspeakers in broken English, telling us to surrender. Don, it was a nightmare, the trumpets would be blowing … and at nighttime, they would start their blasts.

That very day all hell broke loose, as tens of thousands of Chinese surrounded us and international troops, the screaming, the yelling, the killing. And I don’t know, I got shot and I got out of there. And like I said, I haven’t had a bad day since because so many … we had 90 percent casualties between those that were captured, killed, wounded.

And in telling this story, I just can’t see how I could be in love with anything that sounds like Korea except the Korea that’s there now. To believe that I had any part of creating a miracle for people I never knew, never heard of, a country I never thought was there – it makes me proud to be an American, and even prouder to see human beings like South Koreans who can come out of the ashes and become a world power economically.

Donald Manzullo: Charlie, your modesty – it’s always been a part of your life, even though you were one of the flashiest dressers in Congress. But during your time in Korea, you earned a Purple Heart, Bronze Star, Presidential Unit Citation, Republic of Korea Presidential Unit Citation, and three Battle Stars …. Your personal life is absolutely fascinating. Former Congressman, but you’re always a Congressman, high school dropout enrolls in the Army, goes to Korea, comes back home, trying to figure out what to do. The next thing you do is you go back and get your GED. Tell us about the march from the GED to the halls of Congress, Charlie.

Charlie Rangel: I never knew just how ignorant I was until I came out of the Army. I thought a couple of stripes made the difference the same way people get a couple of degrees. When I came out of the Army with all these medals you mentioned, pocket full of money, starched uniform, a couple of stripes, I must have felt like I was 10 feet tall until I went to get a job. They asked what could I do and I start talking about the M1 rife, the automatic carbine…and they said “next.” I was crushed.

And my brother was older, smarter, and so encouraging. He kept me from re-enlisting in the Army, which is what I was going to do. He got me a job at the garment center. I don’t know whether in your part of the country if you have hand trucks – two wheels, carry loads. And I’m carrying a load of lace – wasn’t heavy, just awkward – in the rain, and it slipped out of my hand in Manhattan in the rain, and cop’s cursing me out for blocking the traffic … I went straight to the VA, I told them “I don’t know what the hell’s going on, but I know I need some help.”

And I didn’t know how much help I really needed, I hadn’t completed high school. And the only reason I said I wanted to become a lawyer, which everyone thought was impossible, was because of my grandfather. I wanted to impress him, he was an elevator operator at the criminal court building of New York. He liked me, but he loved judges, he loved lawyers, and he loved the court system.

And I don’t know who laughed the loudest, the people at the Veterans Administration or my grandfather. But somehow we were able to work it out and I became an assistant U.S. attorney. And I got married to the most wonderful, understanding woman in the world – she had finished college while I was in high school.

Donald Manzullo: Well Charlie, I want to thank you for spending the day with us, for talking about old times.

Charlie Rangel: Well let me thank you Don. Like I said, Korea is a small country geographically, but it’s a country with a big, big heart in terms of giving hope to so many people whose countries historically have lived in poverty and never gotten out of it.

Image from KEI’s reception honoring Korean War Veterans in Congress. You can view the video of the event here

 

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Congress Wants to Up the Pressure on North Korean Human Rights Violators

By Jenna Gibson

Earlier this month, three U.S. senators took on North Korea (DPRK) by introducing a broad sanctions bill aimed at addressing concerns about cyberwarfare and the North’s continued nuclear ambitions. Known as the North Korean Sanctions and Policy Enhancement Act (S. 2144), this bill would codify the sanctions put in place by presidential Executive Orders after previous North Korean provocations, including the Sony hacking incident last year, and impose additional sanctions on the North, including penalizing any financial institution that conducts business with the DPRK. S. 2144 mirrors many of the provisions in a similar North Korea sanctions bill (H.R. 757) that passed the Foreign Affairs Committee of the U.S. House of Representatives last February. But while these bills are sold as a response to cyber and nuclear provocations from the North, the Senate and House versions also contain additional steps to address the issue of human rights and accountability in the DPRK, building on the previously enacted North Korean Human Rights Act of 2004.

Along with its enhanced sanctions provisions, Title III of this the new bill asks for concrete plans on how the U.S. Government can more effectively promote human rights in North Korea. If passed, the president would be required to submit a classified report to Congress on how to make “unrestricted, unmonitored, and inexpensive electronic mass communications available to the people of North Korea.”  In addition, the bill requires the State Department to submit another report to Congress to delineate a strategy on how to “promote international awareness of the human rights situation in North Korea.”

Further, S. 2144 takes on the issue of forced overseas labor of North Korean citizens. Interestingly, this is one of the few sections unique to the Senate bill – perhaps as a result of the increased attention put on this subject since the House bill passed committee in February. In fact, this issue was the subject of a program KEI hosted earlier this year in collaboration with the Database Center for Human Rights in North Korea, which raised awareness about the plight of North Koreans sent abroad in to work in terrible conditions to raise money for the Kim regime. To address the issue, the Senate bill would require an annual report that includes a list of countries that forcibly repatriate North Korean refugees,  a list of countries where North Korean laborers work, and a diplomatic strategy to end repatriation of North Korean refugees and forced labor and slavery of North Koreans overseas.

One other difference between S. 2144 and H.R. 757 is that the Senate bill creates a North Korea Enforcement and Human Rights fund, which would take fines for violating sanctions and redirect the money toward human rights promotion, such as radio broadcasting into the DPRK.

Public understanding of the North Korean human rights issue has risen exponentially since the release of the United Nation’s Commission of Inquiry report in February 2014. Up until that point, in the mind of the general public, the DPRK was a strange, mysterious place where bad things probably happen. The COI report, with its thorough and detailed descriptions of exactly what the Kim regime has done to the people of North Korea, changed all that, and has allowed a discussion of North Korean human rights to make its way into the media in an unprecedented way. In a similar way, producing official documentation and creating concrete strategies to combat the gross human rights violations occurring within North Korea and in countries where North Korean forced laborers work could keep this important issue in the news, and hopefully up the pressure on this regime to make some changes.

One word of caution, however – these new reports must stick to the facts and not become hyperbolic in order to be viewed as credible in the eyes of the global community. The harsh truth about North Korea’s deplorable human rights violations is already so startling that there is no need to exaggerate.  This has been a problem for some North Korean defectors who reportedly feel pressured to attract more attention by exaggerating their harrowing escape stories.

If done correctly, these new American publications could serve a similar function as the COI report. The State Department’s annual Human Rights Report and International Religious Freedom Report are the gold standard for tracking these issues around the world, and should serve as models for this new North Korea-focused report. Similar to the COI report, the annual release of these State Department reports garners a lot of attention from foreign governments and from the general public. While these bills have not become law yet, Title III of H.R. 757 and S. 2144 legislation could be one of the few items that can easily pass Congress because of the commonality between the two bills, and this provision would not be viewed as objectionable by the Executive Branch. Hopefully, this provision will be signed into law and this new publication can become a similarly authoritative source that will keep the discussion going about this important issue.

Jenna Gibson is the Associate Director for Communication Technology and Programs at the Korea Economic Institute of America. The views expressed here are the author’s alone.

Photo from Phil Roeder’s photostream on flickr Creative Commons.

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Why Does the U.S. Hesitate to Enforce Its Laws?

This is the first in a 2 part series looking at the North Korea Sanctions Enforcement Act of 2014 (H.R. 1771). Second piece in the series is available here.

By Bruce Klingner

Former Assistant Secretary of State Kurt Campbell recently observed that North Korea was not the most heavily sanctioned country in the world as so often depicted by pundits. While still at the State Department, Campbell realized that “Burma had much more in the way of sanctions” than North Korea and correctly, if belatedly, concluded that “Clearly we have not been successful at putting substantial pressure on North Korea [and] it would be possible for us to put more financial pressure on North Korea.”

He is absolutely right about this.  And he’s not alone among Obama Administration officials acknowledging that there is far more it could do.   In 2009, the State Department’s sanctions czar commented that the administration was considering additional measures against North Korea. U.S. Six Party Talks negotiator Glynn Davies said in 2013, “I think that there are always more sanctions we could put in place if needed.”  President Barack Obama promised in 2013 a “significant, serious enforcement of sanctions” and a year later that the U.S. would consider “further sanctions that have even more bite.” A U.S. official said recently that Washington was considering a “list of blood curdling sanctions.”

The obvious question is why the Administration has not followed through.

Washington has targeted a mere 62 North Korean entities, primarily for illicit activities and weapons of mass destruction. By comparison, the United States has imposed more comprehensive sanctions against the Balkans (231 entities), Burma (164), Cuba (397), Iran (several hundred), and Zimbabwe (161).

The U.S. has targeted Zimbabwe, Congo, and Burma for human rights violations yet has not taken action against North Korea seven months after the UN Commission of Inquiry accused Pyongyang of human rights violations so egregious as to qualify as crimes against humanity. Nor has Washington designated North Korea as a primary money-laundering concern as it did Iran and Burma.

By contrast, the U.S., EU, and UN have imposed far more pervasive and compelling measures against Iran, yet it is Pyongyang, not Tehran, that has withdrawn from the Non-Proliferation Treaty, tested nuclear weapons, and repeatedly threatened nuclear attacks on the United States and its allies.

Unilateral US actions against Iran, combined with diplomatic pressure, led other nations to impose their own financial and regulatory measures against Tehran. Collectively, the international sanctions have isolated Iran from the international banking system, targeted critical Iranian economic sectors, and forced countries to restrict purchases of Iranian oil and gas, Tehran’s largest export.

Just as strong measures induced Iran back to the negotiating table, more robust measures are needed to leverage North Korea. The United States should use its action against Iran as a model for imposing the same severity of targeted financial measures against North Korea.

Targeted financial measures are directed against entities that violate U.S. laws by exploiting their need to access the global financial network. Even the most isolated regime is vulnerable given the centrality of the U.S. financial system. The U.S. dollar is the global currency of choice for international trade, and the requirement that any dollar-denominated transaction anywhere in the world must go through a U.S. Treasury Department-regulated bank give Treasury the power to exclude North Korea and its third country enablers from the U.S. financial system.

Compared with trade sanctions, targeted financial measures are precision guided munitions against violators, rather than economic carpet bombing against a population. For banks, wire services, and insurance companies, there are catastrophic risks to facilitating – even unknowingly — illicit transactions. The British bank HSBC was fined $1.9 billion for money-laundering and sanctions violations, including financial dealings with Iran. French bank BNP Paribas agreed to pay an $8.97 billion fine for processing banned transactions with Sudan, Iran and Cuba.

Tougher measures against North Korea were effective when applied in the past, such as the Treasury Department 2005 designation of the Macau-based Banco Delta Asia (BDA) as a money laundering concern. In conjunction with other sub rosa U.S. actions, “two dozen financial institutions voluntarily cut back or terminated their business with North Korea, including institutions in China, Japan, Vietnam, Mongolia, and Singapore.”

A North Korean negotiator admitted to a senior White House official, “you finally found a way to hurt us.” Obama Administration officials retroactively commented that the BDA initiative was “very effective” and it was “a mistake” for the Bush Administration to have rescinded it. The Obama administration now “hopes to recreate the financial pressure that North Korea endured back in 2005.”

Yet by subsequently pursuing a policy of timid incrementalism of pulling our legal punches but always promising to be tougher “the next time,” Washington squandered the opportunity to more effectively impede progress on North Korea’s nuclear and missile programs and coerce compliance with U.N. resolutions.

The U.S. Congress lost confidence in the Obama Administration’s half-hearted enforcement of U.S. laws and regulations against Pyongyang and the House of Representatives passed the North Korea Sanctions Enforcement Act in part to spur the Obama Administration out of its torpor. Rather than waiting for another North Korean provocation or violation to incrementally enforce U.S. law, the proposed legislation would apply the power of the U.S. financial system against North Korean proliferation, arms trafficking, money laundering, censorship, and human rights violations.

The Act allows the administration to find and block the offshore proceeds of Kim Jong-un’s kleptocracy and applies U.S. law to third-party enablers which help North Korea finance and facilitate these illegal acts. It would demand a fundamental change in North Korea’s resistance to transparency, and progress on issues important to our regional partners, before the sanctions could be relaxed or lifted.

Similarly, the Senate also showed its impatience with President Obama’s strategic patience policy through its Intelligence Authorization Act which would require the administration to “describe the actions the United States is taking to support implementation of the recommendations of the United Nations Commission of Inquiry on Human Rights” in North Korea.

Neither sanctions nor diplomacy alone is a panacea, both are essential and mutually supporting elements of a comprehensive integrated strategy utilizing all the instruments of national power. The U.S. has strong tools,  it has just lacked the resolve to use them. Why, then, should the United States hesitate to impose the same legal measures against North Korea that it has already used with success against other countries for far less egregious violations of U.S. and international law?

Bruce Klingner is a senior research fellow for Northeast Asia at The Heritage Foundation. He previously served 20 years in the U.S. Intelligence Community, including as CIA’s Deputy Division Chief for Korea. The views expressed here are the author’s alone.

Photo from Stefan Krasowski’s photostream on flickr Creative Commons.

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The Peninsula blog is a project of the Korea Economic Institute. It is designed to provide a wide ranging forum for discussion of the foreign policy, economic, and social issues that impact the Korean peninsula. The views expressed on The Peninsula are those of the authors alone, and should not be taken to represent the views of either the editors or the Korea Economic Institute. For questions, comments, or to submit a post to The Peninsula, please contact us at ts@keia.org.