May 14, 2019 | Policy Brief

U.S. Charges against North Korean Vessel Send Strong Signal to Pyongyang

May 14, 2019 | Policy Brief

U.S. Charges against North Korean Vessel Send Strong Signal to Pyongyang

The Department of Justice last Thursday announced it had seized a North Korean shipping vessel, the Wise Honest, for violating U.S. and UN sanctions. The announcement, which came only hours after North Korea’s second short-range missile test in five days, sends Pyongyang a message that America will not capitulate to its demands for comprehensive sanctions relief prior to a meaningful commitment from Pyongyang to dismantle its nuclear weapons.

The Justice Department’s move marks the first time Washington seized a North Korean vessel for sanctions violations. The administration conducted the seizure because the North Korea Sanctions Policy and Enhancement Act (NKSPEA) of 2016 obligates the executive branch to block property belonging to the North Korean government and/or personnel working on its behalf if any transactions come under U.S. jurisdiction.

In this case, the Justice Department found that the vessel’s operator, Korea Songi Shipping Company, conducted over $750,000 worth of payments through unwitting U.S. banks to improve and maintain the ship. The vessel’s operating company is an affiliate of the Korea Songi General Trading Corporation, which Washington sanctioned in 2017 for its involvement in exporting North Korean coal. According to the Treasury Department, North Korea’s military owns this company. Additionally, the department targeted the Wise Honest for helping Pyongyang export coal and import heavy machinery, both of which are UN-sanctioned goods.

In April 2018, the Indonesian government first detained the Wise Honest when authorities observed the ship behaving erratically and then straying into Indonesian waters. Once detained, authorities discovered the vessel loaded with coal from Russia, thereby violating U.S. sanctions. The United States issued a warrant for the Wise Honest in July 2018, and Indonesia subsequently transferred the vessel to U.S. custody.

The Justice Department’s complaint strengthens U.S. leverage for future nuclear talks with Pyongyang by countering Kim’s efforts to intimidate Washington with missile tests. Washington should now bolster U.S. pressure on Pyongyang by addressing other vulnerabilities in the current sanctions regime.

For example, a UN Panel of Experts report assessed in March that financial sanctions against Pyongyang are the “most poorly implemented and actively evaded measures.” Thus, the panel advised member states to enhance financial oversight protocol by mandating stricter reporting measures when offering letters of credit, loans, and other financial transfers.

In the case of the Wise Honest, the Korea Songi Shipping Company made illicit payments through U.S. banks to finance the vessel’s maintenance. This indicates how Pyongygang seeks to evade sanctions even beyond the financial sector. A U.S. application of the UN panel’s recommendation could have a ripple effect, hampering all of North Korea’s sanctions evasion schemes.

While diplomacy remains necessary to achieve North Korea’s final and fully verified denuclearization, escalating pressure is essential to establish the optimal conditions for productive negotiations between Washington and Pyongyang.

Mathew Ha is a research associate focused on North Korea at the Foundation for the Defense of Democracies, where he also contributes to FDD’s Center on Economic and Financial Power (CEFP). Follow Mat on Twitter @MatJunsuk. Follow FDD on Twitter @FDD and @FDD_CEFP. FDD is a Washington-based nonpartisan research institute focusing on national security and foreign policy.

Issues:

Military and Political Power North Korea Sanctions and Illicit Finance United Nations