North Korea

U.S. Foreign Policy Sanctions: North Korea

Recent U.S. sanctions on North Korea attempt to leverage non-U.S. financial institutions to influence North Korean behavior. U.S. trade with and investment in North Korea has been prohibited under the Trading with the Enemy Act (TWEA) since December 1950. Additionally, North Korea is denied most-favored-nation trade status with the United States under the 1974 Jackson-Vanik amendment. As a result, the only U.S. commercial involvement with North Korea has been agricultural exports allowed by the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA). Citing North Korea's nuclear program in September 2005, President Bush froze North Korean funds at Banco Delta Asia in Macao in an effort to isolate North Korea from the international financial system, thereby disrupting correspondent relationships. In June 2008, President Bush removed North Korea from the state sponsors of terrorism list because they had met nuclear inspection requirements and had not sponsored any acts of terrorism since the 1987 bombing to a Korean Airlines flight. At the same time, President Bush invoked the International Emergency Economic Powers Act (IEEPA) to supplant the TWEA, placing North Korea sanctions under the Office of Foreign Assets Control (OFAC).

President Obama continued to use targeted financial sanctions. Citing North Korean missile tests and the March 2010 sinking of a South Korean naval vessel, in August 2010, President Obama issued Executive Orders establishing a list of North Korean individuals and organizations involved in the arms and drug trafficking and importation of luxury goods. The order froze the virtually non-existent U.S. assets of those on the list, but strongly discouraged non-U.S. banks from dealing with North Korea, and targeted the North Korean elite's purchase of luxury goods. In April 2011, OFAC sanctioned North Korean Bank of East Land, a move described by Undersecretary of the Treasury David Cohen as exposing "North Korea's efforts to circumvent sanctions to conduct illicit activities and degrades its ability to abuse the international financial system." The following month Senator Robert Menendez (D-NJ) and 80 co-sponsors introduced the Iran, North Korea, and Syria Consolidation Act, which would require banks to report to OFAC transactions by persons identified as being involved in the nuclear programs of any of the three nations. The bill was referred to the Senate Foreign Relations Committee.