FOLLOW-UP COMMENTS U.S. takes aim at North Korea's remaining financial links

As expected I received these comments from one of our Korea Watchers who knows a lot about north Korean finances and illicit activities, Dr. Bruce Bechtol who clarifies the article and asks the all important question:

Notice this piece talks about what the US government CAN DO.  Not what they HAVE DONE.  This opens the door for the Obama administration to truly go after North Korean financial networks and the front companies that support them.

The question is, and this is an important question…

Will the Obama administration actually use the power these new sanctions authorize?

---------- Forwarded message ----------
From: David Maxwell <David.Maxwell@georgetown.edu>
Date: Tue, Jan 13, 2015 at 5:07 PM
Subject: U.S. takes aim at North Korea's remaining financial links
To:

Seems like we are embarking on a path to try to achieve Banco Delta Asia-like effects.  This seems like good news.  I look forward to hearing the analysis of the Korea hands on this.

Excerpt:

New sanctions announced by President Barack Obama on Jan 2. provided "a tremendous amount of flexibility" and the goal was to identity remaining financial institutions that allowed North Korea access to the global system, which could face sanction themselves, Glaser told a House of Representatives briefing.

"We could target any North Korean government agency; we could target any North Korean government official ... we could apply sanctions with respect to any individual or entity who is providing them, in turn, material support," he said.

U.S. takes aim at North Korea's remaining financial links

BY DAVID BRUNNSTROM

WASHINGTON Tue Jan 13, 2015 4:26pm EST

http://www.reuters.com/article/2015/01/13/us-northkorea-usa-idUSKBN0KM2AO20150113

North Korean leader Kim Jong Un gives field guidance to the newly-built Pyongyang City Mushroom Farm in this undated photo released by North Korea's Korean Central News Agency (KCNA) in Pyongyang January 10, 2015.

CREDIT: REUTERS/KCNA

(Reuters) - The United States aims to use new sanctions imposed on North Korea over the cyber attack on Sony Pictures to cut off the country's remaining links to the international financial system, a senior U.S. Treasury official said on Tuesday.

Daniel Glaser, assistant secretary for terrorist financing at the U.S. Treasury Department, said past sanctions had already discouraged "hundreds" of overseas banks, including China's major commercial banks, from doing business with North Korea.

New sanctions announced by President Barack Obama on Jan 2. provided "a tremendous amount of flexibility" and the goal was to identity remaining financial institutions that allowed North Korea access to the global system, which could face sanction themselves, Glaser told a House of Representatives briefing.

"We could target any North Korean government agency; we could target any North Korean government official ... we could apply sanctions with respect to any individual or entity who is providing them, in turn, material support," he said.

Ed Royce, chairman of the House Foreign Affairs Committee, called for use of the full scope of the new sanctions announced after U.S. authorities said North Korea was behind the Sony attack. North Korea has denied involvement.

"The significance of this new Executive Order may come from the broad power it gives the president to target anyone who is a part of the North Korean government, or is assisting them in any way … that is if the administration chooses to use it to its full advantage," he told the briefing.

"We need to step up and target those financial institutions in Asia and beyond that are supporting the brutal and dangerous North Korean regime."

When challenged by Royce about "a number of small banks" still doing business with North Korea and the need to choke off the country's access to hard currency, Glaser replied: "That's exactly what we are trying to do."

Royce said he hoped a bipartisan bill he sponsored that would label North Korea "a primary money laundering concern" would be passed by the Senate this year.

    Long-standing international sanctions have sought to push North Korea to end its nuclear weapons program, but while they have slowed the program, they have not stopped it.

North Korea's main economic ties are with China and, according U.S. government reports, the country's tiny economy has supported itself with money-making scams ranging from counterfeiting $100 bills to illicit arms sales and drug smuggling.

(Reporting by David Brunnstrom; editing by Gunna Dickson)

I think David Asher is right.  Short of force coercive financial sanctions are the only hope of influencing the behavior of the Kim Family Regime (I still find it difficult to believe that anything will cause the regime to give up its nuclear program but I think we can influence its behavior but attacking its money flow).  The sanctions on Banco Delta Asia had a significant effect on Kim Jong-il and was one of the only international actions that achieved significant effects on regime decision making and of course when those sanctions were lifted the regime reverted to its old ways.

V/R

Dave

(Yonhap Interview) Financial sanctions key to denuking N. Korea: former U.S. official

2013/09/26 08:00

http://english.yonhapnews.co.kr/interview/2013/09/25/70/0800000000AEN20130925009000315F.html

SEOUL, Sept. 26 (Yonhap) -- Countries involved in talks aimed at ending North Korea's nuclear program should ramp up financial sanctions against the communist country in order to achieve their goal, a former Bush administration official said Thursday.

Multilateral efforts are underway to revive the six-party talks to disarm a nuclear-armed North Korea. The talks, involving the two Koreas, the United States, China, Russia and Japan, have been stalled since late 2008 after six rounds of failed negotiations.

"The whole process (of the six-party disarmament forum) has value, but none of this is likely to succeed in getting North Korea to give up its nuclear program unless we are willing to threaten the regime of Korea North in a way that internally threatens it -- taking away their money and forcing them to fight among themselves," said David Asher, a senior fellow at the Center for a New American Security in an interview with Yonhap News Agency on the sidelines of an academic forum on North Korea.

The forum was hosted by the Asan Institute for Policy Studies.

Asher was a senior advisor to former Assistant Secretary of State for East Asian and Pacific Affairs James Kelly under the administration of former President George W. Bush. The former president led a series of hawkish sanctions against what he tagged "rogue states" seeking weapons of mass destruction, including North Korea.

He was one of the authors of the administration's sanctions policy to cut transactions of Macao-based Banco Delta Asia bank in 2007, which was suspected of being used for stashing funds for the regime of then North Korean leader Kim Jong-il.

"If we want, or have any hope trying to get them to change their nuclear posture, let alone give up their nuclear weapons, we are gonna have to aim at the financial heart of Kim Jong-un's regime, .... and personally I consider that to be a feasible potential strategy," said the ex-official.

The communist country is continuing to engage in illegal activities and weapons proliferation for its financial survival because "they literally don't have enough means to generate wealth internally to satisfy the need of the regime," he added.

The absence of a banking system in the North forces it to rely on the international financial system for survival and in many previous cases the U.S. has been proven to be able to target part of the international financial system, he said, adding that it "is something the U.S. can do uniquely because 95 percent of all global dollar wire transfers go through New York."

   "My personal view is that the Kim dynasty needs to be credibly threatened in order for them to ever make a strategic choice. They see the nuclear weapons system as a thing that will save them. They need to see the nuclear system as a thing that will destroy them," noted Asher.

Asher's highlight on financial sanctions against the North comes amid quickening efforts by China to resume the six-way forum, involving two Koreas, the U.S., China, Russia and Japan.

The multilateral forum launched in 2003 held its last meeting in late 2008, as the North walked out of the dialogue and continued to develop its nuclear programs.

(Continued at the link below)

http://english.yonhapnews.co.kr/interview/2013/09/25/70/0800000000AEN20130925009000315F.html

All you need to know about North Korea

Dr. Lee's succinct explanation of the north (as well as the South) is very instructive.  I do think we should attack the "palace economy" while at the same time we  (the RoK/US Alliance) should conduct aggressive influence operations (PSYOP/MISO) to prepare the north for a post Kim Family Regime world.  The operation against Banco Delta Asia was a very good example of what can be done and now after the 3d nuclear test perhaps the Chinese will be more willing to support such actions. More sanctions are unlikely to work.  We have tried the full range of diplomacy and the regime has failed to respond like a responsible member of the international community.  Now it is time to put real pressure on the regime.

V/R

Dave

All you need to know about North Korea

Posted By Daniel Blumenthal  Monday, February 11, 2013 - 1:34 PM   Share

http://shadow.foreignpolicy.com/posts/2013/02/11/all_you_need_to_know_about_north_korea 

North Korea is yanking the world's chain yet again, sending all relevant parties hither and yon. As we contemplate what to do and the Kim clan perfects its ability to deliver its growing nuclear arsenal to targets in South Korea, Japan and the United States, we could do worse than turn to a rising star of Korea analysis: Sung-Yoon Lee of Tufts University. Dr. Lee provides a much-needed dose of reality about what exactly we are dealing with. The basics are not a bad place to start in thinking or rethinking how to deal with the criminal-nuclear enterprise that we call North Korea. Here is an edited version of what he said at a conference in Seoul last week (my commentary is in italics and the final thoughts are my own).

1.    North Korea is "uniquely unique." It is the world's sole communist hereditary dynasty, the world's only literate-industrialized-urbanized peacetime economy to have suffered a famine, the world's most cultish totalitarian system, and the world's most secretive, isolated country -- albeit one with the world's largest military in terms of manpower and defense spending proportional to its population and national income. The result is an exceptional state, perhaps the world's most influential regional power commensurate with its territorial and population size and economic and political power.

That is, North Korea has managed some seemingly impossible feats. It has remained a cultish communist dictatorship even though all its like-minded brethren have been relegated to the ash heap of history. It has managed to produce a spate of famines despite the fact that its population is urbanized and literate. And through its combination of supremely disproportionate spending on military forces, its nuclear program, and its unique ability to outfox, out-negotiate, and outplay the world's industrialized powers, it has become a regional nuclear power with disproportionate influence in Northeast Asia despite its poverty and privation.

2. The other Korea, the one south of the 38th parallel, is a global leader in trade, shipping, automobiles, and electronics. It is also a free democratic polity. And on December 19, South Korea elected Park Geun-hye as president. Park is the first elected female leader in Korea and also in Confucian civilization, which consists of China, Japan, the two Koreas, Taiwan, Singapore, and Vietnam and makes up nearly a quarter of the world's population. The contrast between the two Koreas could not be starker -- beyond the obvious, you have a cultish male hereditary dictatorship in the North, and a freely elected female leader in the South.

Development experts and theorists of democratization take note. South Korea has the same culture, historical legacies, and so on as its neighbor to the North. And yet it is an advanced industrial economy and a thriving democracy that has just, despite its Confucian culture, elected a woman as president. It has managed to reach this high point of prosperity and human dignity because of -- to reduce a complex set of phenomena to its minimal essence -- different institutions than those in the North: democratic and capitalist ones. (I realize that I may be violating some tenet of doctrinaire realism with this observation. For the less doctrinaire, the contrast between the two Koreas is a useful reminder of why we try and favor and even push for democratic capitalism). Given the stark contrast between the two countries one can safely draw at least one conclusion: There is nothing inherent in culture or history that ipso facto should keep a country poor and enslaved.

(Continued at the link below)

http://shadow.foreignpolicy.com/posts/2013/02/11/all_you_need_to_know_about_north_korea

Don't Engage Kim Jong Un -- Bankrupt Him: It's time to play hardball with North Korea's new leader.

The Banco Delta Asia operation was a good one.  Excerpt:

There is a precedent for this: In September 2005, Treasury declared the Macau-based Banco Delta Asia a "primary concern" for North Korean money laundering, and a haven for drug dealing and counterfeiting proceeds. Treasury's action only directly affected $25 million in deposits, but its indirect effects were far greater, causing a run on Banco Delta and damming one of North Korea's main streams of illicit revenue. 

The North Koreans sought new banks elsewhere, but Treasury followed them. Senior Treasury officials visited banks throughout Asia, warned their officers of the risks of doing business with North Korea, and stated that it was "almost impossible to distinguish between the North's legitimate and illegitimate dealings." Multiple banks quickly cut their ties with the North. Stephen Haggard and Marcus Noland, economists who study North Korea, estimated that Treasury sanctions and Japan'scrackdown on remittances to North Korea badly hurt Pyongyang's capacity to launder the proceeds of its illicit activities, which accounted for approximately half of the North's income in the 1990s and still made up a significant share of Pyongyang's total earnings in 2005. As a result, the regime was forced to sell off some of its gold reserves. By January 2006, Kim Jong Il was so desperate that he reportedly told Chinese President Hu Jintao that he feared that the sanctions would cause his regime to collapse.

In principle I agree with Joshua and if we wanted to really strangle north Korea we would go after Department 39 operatives around the world to cut off the supply of illicit trade and the flow of hard currency and luxury goods back to the regime to keep the elite happy.  But I think it will e hard for us to replicate the Banco Delta Asia operation for the very reason highlighted in the last sentence above. We could cause the collapse of the regime but this time China is unlikely to cooperate (as it had to tacitly in 2005) because of the Chinese policy of "Three no's" - no war, no nukes and no collapse.  China will not support regime collapse and going after the north's finances is too dangerous for China.

V/R

Dave

Don't Engage Kim Jong Un -- Bankrupt Him

It's time to play hardball with North Korea's new leader.

http://www.foreignpolicy.com/articles/2013/01/09/dont_engage_kim_jong_un_bankrupt_him?page=full

BY JOSHUA STANTON, SUNG-YOON LEE | JANUARY 9, 2013

Barack Obama and Sen. John McCain clearly agree on one thing: Bill Richardson and Eric Schmidt should not have visited Pyongyang this week. A State Department spokeswoman said last week that the timing, coming just four weeks after a rocket launch that violated three U.N. Security Council Resolutions, was not helpful. McCain tweeted that Richardson and Schmidt were "useful idiots." Richardson is among the staunchest advocates of appeasing North Korea after billions of dollars in U.S. and South Korean aid have bought little more than attacks, provocations, threats, and broken promises to disarm.

This could be the Hermit Kingdom's year of living provocatively. North Korea's dynastic ruler, Kim Jong Un, who turned 29 (or possibly 30) on Jan. 8, is very likely to act aggressively toward his neighbors in 2013 to burnish his leadership credentials at home and to deal with the new South Korean president-elect, Park Geun Hye, from a position of strength. New administrations in Washington, Beijing, Tokyo, Seoul, and Moscow will seek to avoid foreign crises as they consolidate their power domestically, creating a less confrontational and moreappeasement-prone neighborhood in 2013.

The provocations have already begun. North Korea's rocket launch in December was calculated to intimidate the U.S. and South Korean governments: The rocket was theoretically capable of reaching the United States, and North Korea carried out the test on Dec. 12, seven days before South Korea's presidential election. Pyongyang's announcements that it might postpone the test due to technical difficulties in the days leading up to the launch appear to have caught Obama's Asia team off guard.

So far, the Obama administration's response to the North Korean test has been to return to the United Nations to ask for more Security Council sanctions, but the test already violated three Security Council resolutions that China won't enforce. Despite prior U.N. condemnations, North Korea followed its 2006 and 2009 missile tests with nuclear tests three and two months later, respectively. Beijing's new leadership will likely keep funding the Kim regime and letting it smugglemissile parts and sanctioned luxury goods through Chinese ports. (China claims to "resolutely"oppose North Korea's nuclear programs, but probably sees its behavior as useful in keeping the United States distracted and Korea divided, while it pursues territorial ambitions elsewhere in the Pacific.) If the pattern holds, North Korea's next nuclear test could occur around the time of the late Kim Jong Il's Feb. 16 birthday, or president-elect Park's Feb. 25 inauguration.

(Continued at the link below)

http://www.foreignpolicy.com/articles/2013/01/09/dont_engage_kim_jong_un_bankrupt_him?page=full