By Aruna Viswanatha and Ian Talley
WASHINGTON -- The U.S. on Tuesday targeted a host of Chinese and
Russian firms and related individuals it accuses of aiding
Pyongyang, expanding its broader efforts to clamp down on financing
critical to North Korea's nuclear-weapons program.
The U.S. Treasury's Office of Foreign Assets Control added 10
firms, including Chinese coal importers and Russian fuel exporters,
to its North Korea sanctions list. Federal prosecutors also filed a
pair of cases in federal court in Washington seeking tens of
millions of dollars in penalties from these companies in addition
to seizing $11 million in their funds already frozen at U.S.
banks.
The cases target Chinese firms that allegedly had imported $700
million in North Korean coal since 2013 and a Russian-operated firm
allegedly helping Pyongyang procure fuel. In all, the U.S. alleges
that the coal trade generates more than $1 billion in revenue per
year for North Korea, which helps to fuel its weapons programs.
The actions mark a promised escalation of a growing U.S.
sanctions regime aimed at North Korea, which in recent months has
launched intercontinental ballistic missiles that U.S. officials
say put America at risk of a nuclear attack. It also marks an
effort by the Trump administration to ensnare North Korea's
supporters -- particularly in China -- in an effort to crack down
on Kim Jong Un's regime.
"Treasury will continue to increase pressure on North Korea by
targeting those who support the advancement of nuclear and
ballistic missile programs, and isolating them from the American
financial system," Treasury Secretary Steven Mnuchin said in a
statement. "We are taking actions consistent with U.N. sanctions to
show that there are consequences for defying sanctions and
providing support to North Korea, and to deter this activity in the
future."
The United Nations earlier this month banned coal exports from
North Korea. A U.N. panel has complained that compliance among some
of its members has been spotty. The Trump administration has been
particularly frustrated with China's cooperation with North Korea.
But China officials have agreed to enforce the latest measures amid
growing international pressure.
"These complaints show our determination to stop North Korean
sanctioned banks and their foreign financial facilitators from
aiding North Korea in illegally accessing the United States
financial system to obtain goods and services in the global
marketplace," said Channing Phillips, the U.S. Attorney in
Washington, D.C., whose office brought the cases.
North Korean officials didn't immediately appear to comment on
the U.S. sanctions. Earlier Tuesday, Pyongyang attacked President
Donald Trump in the state media, branding his approach to the
crisis on the Korean Peninsula "unimaginably reckless."
Anthony Ruggiero, a former senior U.S. Treasury official now at
the Foundation for Defense of Democracies, said the latest
sanctions move was a strong step forward in the administration's
broader pressure campaign. "It's definitely a message to Beijing
and Moscow they can't continue to facilitate Pyongyang."
Analysts say efforts by the U.S. attorney's office, which has
been working on cases focusing on North Korea's financial conduits
for more than a year, are proving a potent diplomatic weapon in the
White House's broader sanctions offensive.
Sanctions not only make it illegal for companies operating in
the U.S. to do business with designated entities, but are meant to
freeze those firms and individuals out of global markets. Banks,
for example, would no longer be able to clear wire transfers
through the U.S., the world's most important financial market, for
any of those designated companies. And even though the asset
seizures might seem relatively small in the context of North
Korea's total cross-border trade and finance, the forfeiture
actions are a signal to other companies of the risks of doing
business for Pyongyang.
The complaint against the Chinese firms, Dandong Zhicheng, also
described as Dandong Chengtai, and several related companies,
provided new details of how Pyongyang is funding its nuclear
program. Much of the funding, according to prosecutors, comes
through the mining and sale of coal to front companies -- firms
designed to obscure business dealings -- who then pay for the coal
through the purchase of other goods bound for North Korea.
Treasury named Dandong Zhicheng and its majority owner, Chi
Yupeng, to its North Korea sanctions list, along with two other
Chinese coal importers, JinHou International Holding Co., and
Dandong Tianfu Trade Co.
Washington-based C4ADS, which studies transnational threats,
says Dandong Zhicheng is the biggest importer of North Korean goods
into China. In the complaint, prosecutors said North Korea uses the
company to not only supply cash but also as a broker that purchases
goods for North Korean use including sugar, rubber, petroleum
products and soybean oil. The Wall Street Journal attempted to
contact the company via an email listed on its now-defunct website
and it didn't respond to a request for comment.
The complaint sought to forfeit $4 million to the U.S.
government in funds Dandong Chengtai allegedly wired through a
foreign bank account routed through a U.S. correspondent bank on
June 21. The government seized those funds as they were in transit
based on a warrant obtained in May to secretly monitor and freeze
the funds.
One person described in the complaint as "Defector 1, who has
first-hand knowledge" of North Korea's financial dealings, said the
government relies on the exports of coal "as its primary means of
obtaining access to foreign currency," and that the North Korean
military controls the amount of coal produced and its export,
according to the complaint.
The defector told investigators that "over 95%" of North Korea's
foreign currency earnings from coal exports go toward advancing
North Korea's military and North Korea's nuclear missiles and
weapons programs.
Dandong Zhicheng had a page on Alibaba Group Holding Ltd.'s
e-commerce website, in which it advertised it was a "professional
company of trading the North Korea Briquettes," and advertised the
sale of North Korean coal in U.S. dollars, according to the
complaint. The page is no longer accessible on Alibaba's website.
An Alibaba representative had no immediate comment.
In a separate case, prosecutors also sought to forfeit around $7
million in wire transfers being held at a U.S. bank that had been
intended for Velmur Management Pte. Ltd., a Singapore-registered
firm that describes itself as a real-estate company but whose
business "focuses on facilitating the laundering of funds for North
Korean financial facilitators," prosecutors said.
Velmur, an associated firm based in Singapore called
trans-Atlantic Partners, and three Russian officials involved with
the companies were added to Treasury's sanctions list Tuesday.
According to the complaint, Velmur received a $230,000 wire from
Dandong Zhicheng in September 2016, and has received U.S. dollar
payments on behalf of North Korean entities.
Between February and April, according to the complaint, Velmur
sent seven wire transfers totaling $6.8 million to IPC, a Russian
company the Treasury Department sanctioned in June for shipping
petroleum products to North Korea.
Other entities sanctioned by Treasury include China-based
Mingzheng International Trading Ltd., a firm prosecutors accused in
June of operating as a front company helping launder U.S. dollars
for North Korea's Foreign Trade Bank.
It also named China-based Dandong Rich Earth Trading Co., and
Russia's Gefest-M and its director for procuring metals for a North
Korean company involved in the country's weapons program. Those
companies couldn't be immediately reached for comment.
No Chinese banks were named among those sanctioned, though some
U.S. analysts argued the U.S. will eventually need to expand its
targets to Chinese banks to more forcefully crack down on North
Korean funding. To date, the U.S. has sanctioned one Chinese bank,
Bank of Dandong.
Write to Aruna Viswanatha at Aruna.Viswanatha@wsj.com and Ian
Talley at ian.talley@wsj.com
(END) Dow Jones Newswires
August 22, 2017 16:11 ET (20:11 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.