On September 21, 2017, President Trump issued an Executive Order (“Order”) imposing additional sanctions on North Korea. The Order is aimed at curbing North Korea’s ability to fund its nuclear and ballistic missile programs by giving the Secretary of the Treasury additional tools to target non-US persons engaging in trade with North Korea and non-US financial institutions supporting such trade.
The Order builds upon recent efforts by the US Government to put pressure on North Korea through the imposition of sanctions on persons and entities in third countries, such as the sanctions and civil forfeiture actions announced by the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) and the Department of Justice, respectively, on August 22, 2017, that target certain Chinese and Russian entities accused of supporting North Korea’s nuclear and ballistic missile programs (previously discussed in our blog post here). The Order also supplements the passage of the “Countering America’s Adversaries Through Sanctions Act” on August 2, 2017 (previously discussed in our blog post here) and President Obama’s Executive Order 13722 of March 15, 2016 (“E.O. 13722”) (“Blocking Property of the Government of North Korea and the Workers’ Party of Korea, and Prohibiting Certain Transactions With Respect to North Korea”) (previously discussed in our blog post here).
In conjunction with the Order, OFAC issued a new general license and updated an existing one authorizing certain activities involving North Korea. OFAC also published Frequently Asked Questions regarding the Order. The key sanctions provisions of the Order are summarized below:
- Addition of New Blocking Criteria
The Order authorizes the US Secretary of the Treasury, in consultation with the US Secretary of State, to block the property or interests in property of any individuals or entities determined, among other things,:
- to operate in the construction, energy, financial services, fishing, information technology, manufacturing, medical, mining, textiles, or transportation industries in North Korea;
- to own, control, or operate any port in North Korea, including any seaport, airport, or land port of entry; or
- to have engaged in at least one significant import from or export to North Korea of any goods, services, or technology.
- Prohibition on Vessels and Aircraft that Have Called on/Landed in North Korea in the Last 180 Days from Calling on/Landing in the United States
The Order prohibits vessels and aircraft in which a non-US person has an interest that have, respectively, called at a port or landed at a place in North Korea within the previous 180 days from calling at a port or landing in the United States. This ban also applies to vessels in which a non-US person has an interest that have engaged in a ship-to-ship transfer with such a vessel within the previous 180 days.
OFAC has issued new General License 10 to allow vessels and aircraft that have called on/landed in North Korea or engaged in ship-to-ship transfers with such vessels in the last 180 days, a described above, to call at a port or land in the Unites States under certain limited circumstances, including if the vessel is in distress or the aircraft is making an emergency landing.
- Blocking of Funds Transiting Accounts Linked to North Korea
The Order blocks any funds originating from, destined for, or passing through a bank account that the US Secretary of Treasury determines is owned or controlled by a North Korean person, or has been used to transfer funds in which a North Korean person has an interest, that come within the United States or possession of a “US Person” (i.e., entities organized under US laws and their non-US branches; individuals and entities physically located in the United States; and US citizens and permanent resident aliens, wherever located or employed). US Persons may not directly or indirectly transfer, pay, export, withdraw, or otherwise deal in such funds. US Persons are also prohibited from approving, financing, facilitating, or guaranteeing any dealings by a non-US person in funds linked to North Korean accounts.
In FAQ No. 526, OFAC states that it will provide “appropriate notice and additional guidance” to clarify its expectations for implementation of this provision, and that it does not create any immediate compliance obligations for US Persons.
- Imposition of Sanctions on non-US Financial Institutions
The Order provides authority to the US Secretary of Treasury to impose sanctions on any non-US financial institution that, on or after September 21, 2017, knowingly conducts or facilitates:
- any significant transaction on behalf of persons blocked under certain Executive Orders relating to North Korea or the proliferation of weapons of mass destruction relating to North Korea; or
- any significant transaction in connection with trade with North Korea.
Such sanctions may entail restrictions on correspondent or payable-through accounts, or the full blocking of all property and interests in property in the United States or in the possession or control of a US Person.
- General Licenses
Along with the new General License 10 (discussed above), OFAC updated General License 3 issued with E.O. 13722 to take the Order into account. The amended General License 3-A authorizes US financial institutions to debit accounts blocked under the Order for normal services charges. OFAC clarified in FAQ No. 525 that the general licenses issued with E.O. 13722 do not apply to transactions prohibited by the new Order, aside from General Licenses 2 and 9 regarding legal services and emergency medical services, respectively.