On April 10, 2020, the US Treasury Department’s Office of Foreign Assets Control (“OFAC”) issued a rule amending the North Korea Sanctions Regulations (“NKSR”). The NKSR amendments implement certain provisions of the North Korea Sanctions and Policy Enhancement Act of 2016 (“NKSPEA”), as amended by the Countering America’s Adversaries Through Sanctions Act (“CAATSA”), and the National Defense Authorization Act for Fiscal Year 2020 (“2020 NDAA”). Our prior blog post on NKSPEA can be found here and our prior blog post on CAATSA can be found here.
The amendments make the following key changes to the NKSR:
- Implementation of US Secondary Sanctions Mandated by US Congress: Adds in § 510.201 a long list of North-Korea-related activities for which parties may be subject to US secondary sanctions pursuant to NKSPEA, CAATSA and/or 2020 NDAA, including non-US parties that directly or indirectly maintain a correspondent account with any North Korean financial institution except as specifically approved by the UN Security Council, and non-US parties that directly or indirectly import, export, or reexport luxury goods to or into North Korea;
- Restrictions on Correspondent Account – Potential Sanction: Authorizes in § 510.210 new bases for restrictions to be imposed on opening or maintaining US correspondent or payable-through accounts by non-US financial institutions that are determined to have provided significant financial services to persons designated under North Korea sanctions;
- Prohibition for Non-US Subsidiaries of US Financial Institutions: Prohibits in § 510.214 non-US entities that are owned or controlled by US financial institutions from knowingly engaging in any transaction, directly or indirectly, with the Government of North Korea or any person designated under North Korea sanctions, which directly applies US sanctions to such non-US subsidiaries that are not otherwise subject to US sanctions jurisdiction under the NKSR and is similar to Iran-related prohibitions for non-US subsidiaries of US banks imposed in February 2012 under § 561.202 of the Iranian Financial Sanctions Regulations;
- Revised Definition of “Significant Transactions:” Revises the interpretive provision at § 510.413 related to factors considered when determining whether a transaction is “significant” to, among other things, add “financial services” to targeted transactions, and specifically include the following example of impacts on US sanctions program objectives: “Whether and how the activity or activities, transaction(s), or financial service(s) contribute(s) to North Korea’s nuclear and ballistic missile programs, commission of serious human rights abuses, use of funds generated through international trade to support its nuclear and missile programs and weapons proliferation, money laundering and other illicit activities, procurement of luxury goods, human rights violations, and violations of United Nations Security Council Resolutions;” and
- Revised Definition of “Luxury Goods:” Revises the definition of “luxury goods” at § 510.317 to include items so designated by the UN Security Council (in addition to the definition of that term from the Export Administration Regulations, in § 746.4(b)(1) and Supplement No. 1 to Part 746) and to clarify that items specifically approved by the UN Security Council for import, export, or reexport to or into North Korea are not included in this definition.