On September 1, 2020, the US government issued an advisory to alert companies and persons involved in international commerce of the key North Korean procurement entities that support the regime’s ballistic missile program, and described the deceptive techniques they use to evade sanctions. The US Department of State’s Bureau of International Security and Nonproliferation, the US Department of the Treasury’s Office of Foreign Assets Control, and the US Department of Commerce’s Bureau of Industry and Security issued the joint advisory to increase awareness of misleading business and shipping practices, and urged companies to be vigilant and develop additional internal controls to ensure compliance with US and United Nations’ sanctions laws, to mitigate sanctions risks.
The advisory contains a list of entities and individuals, including non-North Korean entities, that have been designated by the US and/or the UN for supporting North Korea’s weapons program, reminding businesses to consult OFAC’s List of Specially designated Nationals and Blocked Persons before transacting with unfamiliar customers, especially those in the electronics, chemicals, metals and materials industries as well as those working in the financial, transportation and logistics sectors. According to the advisory, North Korea relies on these industries to obtain foreign-sourced missile components that it cannot produce domestically, and collaborates with Chinese and Russian companies among others, that mislabel specialized materials as general-purpose items in export documentation, then repackage the items for shipment to North Korea, in order to conceal the true end-user from manufacturers and distributors.
The advisory aims to help both public and private sector business improve their sanction compliance programs, by encouraging them to reference previously issued guidance documents such as the National Proliferation Financing Risk Assessments, A Framework for OFAC Compliance Commitments, the BIS Export Management and Compliance Division, to name a few, including an maritime industry advisory issued in May 2020 to warn of deceptive shipping practices used to evade North Korean sanctions. The advisory concludes with a description of consequences for engaging in activities prohibited or sanctionable under North Korea Sanctions Regulations, 31 CFR Part 510, and the Export Control Reform Act of 2018, 50 USC §§ 4801-4852, that include statutory civil penalties of up to $307,902, and a risk of criminal penalties of up to $1 million per violation, with a possibility of up to 20 years in prison.