September 28, 2017

Senate Banking Committee “Evaluating Sanctions Enforcement and Policy Options on North Korea: Administration Perspectives”

Key Topics & Takeaways

  • Secondary Sanctions: Sigal Mandelker, Under Secretary for Terrorism and Financial Crimes at the Treasury Department, clarified that the recently-issued executive order now gives Treasury the authority to impose secondary sanctions against financial institutions, if necessary.  Mandelker clarified that the “message is clear: we will go after any company that does trade with North Korea.”  She also argued that the most recent sanctions agreed to by the UN Security Council, coupled with the authorities granted under the executive order, are the “strongest [measures] ever.”
  • China’s Cooperation: Mandelker stated that China is sending “very deliberate messages” to its banks to enforce the international sanctions agreed to at the UN Security Council.  She stated her belief that China is cooperating with the international community on the implementation of the most recent sanctions, adding that Beijing’s cooperation is a central to ensuring success of these efforts.

Witnesses

  • Sigal Mandelker, Under Secretary for Terrorism and Financial Crimes, Treasury Department
  • Susan Thornton, Acting Assistant Secretary, Bureau of East Asian and Pacific Affairs, State Department

Opening Remarks

Senators forwent giving oral remarks to ensure they could finish the hearing prior to votes being called.

Testimony
Sigal Mandelker, Under Secretary for Terrorism and Financial Crimes, Treasury Department

In her testimony, Mandelker provided an overview of the Treasury Department’s strategy to combat the national security threats posed by North Korea’s nuclear proliferation program.  She explained that the Trump Administration is “applying maximum economic and diplomatic pressure to counter this threat” and that the Treasury Department is “strategically and smartly deploying all of our economic authorities – including sanctions, anti-money laundering (AML) measures, enforcement actions, actions under Section 311 of the USA PATRIOT Act,” among others, to disrupt North Korea’s access to international finance. She reiterated that the intent of Treasury is to “suffocate North Korea financially,” and highlighted the designation of dozens of entities and emissaries working on behalf of North Korea all over the globe to thwart its efforts to evade sanctions.

Mandelker explained that the executive order recently issued by President Trump gives the Treasury Department greater ability to target foreign banks that support the Kim regime.  She emphasized that a recent action taken against a Chinese bank was the “first in over a decade” in response to its role facilitating North Korean access to the U.S. financial system.  Mandelker cautioned that banks across the globe “should take note” of those enforcement actions.

Susan Thornton, Acting Assistant Secretary, Bureau of East Asian and Pacific Affairs, State Department

In her testimony, Thornton claimed that the Administration has a “clear and aggressive strategy” to counter the threat posed by the nuclear proliferation efforts of North Korea.  She explained that the Administration is using “all diplomatic levers” to change the Kim regime’s calculus to bring it back to the negotiating table. Thornton acknowledged that successful denuclearization of North Korea will depend on “heavy cooperation” from international partners, principally Beijing.  She added that the State Department aims to hold China and others to account to uphold their commitments to the international sanctions resolutions. Thornton added that the overarching policy goal of the U.S. with respect to Korea is to seek a peaceful denuclearization of North Korea.

Question and Answer

Secondary Sanctions

In response to a question from Sen. Mike Crapo (R-Idaho), Mandelker clarified that the executive order now gives Treasury authority to impose secondary sanctions against financial institutions, if necessary, and she stated that they take that authority “very seriously.”  Mandelker clarified that the “message is clear: we will go after any company that does trade with North Korea.”  She also argued that the most recent sanctions agreed to by the UN Security Council, coupled with the authorities granted under the executive order, are the “strongest [measures] ever.”

Sen. Pat Toomey (R-Penn.) called for the imposition of secondary sanctions, which he said, “sends a very powerful message to financial institutions” and would help bring the North Koreans to the negotiating table.

China’s Cooperation 

Mandelker stated that China is sending “very deliberate messages” to its banks to enforce the international sanctions agreed to at the UN Security Council.  She added that the China Ministry of Commerce issued a notice indicating that all firms and joint ventures with ties to North Korea have to be shut down.  She stated her belief that China is cooperating with the international community on the implementation of the most recent sanctions, adding that Beijing’s cooperation is a central to ensuring success of these efforts.

Thornton added that the success of the NK sanctions regime requires the cooperation of the “entire” international community. She added that Chinese officials have shown their dedication to complying with the international sanctions regime that they voted for at the UN Security Council.

Emphasis on Implementation

Mandelker stated that the Treasury Department is closely cooperating with international partners, the U.S. intelligence community, and financial institutions to confront and block North Korea’s ability to work through front companies to access the international financial system.  She emphasized that the administration has the tools and authorities it needs to block North Korea’s access to international finance, and intends to focus on implementation to bring the Korean’s to the negotiating table to achieve de-nuclearization.

Additional information about this event can be accessed here.