North Korea Government Agencies’ and Front Companies’ Involvement in Illicit Financial Activities

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Advisory
FIN-2009-A002
Issued: June 18, 2009 (Amended December 18, 2009) Subject: North Korea Government Agencies’ and Front Companies’ Involvement in Illicit Financial Activities The Financial Crimes Enforcement Network (“FinCEN”) is issuing this advisory to supplement information previously provided1 regarding the involvement by Democratic People’s Republic of Korea (“North Korea”) government agencies and front companies in illicit activities. The U.N. Security Council has recently adopted a resolution containing new provisions, including a call for enhanced monitoring of financial transactions, to prevent the financing of North Korea’s nuclear, ballistic missile, and other weapons of mass destruction (WMD)-related programs or activities. The Security Council’s action, combined with the potential that North Korea will attempt to evade these financial measures, illustrates the increased risk that North Korea and North Korean entities, as well as individuals acting on their behalf, pose to the international financial system and financial institutions worldwide. On June 12, 2009, the U.N. Security Council adopted Resolution 1874, condemning North Korea’s May 25 nuclear test and calling upon member states to prevent the provision of financial services or any financial or other assets or resources that could contribute to North Korea’s nuclear, ballistic missile, or other WMD-related programs or activities. These provisions were adopted in addition to pre-existing obligations imposed by U.N. Security Council Resolution (“UNSCR”) 1718, adopted in 2006, to, among other things, freeze the assets of designated North Korean individuals and entities involved in nuclear, ballistic missile, and other WMD-related programs or activities.2 UNSCR 1874 includes additional measures beyond the asset freeze in UNSCR 1718 by calling upon states to prevent North Korea from accessing financial services to facilitate transactions related to its nuclear, ballistic missile, and other WMD-related programs or activities. It also bans financial transactions related to the sales of all arms and related materiel, except for the export of small arms and light weapons and related materiel to North Korea.3 1 See “Guidance to Financial Institutions on the Provision of Banking Services to North Korean Government Agencies and Associated Front Companies Engaged in Illicit Activities,” December 13, 2005. For example, UNSCR 1874 calls upon member states to prevent the provision of financial services by financial institutions within their jurisdictions, and by those institutions’ overseas branches, www.fincen.gov/statutes_regs/guidance/html/advisory.html 2 For details on UN member states obligations, see Resolution 1718 (2006), Adopted by the Security Council on 14 October 2006. www.un.org/docs/sc 3 See UNSCR 1874 (2009), ¶¶ 9, 10, 18. www.un.org/docs/sc.