U.S. Expands North Korea Sanctions, Seeks to Seize Millions

(Bloomberg) -- The U.S. tightened its financial restrictions on North Korea, slapping sanctions on Chinese and Russian entities it accused of assisting Pyongyang’s development of nuclear weapons and ballistic missiles. It’s also seeking millions of dollars it said moved through the U.S. as part of the alleged scheme.

Prosecutors in Washington, D.C., are seeking to recover $11 million from companies based in China and Singapore that they accuse of conspiring with North Korea to evade sanctions. In complaints filed Tuesday in a federal court in the District of Columbia, they said the companies laundered dollars through U.S. accounts on behalf of sanctioned entities in North Korea.

The sanctions and forfeiture requests are the latest against third-country companies and individuals in an effort to exert greater economic pressure on Kim Jong Un’s regime, which has conducted regular missile and nuclear tests in defiance of United Nations resolutions and has developed weapons that may be capable of hitting the continental U.S. President Donald Trump has sought to pressure China -- North Korea’s top trading partner -- to use greater leverage on its neighbor and ally, though Kim’s regime often makes decisions contrary to Beijing’s wishes.

“These complaints show our determination to stop North Korean sanctioned banks and their foreign financial facilitators from aiding North Korea in illegally accessing the United States financial system to obtain goods and services in the global market place,” said U.S. Attorney Channing D. Phillips. “According to the complaints, these front companies are supporting sanctioned North Korean entities, including North Korean military and North Korean weapons programs.”

Blacklisted Entities

Earlier Tuesday, the U.S. Treasury added more than a dozen individuals and companies to its roster of blacklisted North Korea-related entities, an escalation of the Justice Department’s focus on tightening sanctions against Pyongyang.

Treasury’s Office of Foreign Assets Control added six individuals and 10 companies and other entities to its sanctions list, saying they have helped people previously penalized for North Korea’s weapons program, facilitated North Korea’s energy sector and enabled entities to bypass sanctions to get access to the U.S. and international financial system.

The new restrictions seek to further reduce the flow of money to North Korea’s weapons development, which is partially financed by selling coal and other natural resources. North Korea generates about $1 billion a year from the coal trade, according to the Treasury, which singled out three Chinese coal companies it said were responsible for importing almost a half-billion dollars in North Korean coal between 2013 and 2016.

“Treasury will continue to put pressure on North Korea by targeting those who support the advancement of nuclear and ballistic missile programs and isolating them from the American financial system,” Treasury Secretary Steven Mnuchin said in a statement accompanying the sanctions announcement.

Read a QuickTake on North Korea’s nuclear weapons program

As part of the announcement, three Russian individuals and two Singapore-based companies were accused of providing oil to North Korea.

The sanctions drew the ire of Russia, which already is at odd with the U.S. over its annexation of Crimea and interference in the American presidential election. Deputy foreign minister Sergei Ryabkov said in a statement on the ministry’s website that the sanctions against the Russian individuals continues a trend damaging the U.S.-Russia relationship. He warned that Russia would develop unspecified “counter-measures inevitable in this situation.”

In early July, after tensions with Pyongyang escalated, U.S. prosecutors disclosed their effort to seize millions of dollars linked to North Korean entities from eight global banks.

In lawsuits filed Tuesday in Washington, prosecutors outline how a web of front companies -- some run by Russian nationals -- were used by North Korean banks, including the country’s government-owned Foreign Trade Bank, or FTB, to launder money through transactions involving coal and oil.

In one of the lawsuits, U.S. prosecutors allege that Singapore-based Velmur Management Pte. Ltd and Transatlantic Partners Pte. Ltd. laundered U.S. dollars for sanctioned North Korean banks that were seeking to buy petroleum products from JSC Independent Petroleum Company, a blacklisted entity based in Russia.

Velmur Payments

North Korean banks used companies such as Transatlantic to make U.S. dollar payments to Velmur, according to the complaint. The lawsuit involves funds that the U.S. alleges were transferred through four companies to Velmur, which then wired the proceeds to JSC. That company was designated a sanctioned entity by OFAC on June 1 for allegedly shipping more than $1 million of petroleum products to North Korea.

The U.S. is seeking the $7 million that was wired to Velmur in May.

In a second lawsuit, China-based Dandong Chengtai Trading Limited and related companies are accused of laundering millions of dollars for North Korea through the purchase of coal. Dandong Chengtai was added Tuesday to Treasury’s list of sanctioned entities, along with Transatlantic and Velmur. It wasn’t immediately possible to locate company representatives for comment.

Controlled by Chinese national Chi Yupeng, Dandong Chengtai allegedly conspired to evade U.S. sanctions by facilitating prohibited U.S. dollar transactions on behalf of the North Korean Workers’ Party, a sanctioned entity, according to the complaint.

Dandong Chengtai allegedly made U.S. dollar wire transfers for purchases of goods that are well outside the scope of a mineral trading company and financial records allegedly show that purchases of bulk commodities such as sugar, rubber, petroleum products and soybean oil, among others, were in fact destined for North Korea, according to the complaint.

The U.S. is seeking the forfeiture of more than $4 million that Dandong Chengtai wired on June 21 to an affiliated company, Maison Trading Limited, using Chinese bank accounts. U.S. investigators allege Maison Trading is a front company operated by a Dandong Chengtai employee.

--With assistance from Stepan Kravchenko

To contact the reporters on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net, Greg Farrell in New York at gregfarrell@bloomberg.net, Joe Sobczyk in Washington at jsobczyk@bloomberg.net.

To contact the editors responsible for this story: Sara Forden at sforden@bloomberg.net, Joe Sobczyk, Michael B. Marois