On September 20, 2017, President Trump issued Executive Order 13810, imposing additional sanctions against North Korea. Most notably, the new Executive Order provides for a “secondary sanctions” regime, threatening to impose U.S. sanctions against persons engaging in targeted transactions (whether or not they have any connection to the United States).
In particular, the Executive Order provides authority to impose sanctions against persons of any nationality found to:
- Operate in the construction, energy, financial services, fishing, information technology, manufacturing, medical, mining, textiles, or transportation industries in North Korea;
- Own, control, or operate any port in North Korea, including any seaport, airport, or land port of entry; or
- Have engaged in at least one significant importation from or exportation to North Korea of any goods, services, or technology.
Persons or entities sanctioned under these authorities would become SDNs subject to full U.S. blocking sanctions, effectively foreclosing them from the U.S. economy and financial system. The Executive Order also provides authority to sanction any North Korean person or entity and the usual blanket authority to sanctions persons providing support to, or operating for or on behalf of, listed persons.
In addition, the Executive Order provides authority to sanction any foreign financial institution that:
- Knowingly conducts or facilitates any significant transaction with or on behalf of a north Korean blocked person or entity; or
- Knowingly conducts or facilitates any transaction in connection with trade with North Korea.
Any such institution designated would either have its access to U.S. dollar correspondent accounts restricted or terminated or become an SDN.
Furthermore, the Executive Order creates a somewhat novel form of sanctions pursuant to which the Secretary of the Treasury can designate for blocking sanctions any account:
- Owned or controlled by a North Korean person, or
- That has been used to transfer funds in which any North Korean person has an interest.
It appears that the sanctions would apply to particular accounts rather than to the accountholders, which is unusual. Designating accounts that have been used to process North Korean funds blocking seems to be a possible variation on secondary sanctions, in the case of non-North Korean accounts that have been used to route funds on behalf of North Korea. It remains to be seen how these sanctions will be applied; no accounts have yet been designated.
As with all secondary sanctions, the imposition of the sanctions above is not automatic upon engaging in the specified conduct. A specific designation by the U.S. authorities is required to impose sanctions, and such a designation is fundamentally a political decision. The secondary sanctions are best understood as a threat to impose the specified consequences on persons engaged in targeted transactions with North Korea rather than a violation of law per se.
Finally, the Executive Order bars from the United States any vessel or aircraft that has called in North Korea within the last 180 days (or, in the case of vessels, has engaged in a ship-to-ship transfer with a vessel that has called in North Korea within the last 180 days).
Please do not hesitate to contact Paul Marquardt of our Washington office, or any of your usual contacts at the Firm, should you have any further question.