G-20 summit: Tougher economic sanctions on North Korea will be high on agenda

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Rajiv Biswas, Asia Pacific Chief Economist, IHS Markit 

The US has signaled that it will push for tougher economic sanctions at the G-20 summit in Hamburg this week in order to step up economic and financial pressure on North Korea.

A key focus is likely to be on imposing sanctions on additional banks and companies that are considered to be involved in facilitating illicit North Korean financial activity.

Both the US and the United Nations Security Council have also recently increased the number of companies subject to economic and financial sanctions in relation to involvement in North Korea’s nuclear weapons program.

North Korea’s decision to launch another missile on 4 July will increase the pressure on G-20 nations to step up economic sanctions on North Korea. North Korea claimed that it was the Hwasong-14 missile and it flew for a distance of 933 kilometers. It is believed to have landed in Japan’s exclusiveeconomic zone.

A trilateral meeting between US President Trump, Japanese Prime Minister Abe, and South Korean President Moon Jae-in will be held on the sidelines of the G-20 Summit, in order to take the lead in increasing economic pressure on North Korea.

The decision to hold a US-Japan-South Korean trilateral meeting follows the US-South Korea summit on 30 June, during which a key focus of the bilateral discussions was on joint action strategy to increase pressure on North Korea.

US Treasury Secretary Steven Mnuchin has also signaled that the US will meet with other G-20 countries at the G-20 summit in Hamburg on 7-8 July to discuss further measures to cut off North Korea’s illicit activities.

On 29 June, Mnuchin announced that the US had imposed sanctions on a Chinese shipping company, the Dalian Global Unity Shipping Co Ltd., as well as two Chinese individuals for facilitating North Korea’s nuclear weapons and missiles programs.

At the same time, the US also imposed sanctions on a Chinese bank, the Bank of Dandong, for alleged money laundering for North Korea, with the US Treasury stating that the bank had acted as a conduit for illicit North Korean financial activity.

The US Treasury’s Financial Crimes Enforcement Network will take immediate steps to prevent the bank from having access to the US and international financial systems.

As a result of the new US sanctions and expectations that additional banks could face sanctions, global banks are likely to step up their compliance measures in order to ensure that their counter party banks and clients are not involved in any illicit transactions involving North Korea’s nuclear weapons or ballistic missiles program or other forms of activities that could be construed as money laundering for North Korea.

Increased international support for tougher sanctions on North Korea was also reflected in the United Nations Security Council decision on 3 June to increase the number of individuals and entities covered by a travel ban and asset freeze due to their involvement in North Korea’s nuclear weapons program, including North Korea’s Koryo Bank and two North Korean companies.