IMPLEMENTATION OF UNSCR 1874 FINANCIAL

UNCLAS SECTION 01 OF 04 STATE 066250

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EFIN PARM PREL KNNP
SUBJECT: IMPLEMENTATION OF UNSCR 1874 FINANCIAL
PROVISIONS AND INFORMATION ON U.S. ADVISORY ON NORTH
KOREA

REF: 09 STATE 62131


1. (U) This is an action request. Please see paragraph

4.

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SUMMARY AND BACKGROUND
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2. (SBU) On June 12, 2009, the U.N. Security Council
adopted Resolution 1874, a Chapter VII resolution
imposing further measures on the Democratic People's
Republic of Korea (DPRK) in response to its May 25,
2009, nuclear test, including new financial measures
designed to limit the ability of the DPRK to fund WMD
and ballistic missile-related activities, as well as
arms procurement and sales (reftel). Given the
continuation of DPRK proliferation activities, we
strongly urge host governments to undertake specific
actions to ensure immediate and robust implementation of
the financial provisions of UNSCR 1874 in order to
prevent North Korea from using host government
jurisdictions to facilitate arms-related or
proliferation-related financial transactions.


3. (U) We also wish to provide host governments with the
text of the June 18, 2009 Treasury Department advisory
regarding the involvement by DPRK government agencies
and front companies in illicit activities and request
that host governments take specific action to mitigate
the risks posed by North Korea's illicit activities.

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OBJECTIVES/ACTION REQUEST
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4. (U) Washington requests Posts approach appropriate
host government officials in the foreign affairs and
finance ministries to deliver the nonpaper in paragraph
5 and achieve the objectives below. The text of UNSCR
1718 can be found at
www.un.org/Docs/sc/unsc_resolutions06.htm under
S/RES/1718 (2006). The text of UNSCR 1874 can be found
at www.un.org/Docs/sc/unsc_resolutions09.htm under
S/RES/1874 (2009). The text of the FINCEN advisory is
available at
www.fincen.gov/statutes_regs/guidance/html/fi n-2009-
a002.html.

-- Note that UN Security Council Resolution 1874
includes expanded financial measures that aim to impede
the DPRK's ability to fund its nuclear, ballistic
missile, other WMD-related, and conventional
proliferation activities.

-- Note that UNSCR 1718 obligations, including an asset
freeze against designated North Korean entities and a
ban on the sale of luxury goods to North Korea, remain
in place.

-- Request that host governments provide the Treasury
Advisory (paragraph 5) to their financial institutions
and urge host governments to issue advisories to their
financial institutions informing them of the financial
provisions in both UNSCR 1718 and UNSCR 1874,
particularly:


1. the asset freeze requirements for designated DPRK
entities;


2. provisions calling on states to prevent the transfer
of funds and provision of financial services that could
be related to DPRK nuclear-related, ballistic missile-
related, and WMD-related activities;


3. obligations to prevent not only the transfer of all
arms and related materiel to and from the DPRK (except
for North Korean imports of small arms and light weapons
and related materiel),but also services or assistance,
including financial services, related to such transfers;
and


4. the requirement to prevent the supply, sale, or
transfer to the DPRK of luxury goods.

-- Emphasize USG concerns that, given these new

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SUBJECT: IMPLEMENTATION OF UNSCR 1874 FINANCIAL
PROVISIONS AND INFORMATION ON U.S. ADVISORY ON NORTH
KOR
financial measures, the DPRK is likely to engage in
deceptive financial practices and increase its use of
cash couriers to evade sanctions.

-- Note that the USG remains concerned regarding North
Korean production and distribution of high-quality
counterfeit U.S. currency, and urge host governments to
turnover any seized counterfeit U.S. currency to the
USG.

-- Request host governments to require that banks
enhance due diligence regarding North Korean
transactions and banks in light of UNSCR 1874. In
particular, host governments should request that their
financial institutions:


1. Apply enhanced scrutiny to North Korean customers,
transactions and banks, including correspondent accounts
held for North Korean financial institutions, as well as
their foreign branches and subsidiaries, to mitigate the
risks of North Korean proliferation-related activity,
North Korean arms sales/purchases, and North Korean
procurement of luxury goods;


2. Prevent the transfer of funds and the provision of
financial services that could be linked to North Korean
proliferation-related, ballistic-missile related and
WMD-related activities, and illicit conduct;


3. Prevent the provision of financial services that
could contribute to arms sales to/from North Korea;


4. Prevent the provision of financial services that
could contribute to North Korea's procurement of luxury
goods; and


5. Remain vigilant regarding attempts by North Korean
customers to make large cash deposits into new or
existing accounts, as well as the associated risk of the
passing of counterfeit currency.

-- Note USG concerns that the DPRK may increase its use
of cash couriers, urge host governments to investigate
and intercept any North Korean cash couriers, and urge
states to apply enhanced scrutiny to all North Korean
individuals suspected of transporting cash across
international borders.

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TREASURY ADVISORY
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5. (U) BEGIN TREASURY ADVISORY:

The Financial Crimes Enforcement Network ("FinCEN") is
issuing this advisory to supplement information
previously provided 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 Korean
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. 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

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SUBJECT: IMPLEMENTATION OF UNSCR 1874 FINANCIAL
PROVISIONS AND INFORMATION ON U.S. ADVISORY ON NORTH
KOR
arms and light weapons and related materiel to North
Korea. For example, UNSCR 1874 calls upon member states
to prevent the provision of financial services that
could contribute to North Korea's nuclear, ballistic
missile, and other WMD-related programs or activities.
In addition, UNSCR 1874 demands that North Korea
immediately comply with UNSCR 1718, which includes a ban
on the transfer of luxury goods to North Korea.

The U.N. Security Council's adoption of specific
financial measures to address this conduct reinforces
long-standing Treasury Department concerns regarding
North Korea's involvement through government agencies
and associated front companies, in financial activities
in furtherance of a wide range of illicit activities.
These activities include currency counterfeiting, drug
trafficking, and the laundering of related proceeds.
FinCEN has previously noted such conduct, most recently
in 2007. The Treasury Department remains especially
concerned about the use of deceptive financial practices
by North Korea and North Korean entities, as well as
individuals acting on their behalf. Such deceptive
practices may include North Korean clients' suppression
of the identity and location of originators of
transactions; their practice of arranging for funds
transfers via third parties; repeated bank transfers
that appear to have no legitimate purpose; and routine
use of cash couriers to move large amounts of currency
in the absence of any credible explanation of the origin
or purpose for the cash transactions.

In light of the financial measures in UNSCR 1718 and
UNSCR 1874, and the use of deceptive financial practices
by North Korea and North Korean entities, as well as
individuals acting on their behalf, to hide illicit
conduct, FinCEN advises all U.S. financial institutions
to take commensurate risk mitigation measures. FinCEN
notes that with respect to correspondent accounts held
for North Korean financial institutions, as well as
their foreign branches and subsidiaries, there is now an
increased likelihood that such vehicles may be used to
hide illicit conduct and related financial proceeds in
an attempt to circumvent existing sanctions. Financial
institutions should apply enhanced scrutiny to any such
correspondent accounts they maintain, including with
respect to transaction monitoring. Financial
institutions should also continue to ensure that they
are not providing financial services for North Korea's
procurement of luxury goods. This vigilance will help
ensure compliance with UNSCR 1718, which prohibits North
Korea's procurement of such goods. In order to assist
in applying enhanced scrutiny, a list of North Korean
banks is included below. The Treasury Department
encourages financial institutions worldwide to take
similar precautions.

In addition, Treasury is concerned that, in an attempt
to evade U.N. Security Council provisions, North Korea
may increasingly rely on cash transactions. All
financial institutions should remain vigilant regarding
attempts by North Korean customers to make large cash
deposits into new or existing accounts, as well as the
associated risk of the passing of counterfeit currency.
The Treasury Department remains concerned about North
Korean production and distribution of high-quality
counterfeit U.S. currency. The U.S. government is ready
to assist with the investigation of North Korean
counterfeiting of U.S. currency wherever it is detected.
For assistance with counterfeit U.S. currency-related
investigations, please contact your local U.S. Secret
Service office.

Consistent with the standard for reporting suspicious
activity as provided for in 31 C.F.R. part 103, if a
U.S. financial institution knows, suspects, or has
reason to suspect that a transaction involves funds
derived from illegal activity or that a customer has
otherwise engaged in activities indicative of money
laundering, terrorist financing, or other violation of
federal law or regulation, the financial institution
shall then file a Suspicious Activity Report. FinCEN
reminds financial institutions that Executive Order
13382 of June 28, 2005, requires blocking of all
property and interests in property, within the United
States or in the possession or control of U.S. persons,
of certain individuals and entities. Further
information can be obtained from the website of the
Office of Foreign Assets Control of the U.S. Treasury
Department.

Below is a list of some North Korean banks as taken from
public and commercially available information. This is

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SUBJECT: IMPLEMENTATION OF UNSCR 1874 FINANCIAL
PROVISIONS AND INFORMATION ON U.S. ADVISORY ON NORTH
KOR
not meant to be a comprehensive list and is provided for
ease of reference only. For the purposes of this
advisory, financial institutions should take independent
steps as necessary to ensure sufficient awareness of
their entire exposure to North Korean financial
transactions regardless of the financial institution
conducting the transactions.

- Amroggang Development Bank
- Bank of East Land
- Central Bank of the Democratic People's Republic of
Korea
- Credit Bank of Korea
- Dae-Dong Credit Bank
- First Credit Bank
- Foreign Trade Bank of the Democratic People's Republic
of Korea
- Hana Banking Corporation Ltd.
- The International Industrial Development Bank
- Korea Joint Bank (KBJ)
- Korea Daesong Bank
- Korea Kwangson Bank
- Korea United Development Bank
- Koryo Commercial Bank Ltd.
- Koryo Credit Development Bank
- North East Asia Bank
- Tanchon Commercial Bank

END TREASURY ADVISORY

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REPORTING DEADLINE
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6. (U) Post should report results within seven business
days of receipt of this cable. Please slug replies for
ISN, T, EAP, and TREASURY. Please use the caption
SIPDIS in all replies.

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POINT OF CONTACT
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7. (U) Washington point of contact for follow-up
information is Jennifer Chalmers, ISN/CPI, (202) 647-

9715.


8. (U) Department thanks Posts for their assistance.
CLINTON