By Chang Jae-soon
WASHINGTON, June 1 (Yonhap) -- The U.S. blacklisting of North Korea as a "primary money laundering concern" could hit Pyongyang hard by making banks around the world shun dealings with the regime as seen in the case of a similar 2005 sanction, American experts said Wednesday.
The U.S. Treasury Department announced the designation earlier in the day as a follow-up measure of the North Korea Sanctions and Policy Enhancement Act, enacted in February to punish the North for conducting its fourth nuclear test in January and a long-range rocket launch the following month.
The Treasury said the North is "notoriously deceitful in its financial transactions in order to continue its illicit weapons programs and other destabilizing activities." It also called on all governments and financial authorities to follow suit.
It was the first time the U.S. has blacklisted the North as a money laundering concern. The decision also came well ahead of the August deadline for such designation under the sanctions law. These show that the U.S. is determined to increase pressure on Pyongyang over its nuclear and missile programs.
"This is a significant action. It puts at risk any foreign financial institution that Treasury finds is conducting transactions on North Korea's behalf and which involves the U.S. financial system," Richard Nephew, a former State Department sanctions expert, said in comments to Yonhap News Agency.
"It doesn't necessarily preclude banks from doing business with North Korea but it will make that business more risky and -- hopefully -- therefore discourage banks from taking on that business altogether," said Nephew, currently an adjunct professor at Columbia University's School of International and Public Affairs.
The designation is similar to the 2005 blacklisting of a Macau bank for doing business with the North.
By designating the bank in the Chinese territory, Banco Delta Asia (BDA), the U.S. not only froze $24 million in North Korean money held in the bank, but also scared away other financial institutions from dealing with Pyongyang for fear they would also be blacklisted.
The measure hit Pyongyang hard, and reports at the time said North Korean officials had to carry around bags of cash for financial transactions because they were not able to use the international banking system. The sanctions were later lifted in exchange for a denuclearization agreement that later fell apart.
The measure has been considered the most effective U.S. sanction on the North yet.
"Will it be more effective than BDA? Perhaps. It really depends on how Treasury uses the authority and how North Korea perceives the impact," Nephew said. "If they have money at direct risk and care about losing it then I suspect they can be influenced by this action. But that was the key in BDA and will be the key here."
Joshua Stanton, a lawyer and sanctions expert who helped write the North Korea sanctions law, hailed Wednesday's blacklisting as "the single most important sanction yet imposed on North Korea by the United States."
"It invokes the most powerful special measure that Section 311 of the Patriot Act provides, by cutting off North Korea's access to correspondent accounts in the U.S. financial system, and consequently, to the system itself. It has the potential to greatly exceed the effect of the more limited 2005 action against Banco Delta Asia," he told Yonhap.
Stanton said that the North has sustained itself using the U.S. financial system to profit from proliferation, arms dealing, counterfeiting, and drug trafficking to fund its prohibited weapons programs, military, internal security forces, and the extravagant lifestyles of its elites
"Pyongyang accessed the financial system through deceptive financial practices, co-mingling the proceeds of its legal and illegal trade, which is commonly known as money laundering," he said.
Stanton also said the blacklisting is the "death knell for Kim Jong-un's byungjin policy" of simultaneously pursuing nuclear and economic development.
"By cutting off his access to his sources of regime-sustaining hard currency, it denies him a viable, long-term strategy for financial survival unless he commits, irreversibly, to disarmament and reform," the expert said.
Combined with new sanctions imposed by the European Union last week, the measure will "put unprecedented financial pressure on Kim Jong-un, and will eventually deny him the means to sustain his regime," he said.
"In due course, Kim Jong-un must either disarm and reform, or face the end of his misrule," Stanton said.
BTS-inspired webtoon to be released this week
(URGENT) 1 person recovered from Gwangju construction accident site pronounced dead: officials
(LEAD) Daily infections over 4,000 for 2nd day; imported cases hit record high
Moon expresses condolences over death of pilot in F-5E crash
(LEAD) U.S. reaffirms security commitment to S. Korea following NK missile tests
(2nd LD) N. Korean cargo train arrives in Chinese city of Dandong: sources
(3rd LD) N. Korea says it has succeeded in final test-firing of hypersonic missile
(3rd LD) N. Korea announces firing of 2 train-borne guided missiles into East Sea
(2nd LD) Ruling party's presidential candidate eyes 'de facto' unification with N. Korea
Moon not considering attending Beijing Olympics: Cheong Wa Dae
(3rd LD) N. Korea says it confirmed accuracy of tactical guided missiles in test-firing
(LEAD) Daily cases back above 4,000 amid omicron woes
Man sets himself on fire over feud with international marriage agency
Up to 5cm of snow forecast for Seoul on Wednesday afternoon
DP presidential candidate Lee apologizes over recordings containing invective