King's College London

During the period under review, the Democratic People’s Republic of Korea has intensified its prohibited activity by engaging in an unprecedented number of nuclear and ballistic missile-related tests. In response, the Security Council adopted resolutions 2270 (2016) and 2321 (2016), in which it significantly strengthened the sanctions regime against the Democratic People’s Republic of Korea. While these measures impose new obligations on Member States, the Panel’s investigations show that implementation remains insufficient and highly inconsistent. All Member States should reaffirm their commitment to rigorous enforcement of United Nations sanctions.

The Democratic People’s Republic of Korea is flouting sanctions through trade in prohibited goods, with evasion techniques that are increasing in scale, scope and sophistication. The Panel investigated new interdictions, one of which highlighted the country’s ability to manufacture and trade in sophisticated and lucrative military technologies using overseas networks. Another interdiction, of the vessel Jie Shun, was the largest seizure of ammunition in the history of sanctions against the Democratic People’s Republic of Korea, and showed the country’s use of concealment techniques, as well as an emerging nexus between entities trading in arms and minerals. The Panel’s investigations further revealed previous arms trading by the Democratic People’s Republic of Korea and cooperation in Africa, including hitherto unreported types of cooperation on a large scale.

Designated entities and banks have continued to operate in the sanctioned environment by using agents who are highly experienced and well trained in moving money, people and goods, including arms and related materiel, across borders. These agents use non-nationals of the Democratic People’s Republic of Korea as facilitators, and rely on numerous front companies. Diplomats, missions and trade representatives of the Democratic Peoples’ Republic of Korea systematically play key roles in prohibited sales, procurement, finance and logistics. In particular, designated entities are trading in banned minerals, showing the interconnection between trade of different types of prohibited materials.

Behind these illicit activities is the continued access of the Democratic People’s Republic of Korea to the international banking system. Despite strengthened financial sanctions in 2016, the country’s networks are adapting by using greater ingenuity in accessing formal banking channels, as well as bulk cash and gold transfers. Banks of the Democratic People’s Republic of Korea maintain correspondent bank accounts and representative offices abroad and partner with foreign companies in joint ventures. Banks and designated entities of the Democratic People’s Republic of Korea make use of broad interwoven networks to undertake procurement and banking activity. Their ability to conceal financial activity by using foreign nationals and entities allows them to continue to transact through top global financial centres.

Despite the new sectoral bans adopted for the first time in 2016, the Democratic People’s Republic of Korea continues to export banned minerals to generate revenue. This is complicated by the fact that Member States have different interpretations of the minerals listed in the 2016 resolutions and construe their exemption clauses differently in practice. S/2017/150 17-01388 5/326 By blocking the vessels listed in resolution 2270 (2016) as assets of Ocean Maritime Management, Member States successfully prevented their access to foreign ports. However, the Democratic People’s Republic of Korea has since adapted to these measures through various tactics, including identity fraud.

The Panel’s report shows that, despite the support of Member States for strengthened sanctions by the Security Council through two new resolutions adopted in 2016, this effort has not yet been matched by the requisite political will, prioritization and resource allocation to ensure effective implementation. The Panel recommends a series of designations and practical measures in order to offer the Security Council, the Committee and Member States additional tools by which to address current challenges and shortcomings.

The Panel reiterates that the recommendations made in its previous reports remain valid and should be reconsidered in the light of the additional information that it has gathered.

A. Recommendations of the Panel to the Committee

Recommendation 1: In accordance with paragraph 27 of resolution 2094 (2013) and paragraph 43 of resolution 2270 (2016), the Panel recommends that the Committee designate the entities and individuals listed in annex 17 to the present report.

Recommendation 2 The Panel recommends that the Committee update the existing list of designated individuals and entities as follows:

(a) Namchongang Trading Corporation as an a.k.a. to KPe.004: A.k.a: Korea Tearyonggang/or Daeryonggang Trading Corporation (조선대령강무역회사, 朝鲜大玲江贸易会社) Address: Sengujadong 11-2/(or Kwangbok-dong), Mangyongdae District, Pyongyang, Democratic People’s Republic of Korea Other information: Tel.: +850-2-18111, 18222 (ext. 8573); fax: +850-2-381-4687

(b) Green Pine Associated Corporation as an a.k.a. to KPe.010: A.k.a. “National Resources Development and Investment Corporation” and “Saeng Pil Trading Corporation” Address: Rakrang No. 1 Rakrang District Pyongyang Korea, Chilgol-1 dong, Mangyongdae District, Pyongyang, Democratic People’s Republic of Korea; Other information: Tel.: +850-2-18111 (ext. 8327); fax: +850-2-3814685; +850-2-3813372; e-mail: pac@silibank.com; kndic@co.chesin.com.

Recommendation 3 The Panel recommends that the Committee establish a list of designated vessels (subject to seizure as economic resources pursuant to paragraphs 12 and 23 of resolution 2270 (2016)), which includes vessel-identifying characteristics, and maintain the list as for designated individuals. In addition, the aliases of OMM vessels contained in table 5 should be added to the list.

Recommendation 4 The Panel recalls paragraph 23 of resolution 2321 (2016), by which the Security Council decided to prohibit the procurement of crewing services from the Democratic People’s Republic of Korea, and recommends that the Council prohibit all flag registries from registering vessels commanded by officers from the Democratic People’s Republic of Korea or operated by crews from that country.

Recommendation 5 The Panel recommends that the Committee propose to the Security Council that “chartering” be added to paragraph 9 of resolution 2321 (2016).

Recommendation 6 In the light of the use by the Democratic People’s Republic of Korea of foreign companies to perform financial services, the Panel recommends that the Committee clarify that companies performing financial services commensurate with those provided by banks are considered to be financial institutions for the purposes of the resolutions.

Recommendation 7 The Panel recommends that the Committee propose that the Security Council extend the prohibition on establishing joint ventures with banks of the Democratic People’s Republic of Korea to include companies as well as financial institutions.

Recommendation 8 To ensure consistency as to which actual items are considered prohibited, the Panel recommends that the Committee issue an implementation assistance notice containing the Harmonized System codes that correspond to the minerals listed in resolutions 2270 (2016) and 2321 (2016).

B. Recommendations of the Panel to Member States

Recommendation 1 Member States should exercise heightened vigilance over diplomatic agents of the Democratic People’s Republic of Korea who are engaging in professional or commercial activities, particularly in prohibited items.

Recommendation 2 Member States should annul any contracts with the Democratic People’s Republic of Korea or its nationals concerning the direct or indirect supply or transfer of statues, or services related to the maintenance of statues.

Recommendation 3 Flag and port States should verify the origin and legal validity of insurance of Democratic People’s Republic of Korea-flagged vessels or vessels suspected of being crewed by the Democratic People’s Republic of Korea.

Recommendation 4 Member States should communicate to the Committee available information on designated entities or entities owned or controlled by individuals acting on behalf of or at the direction of designated entities or individuals, or those which have assisted in the evasion of sanctions or violation of the resolutions.

Recommendation 5 Member States should exercise enhanced vigilance over their companies participating in the Pyongyang International Trade Fair and alert them that any form of engagement with designated entities or those undertaking prohibited activities is a violation of the resolutions.

Recommendation 6 Given the continuing activities by designated banks and their representatives, the Panel recalls Member States’ obligation to freeze all assets controlled by them and those acting on their behalf, and to report such actions to the Committee and to share relevant information with the Panel.

Recommendation 7 When Member States freeze bulk cash or gold smuggled by nationals of the Democratic People’s Republic of Korea, they should immediately inform the Committee and ensure that they cannot be used for prohibited activities or evasion of sanctions before releasing them.

Recommendation 8 Member States should strengthen information-sharing on transnational network evasion cases and typologies to assist banks and financial institutions in determining whether certain transactions involve activities prohibited under the resolutions.

Recommendation 9 The Panel draws attention to the continued export by the Democratic People’s Republic of Korea of prohibited minerals and calls upon Member States to effectively implement paragraphs 26 and 28 of resolution 2321 (2016) and paragraph 30 of resolution 2270 (2016) by ceasing the import of all banned minerals, adhering to the caps established for coal and ensuring that all the listed conditions are met for coal shipments falling under the cap.