Three Things the U.S. Government Can Do Now to Ruin Kim Jong-un Financially

By Jeune Kim, HRNK Research Intern
Edited by Rosa Park, HRNK Director of Programs and Editor and Benjamin Fu, HRNK Research Intern

October 1, 2020

On the third anniversary of Otto Warmbier’s passing, HRNK hosted a conversation with Warmbier’s mother, Cindy Warmbier. Mrs. Warmbier and her husband, Fred, have been actively chasing North Korean financial assets and raising awareness about the Kim regime’s human rights abuses. During the conversation, Mrs. Warmbier emphasized the need to sustain pressure on North Korea and expressed her frustration with the U.S. government’s inability to properly respond to Pyongyang’s transgressions and illegal activities. 

North Korea is relentless, brutal, and unapologetic as it continues to commit atrocities against its own citizens, South Korean citizens, and innocent victims in the international community. It seems that there is little that can be done to hold this regime accountable for its crimes against humanity. While the United States does not have the personal or territorial jurisdiction to physically arrest North Korean officials who commit crimes against humanity or violate sanctions, unless they are on U.S. soil, the government does have the power to target a critical element of the Kim regime’s survival arsenal: its financial assets.  

Emptying Kim Jong-un’s pocketbook is a matter of national security. Cutting off the North Korean regime from illicitly accessing global financial markets is the first step toward stalling the development of its WMD program. It would destabilize and disempower a regime that brutalizes and oppresses its own citizens and threatens the human rights and lives of members of the international community and innocents such as Otto Warmbier. 

Targeting Kim Jong-un’s financial network is the key to depleting his regime’s cash reserves. Specifically, the United States government must deal with an unregulated cryptocurrency market and Chinese banks that enable the North Korean regime to continue its illicit activities. 

The three following recommendations specify what the U.S. government can do now to ruin Kim Jong-un financially:

1. Federal Recognition and Regulation of Cryptocurrency

North Korea has exploited the vulnerabilities of the unregulated cryptocurrency industry to finance their criminal activities. As expressed in former HRNK Legal Research Intern Lauren Jackson’s article “An Irresistible Target: North Korea’s Use of Cryptocurrency to Fund the Regime,” a steady revenue of funds from cryptocurrency would allow the North Korean leadership to continue funding its nuclear and ballistic missile programs and systematic denial of human rights. While some states have taken steps to implement legal regulations of the cryptocurrency industry, the lack of a coherent federal policy has limited the U.S. government’s ability to hold bad actors accountable. The Financial Action Task Force (FATF) has already produced a report with policy proposals to address this issue. Some of their recommendations include the acceptance of cryptocurrency as legal tender and the banning of mixers, a coin laundering technology that allows actors to remain anonymous. Legitimizing cryptocurrency would subject the crypto market to anti-money laundering laws and know-your-customer regulations. Banning mixers would remove the cover of anonymity from virtual coin exchanges and make transactions easier to trace. Furthermore, the United States could push the UN Global Programme on Cybercrime to charge North Korean cryptocurrency-related crimes as human rights violations. 

2. Raise the Legal Stakes for North Korea’s Enablers

Raising the legal pressure on third-party banks and countries that facilitate Kim Jong-un’s illicit financial flows is essential to dismantling his financial networks. The Treasury and Justice Departments can use summons and subpoena authority to collect bank records about the transactions and financial activities of the parties named in indictments. This action would open the path for escalation to civil forfeiture actions and civil penalties for violating sanctions regulations. This method of executing heavy civil penalties was central to the success of the Iranian sanctions during the Obama administration. To incentivize foreign governments to cooperate with these legal proceedings, these Departments could also offer to share a portion of the forfeiture assets with them. Raising the legal stakes would be critical as an ex-ante preventive measure to dissuade other banks and financial institutions from getting involved in any deal with Pyongyang and isolate them from the global financial system.

3. Penalize Chinese Banks and Financial Institutions for Violating or Failing to Enforce International Sanctions

There is ample evidence that China’s financial institutions have facilitated North Korea’s money-laundering operations and disregarded UN and U.S. sanctions and money-laundering laws. For example, the Bank of China was responsible for facilitating the transaction of an illegal shipment of North Korean weapons through a Singapore-based account. While the Justice Department has taken steps in recent years to indict Chinese banks such as Dandong Hongxiang and Dandong Zhicheng Metallic Materials for violating North Korea sanctions, UN reports reveal how North Korean banks and money launderers continue to operate through Chinese financial institutions. 

Joshua Stanton, an attorney and expert on North Korea sanctions policy, stressed the need to hold China’s banks accountable, saying: 

[I]n terms of financial sanctions, I’ll believe we’ve reached maximum pressure when Treasury begins to impose nine-digit penalties on major Chinese banks that continue to launder Kim Jong-un’s money like the ones the Obama administration assessed against major European banks in 2014 and 2015 for laundering Iran’s money… I’ll believe it’s maximum pressure when major Chinese banks are serious enough about blocking and closing North Korean accounts that U.N. reports and Justice Department documents cease to confirm that the banks aren’t complying.

It is not overreaching to demand that China, a permanent member of the UN Security Council uphold its obligation to enforce UN sanctions resolutions and expel all representatives of North Korean financial institutions. Why should China’s banks be immune from international monetary laws and regulations, especially when these resolutions were passed with the support of their own government? 

Implementing these three courses of action will yield two results. First, the U.S. government can raise the stakes for North Korea’s enablers and discourage future third-party involvement in such illicit activities. Second, the U.S. government can raise the premium that Pyongyang must pay any third-party facilitator that does take the risk of dealing with them, which will accelerate the depletion of Kim Jong-un’s cash reserves. Hesitating to do so is essentially the equivalent of granting immunity to the Kim regime and its enablers, and putting their interests above the survival of 25 million North Koreans. While these measures will not deliver an immediate halt to North Korea’s illicit activities nor bankrupt Kim Jong-un in a day, they are critical steps to ensuring that his enablers pay the price for bankrolling a regime that is guilty of crimes against humanity.

​Jeune Kim is a second-year student pursuing an M.A. in Global Policy Studies at the LBJ School of Public Affairs at the University of Texas. Her specialization is in Security, Law, and Diplomacy.

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[1] See Kim Young-gyo and Eunjung Cho, “Otto Warmbier's Parents Chase North Korean Assets in Eastern Europe,” Voice of America, July 10, 2020,
https://www.voanews.com/usa/otto-warmbiers-parents-chase-north-korean-assets-eastern-europe
[2] See FATF, FATF Report to the G20 Finance Minister and Central Bank Governors, July 18, 2018, http://www.fatf-gafi.org/media/fatf/documents/reports/FATF-Report-G20-FM-CBG-July-2018.pdf.
[3] See Joshua Stanton, “You want maximum pressure? Oh, I’ll show you maximum pressure.”, One Free Korea, February 28, 2018, http://freekorea.us/2018/02/28/you-want-maximum-pressure-oh-ill-show-you-maximum-pressure/
[4] See Joshua Stanton, “Steve Mnuchin is defying Congress & undermining the President’s North Korea policy,” One Free Korea, April 25, 2018, http://freekorea.us/2018/04/25/steve-mnuchin-is-defying-congress-undermining-the-presidents-north-korea-policy/
[5] See UN Security Council, “Report of the Panel of Experts established pursuant to resolution 1874 (2009)”, February 23, 2015, UN Doc. S/2015/131, https://www.un.org/ga/search/view_doc.asp?symbol=S/2015/131
[6] See UNITED STATES OF AMERICA V. DANDONG HONGXIANG INDUSTRIAL DEVELOPMENT CO. LTD., MA XIAOHONG, ZHOU JIANSHU, LUO CHUANXU, and HONGJINHUA (2016)
​https://www.justice.gov/opa/file/897041/download and U.S. Department of the Treasury, “Treasury Targets Chinese and Russian Entities and Individuals Supporting the North Korean Regime”, August 22, 2017, https://www.treasury.gov/press-center/press-releases/Pages/sm0148.aspx
[7] See UN Security Council, “Report of the Panel of Experts established pursuant to resolution 1874 (2009)”, March 2, 2020, UN Doc. S/2020/151, https://undocs.org/S/2020/151
[8] See Joshua Stanton, “You want maximum pressure? Oh, I’ll show you maximum pressure.”, One Free Korea, February 28, 2018, http://freekorea.us/2018/02/28/you-want-maximum-pressure-oh-ill-show-you-maximum-pressure/
[9] See Mary Dejevsky, “The UN vote against North Korea shows the system working – for once,” The Guardian, August 6, 2017, https://www.theguardian.com/commentisfree/2017/aug/06/north-korea-un-vote-russia-china-resolution-2371