CONSEQUENCES OF ENGAGING IN PROHIBITED OR SANCTIONABLE CONDUCT

CONSEQUENCES OF ENGAGING IN PROHIBITED OR SANCTIONABLE CONDUCT
1. DPRK REWARDS FOR JUSTICE

CONSEQUENCES OF ENGAGING IN PROHIBITED OR SANCTIONABLE CONDUCT

Individuals and entities engaged in or supporting DPRK IT worker-related activity, including processing related financial transactions, should be aware of the potential legal consequences of engaging in prohibited or sanctionable conduct.

UN Security Council resolutions 2321, 2371, and 2397 highlight that the revenue generated from overseas DPRK workers contributes to the DPRK’s nuclear weapons and ballistic missile programs. UN Security Council resolution 2375 prohibits UN Member States from providing new work authorizations, or renewing expired authorizations, for DPRK nationals in their jurisdictions in connection with admission to their territories unless approved in advance by the UN Security Council’s 1718 Committee. UN Security Council resolution 2397 requires all Member States to repatriate, by December 22, 2019, DPRK nationals earning income in their jurisdiction—regardless of when or whether work authorizations were issued for the DPRK nationals in question.

The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has the authority to impose financial sanctions on any person determined to have, among other things:

Engaged in significant activities on behalf of the Government of the DPRK or the Workers’ Party of Korea that undermine cybersecurity;
Operated on behalf of the DPRK in the IT industry;
Engaged in certain other malicious cyber-enabled activities;
Engaged in at least one significant importation from or exportation to the DPRK of any goods, services, or technology;
Sold, supplied, transferred, or purchased, directly or indirectly, to or from the DPRK or any person acting for or on behalf of the Government of the DPRK or the Workers’ Party of Korea, software, where any revenue or goods received may benefit the Government of the DPRK or the Workers’ Party of Korea; or
Materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, the Government of the DPRK or the Workers’ Party of Korea

For example, in 2018, the United States designated for sanctions the China-based technology firm Yanbian Silverstar Network Technology Co., Ltd. This company was nominally a Chinese IT company, but in reality it was managed and controlled by North Koreans. This company also created a Russia-based front company, Volasys Silver Star, to circumvent identification requirements on freelance job forums. Additionally, if the Secretary of the Treasury, in consultation with the Secretary of State, determines that a foreign financial institution has knowingly conducted or facilitated significant trade with the DPRK, or knowingly conducted or facilitated a significant transaction on behalf of a person designated under a DPRK-related Executive Order, or under Executive Order 13382 (Weapons of Mass Destruction Proliferators and Their Supporters) for DPRK-related activity, that institution may, among other potential restrictions, lose the ability to maintain a correspondent or payable-through account in the United States.

OFAC investigates apparent violations of its sanctions regulations and exercises enforcement authority, as outlined in the Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, appendix A. Persons who violate the North Korea Sanctions Regulations, 31 C.F.R. part 510, may face civil monetary penalties of up to the greater of the applicable statutory maximum penalty or twice the value of the underlying transaction.

In addition, the Countering America’s Adversaries Through Sanctions Act (CAATSA; Public Law 115-44) Section 321(b) (22 U.S.C. § 9241a), which amended the North Korea Sanctions and Policy Enhancement Act of 2016 (22 U.S.C. § 9241 et seq.), created a rebuttable presumption that significant goods, wares, merchandise, and articles mined, produced, or manufactured wholly or in part by North Korean nationals or North Korean citizens anywhere in the world are forced-labor goods prohibited from importation under the Tariff Act of 1930 (19 U.S.C. § 1307). This means that these goods shall not be entitled to entry at any port of the United States and may be subject to detention, seizure, and forfeiture. Violations may result in civil penalties, as well as criminal prosecution. However, pursuant to CAATSA, such goods may be imported into the United States if the Commissioner of U.S. Customs and Border Protection (CBP) finds by clear and convincing evidence that the goods were not produced with convict labor, forced labor, or indentured labor. The prohibition against the importation of goods produced with convict labor, forced labor, or indentured labor under penal sanctions (including forced or indentured child labor) was created under the Tariff Act of 1930, and as such, has been in place for nearly 90 years.

The Department of Justice is responsible for the investigation and prosecution of applicable federal laws, including the International Emergency Economic Powers Act (“IEEPA”), 50 U.S.C. §§ 1701 et seq., and the Bank Secrecy Act (BSA), 31 U.S.C. §§ 5318 and 5322. Under IEEPA, it is a crime to willfully violate, attempt to violate, conspire to violate, or cause a violation of any license, order, regulation, or prohibition issues pursuant to IEEPA, to include any DPRK-related Executive Order (e.g., Executive Orders 13722 and 13810), Executive Order 13382, and the North Korean Sanctions Regulations, 31 C.F.R. part 510. Persons who willfully violate IEEPA face up to 20 years’ imprisonment, fines of up to $1 million or totaling twice the gross gain, whichever is greater, and potential forfeiture of all funds involved in such transactions. The BSA requires financial institutions to, among other things, maintain effective anti-money laundering programs and file certain reports with FinCEN. Persons violating the BSA may face up to 5 years’ imprisonment, a fine of up to $250,000, and potential forfeiture of property involved in such violations. Corporations and other entities that violate IEEPA, the BSA, and other applicable federal laws may also be criminally prosecuted. The Department of Justice also works with foreign partners to share evidence in support of criminal investigations and prosecutions in the United States and abroad.

Pursuant to 31 U.S.C. § 5318(k), the Secretary of the Treasury or the Attorney General may subpoena a foreign financial institution that maintains a correspondent bank account in the United States for records stored overseas. Where the Secretary of the Treasury or Attorney General provides written notice to a U.S. financial institution that a foreign financial institution has failed to comply with such a subpoena, the U.S. financial institution must terminate the correspondent banking relationship within ten business days. Failure to do so may subject the U.S. financial institutions to daily civil penalties.

DPRK REWARDS FOR JUSTICE

If you have information about illicit DPRK activities in cyberspace, including past or ongoing operations, providing such information through the Department of State’s Rewards for Justice program could make you eligible to receive an award of up to $5 million. For further details, please visit https://rewardsforjustice.net/index/?north-korea=north-korea.

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