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Experts Predict Tighter US Sanctions on N. Korean Front Companies

FILE - A propaganda billboard, which reads "Forward to the Ultimate Victory" in Korean is seen standing in central Kaesong, North Korea.
FILE - A propaganda billboard, which reads "Forward to the Ultimate Victory" in Korean is seen standing in central Kaesong, North Korea.

North Korea experts in the United States say they expect Washington to strengthen sanctions against the communist country’s front companies abroad. They also argue, however, that sanctions on Chinese financial institutions which engage with the North will not be as easy.

On January 2, U.S. President Barack Obama issued an administrative order for sanctions on North Korea in response to the recent hacking of Sony Pictures Entertainment. The company released a film titled The Interview late last year, a fictional comedy which depicts American journalists attempting to assassinate North Korean leader Kim Jong Un.

The latest measure allows the American government to impose sanctions on the North Korean Reconnaissance General Bureau, Mining Development Trading Corporation, and Tangun Trading Corporation, as well as 10 individuals.

White House Press Secretary Josh Earnest implied there will be follow-ups to the administrative order, stating it is “the U.S. government’s first action against North Korea.”

While the Obama administration is considering more ways to put pressure on Pyongyang, experts say the latest sanctions are more symbolic than anything else.

“We are running out of things to sanction [regarding North Korea],” said John Merrill, former Chief of the Northeast Asia Division of the Bureau of Intelligence and Research at the State Department, told VOA’s Korean Service.

“We have already sanctioned so many things that what we had to do was to double up," he said. "We essentially sanctioned some organizations and entities that have been previously sanctioned," said Merrill.

Room for more, some say

Sanctions on the North’s front companies abroad, however, can be strengthened further, experts say.

Former member of the United Nations Panel of Experts on DPRK Sanctions William Newcomb said, “a good part of North Korea’s overseas support is through North Korean established front companies.”

Front companies are shell companies protecting select entities from liability.

Newcomb added foreigners who are working with the North via the front companies are also “potential candidates” for sanctions by Washington.

With the new administrative order, Newcomb said the North’s front companies can now be on a designated list run by the Office of Foreign Assets Control (OFAC) of the U.S. Treasury Department.

For the additional sanctions on North Korea to be effective, experts say the ability to sanction a third country’s institutions and individuals are necessary.

“We know that the North Koreans have been able to penetrate banks and financial institutions in China and operating through them [by] moving money and laundering money,” said Larry Niksch, a senior associate with the Washington-based Center for Strategic and International Studies.

Niksch added, however, that sanctions on Chinese financial institutions are a low priority amongst other issues between the world’s two biggest economies. “It is viewed, especially within the State Department, as potentially too disruptive of overall U.S.-China relations,” he said.

Jee Abbey Lee contributed to this report, which was produced in collaboration with VOA’s Korean Service.