Enacts Most Stringent Section 311 Measure Against North Korea
WASHINGTON – The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) today issued a final rule under Section 311 of the USA PATRIOT Act to further restrict North Korea’s access to the U.S. financial system. Specifically, the final rule prohibits U.S. financial institutions from opening or maintaining correspondent accounts for North Korean banks and also requires U.S. financial institutions to apply additional due diligence measures in order to prevent North Korean financial institutions from gaining improper indirect access to U.S. correspondent accounts. The rule was proposed in June 2016 along with publication of the notice of finding that North Korea is a jurisdiction of “primary money laundering concern” engaged in illicit conduct, including using state-controlled financial institutions and front companies to engage in proliferation of WMD and ballistic missiles and to evade international sanctions.
“North Korea continues to use front companies and agents to conduct illicit financial transactions—some of which support the proliferation of WMD and the development of ballistic missiles—and evade international sanctions,” said Adam J. Szubin, Acting Under Secretary for Terrorism and Financial Intelligence. “Such funds have no place in any reputable financial system.”
While North Korea’s financial institutions do not maintain correspondent accounts with U.S. financial institutions, the North Korean government continues to use state-controlled financial institutions and front companies to surreptitiously conduct illicit international financial transactions, some of which support the proliferation of weapons of mass destruction and the development of ballistic missiles. Section 311 of the USA PATRIOT Act grants the Secretary of the Treasury the authority, upon finding that reasonable grounds exist, to conclude that a foreign jurisdiction is of primary money laundering concern and to require domestic financial institutions and financial agencies to take certain “special measures” against the identified jurisdiction. Section 311 also provides the Secretary with a range of options that can be adapted to protect the U.S. financial system from specific money laundering and terrorist financing risks.
While current U.S. law already generally prohibits U.S. financial institutions from engaging in both direct and indirect transactions with North Korean financial institutions, today’s action supports international sanctions already in place against North Korea and provides greater protection for the U.S. financial system from North Korean illicit activity.
The final rule, as submitted to the Federal Register, is available here.