OFAC Issues Guide for North Korea's Illegal Shipping Practices
The Treasury's Office of Foreign Assets Control updated its Specially Designated Nationals List while also issuing an updated guide on “addressing North Korea’s illicit shipping practices,” which includes risk mitigation measures and a summary of penalties for violators, according to a March 21 notice. The changes made to OFAC’s SDN list include the additions of three individuals associated with the Democratic Republic of the Congo, an update to the SDN listing for the Islamic State of Iraq and the Levant, and the addition of two Chinese entities that violated North Korean sanctions regulations. The two Chinese entities are Dalian Haibo International Freight Co. and Liaoning Danxing International Forwarding Co., according to the notice.
As part of the notice, OFAC issued a 19-page guide from the Treasury, the State Department and the Coast Guard on illegal shipping practices they say North Korea is using to evade sanctions. In the report, the U.S. said it recommends “all parties involved in the shipping industry and related commercial entities” -- including shipping companies, managers, operators and brokers -- “be aware of the practices set out in this advisory.”
The report states that North Korea is evading sanctions through “illicit ship-to-ship transfers” of refined petroleum and coal despite “robust” sanctions from both the U.S. and the United Nations. North Korean ports received at least 263 tanker deliveries of petroleum “procured from UN-prohibited ship-to-ship transfers” in 2018, the report said. “If these tankers were fully laden when they made their delivery, North Korea would have imported 3.78 million barrels,” according to the report, which is more than seven times the permitted amount under UN Security Council resolutions. The report also said North Korea is exporting coal through the Gulf of Tonkin, which violates a UN resolution that prohibits trading of North Korean-origin coal.
The report lists and describes several of North Korea’s “deceptive shipping practices,” including disabling and manipulating the Automatic Identification System, in which North Korean ships “often intentionally disable their AIS transponders to mask their movements.” The ships also “sometimes manipulate the data transmitted via AIS,” which includes changing vessel names or altering International Maritime Organization numbers.
North Korean ships are also “physically altering” their vessel’s identification, the report says, and conducting ship-to-ship transfers at sea, potentially transferring petroleum from one ship to another to “conceal the origin or destination of the transferred cargo.” Lastly, the report describes North Korea’s practice of falsifying cargo documents, saying the country “routinely falsifies these documents to obscure” origin or destination.
The guide includes several lists, including an updated list of 28 North Korean tankers “known to be capable of engaging in ship-to-ship transfers of refined petroleum products and other banned goods,” a list of 18 vessels “believed to have engaged in illicit ship-to-ship transfers of refined petroleum with North Korean tanker vessels,” and a list of 49 vessels “believed to have exported North Korean-origin coal” since Aug. 5, 2017.
The report suggests several possible risk mitigation measures companies can take, including researching a ship’s history to “identify regular AIS manipulation,” monitoring for AIS disablement, promoting “continuous AIS broadcasts” and reviewing “all applicable shipping documentation.” The guide also recommends “petroleum supply chain due diligence,” suggesting companies should “mandate that those in the supply chain conduct due diligence to ensure that each recipient and counterparties are not providing oil to a North Korean tanker.”
Companies or individuals who violate sanctions regulations may face “civil monetary penalties and criminal prosecution,” the report states. Each violation of U.S. sanctions on North Korea is subject to a penalty “of up to the greater of $295,141 or twice the value of the underlying transaction,” according to the guide.