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Financial sanctions best way to hit N. Korea

Calls for action have followed a United Nations report that the North Korean regime is culpable for “unspeakable atrocities” and crimes against humanity, including the starvation and murder of millions of people over the past 20 years. China has already said it would block a referral to the International Criminal Court. But the world still has a way to pressure Pyongyang to modify its behavior.

Many believe that U.S. sanctions against North Korea are maxed out. In fact, U.S. sanctions are relatively weak. There are no travel sanctions against North Korea (as with Cuba) nor any against human rights violators (as with Sudan, Iran and Belarus). Critically, there are no broad-based, third-party sanctions against North Korea’s exports or financial sector. Iran and Myanmar are designated as primary money-laundering “concerns” under the Patriot Act, which restricts their access to the global financial system. But North Korea, the world’s most notorious counterfeiter and money-launderer, is not. Import sanctions were relaxed between 2008 and 2011, and Americans can still export to North Korea if they obtain a license.

Opponents of sanctions argue that they would harm the most vulnerable North Koreans. But North Koreans are not hungry because their government is poor. Kim Jong Un has more than $1 billion in European banks and hundreds of millions more in China. In the 1990s, while an estimated 600,000 to 2.5 million North Koreans starved to death, Kim Jong Il bought dozens of new warplanes but impeded the delivery of food aid. The World Food Program sought $98 million last year to feed hungry North Koreans. In 2012 alone, by South Korean government estimates, Kim Jong Un spent $1.3 billion on his missile programs, an amount that could have eliminated North Korea’s food deficit for years. Although multiple U.N. Security Council resolutions ban North Korea from importing luxury items, Kim recently spent $300 million on a water park, a fitness center, a dolphin aquarium, a 3-D cinema and a ski resort stocked with Canadian snowmobiles.

There is good reason to believe that cutting Pyongyang’s links to the global financial system could force changes in its behavior. In September 2005, the U.S. Treasury sanctioned a Chinese bank for laundering money, including counterfeit dollars, for then-leader Kim Jong Il. The sanctions blocked the bank’s access to corresponding accounts in U.S. financial institutions that led to the global financial system; this caused a run on the bank and nearly destroyed it. Other banks around the world, questioned by the Treasury Department about their North Korean deposits, began to block or close those accounts. Soon, Kim Jong Il was financially isolated. He began selling his gold reserves to sustain his regime. One North Korean diplomat told a U.S. counterpart, “You finally found a way to hurt us.”

The bipartisan North Korea Sanctions Enforcement Act would block the offshore accounts that pay for Kim Jong Un’s extravagant lifestyle, weapons programs and the secret police, border guards and others who terrorize the North Korean people. Kim’s rule has been marked by brutal purges and crackdowns. Financial pressure could undermine his capacity to seal borders, frighten his people and buy the loyalty of North Korea’s elites.

A financial strategy also would be harder for China to undermine than a diplomatic strategy or traditional trade sanctions. In 2005 and again last year, Chinese banks shunned North Korean deposits that were targeted by the United States. The Chinese government may not share Washington’s or Seoul’s security or humanitarian goals, but Chinese banks would not risk their access to the global economy to save Kim. And without the help of Chinese banks, Beijing would find it difficult to continue propping up Pyongyang.

Financial sanctions should aim to force the regime to make better decisions about North Korea’s wealth, to add an additional deterrent to protect the United States and its allies and to present Kim with a clear choice between reform and collapse.

Diplomacy has failed to curb North Korea’s growing threat. Pyongyang is on the brink of nuclear breakout. It may be helping Iran achieve the same goal. It has contributed to Syria’s weapons programs. It has abducted foreign nationals. And governments that make war against their own people eventually look for new victims.

Financial pressure was key to bringing Iran to the bargaining table. It could give diplomats the leverage they need with Pyongyang. Improvements in human rights should be an essential first test of North Korea’s acceptance of transparency. To get there, the Obama administration should lead the world in denying the Kim dynasty the tools it uses to brutalize its people and threaten the world.

Joshua Stanton, a lawyer, did work for the House Foreign Affairs Committee last year regarding North Korea, including contributing to the North Korea Sanctions Enforcement Act. Sung-Yoon Lee is an assistant professor of Korean studies at Tufts University’s Fletcher School of Law and Diplomacy. The views expressed are solely their own. This column first appeared in The Washington Post.

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