Wall Street Journal: Cutting Off the Kim Family Cash

Mar 11, 2013

The Wall Street Journal 

A strategy for making financial sanctions bite in Pyongyang

The United Nations Security Council passed its eighth resolution on North Korea's nuclear program last week, and nobody expects this one to have much more impact than its predecessors. The new sanctions make it a bit harder for the Kim regime to sell arms abroad and procure luxury goods for the ruling elite, but the regime will still be able to earn enough foreign exchange to import necessities for its Stalinist economy.

However, the Obama Administration could wield one part of the sanctions to great effect, if it wants to. Banks in U.N. countries are required to stop handling funds that could be used in the North's nuclear or missile programs. Interpreted broadly, that could be used to cut off all banks doing business with the North from U.S. clearing systems.

Former U.S. National Security Council official David Asher testified last week before the House Foreign Affairs Committee that the Bush Administration discovered financial interdiction was one way to cause enough economic pain for Pyongyang to pay attention. The North Korean Illicit Activities Initiative was able to investigate criminal acts such as drug dealing and counterfeiting, and it used "law enforcement, sensitive diplomacy and other tools to strategically interfere with the Kim regime's financial lifelines."

The culmination of Mr. Asher's effort came in 2005, when the U.S. accused a small Macau bank, Banco Delta Asia, of money laundering and forced it to freeze $25 million believed to belong to the Kim family. That touched a nerve since it threatened the leaders' private wealth, estimated in the billions of dollars. It also warned other financial institutions that dealing with North Koreans could put them in a world of trouble.

President George W. Bush allowed his Secretary of State Condoleezza Rice and lead North Korea negotiator Christopher Hill to give away this leverage in 2007 in return for Pyongyang's promise to come clean about its nuclear program. Naturally that never happened, and the following year the U.S. took the North off the list of nations sponsoring terrorism in another misguided carrot. This means that North Korea has better access to the global financial system today than Iran does, despite being much further along in its nuclear program and having 28,000 American troops in its cross-hairs on the Korean Peninsula. Mr. Asher last week set out some eminently sensible recommendations to put the economic pressure back on.

First and foremost, he called on the Obama Administration to resurrect the interagency task force he once led, the North Korean Activities Group. Without a body taking responsibility for going after the Kim family's money, the West will continue to play the losing game of resolutions and ineffective sanctions.

http://online.wsj.com/article/SB10001424127887323826704578353871979784406.html