U.S. GOVERNMENT PUBLISHING OFFICE

28–660 PDF WASHINGTON : 2018

S. HRG. 115–156 

EVALUATING SANCTIONS ENFORCEMENT AND POLICY OPTIONS ON NORTH KOREA: ADMINISTRATION PERSPECTIVES 

HEARING 

BEFORE THE

COMMITTEE ON 

BANKING, HOUSING, AND URBAN AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

ON 

REVIEWING THE CURRENT SANCTIONS AGAINST NORTH KOREA, THE 

EFFECTIVENESS AND ENFORCEMENT OF SANCTIONS AND ASSESSING 

WHAT ADDITIONAL SANCTIONS ACTION, IF ANY, THE UNITED STATES 

SHOULD IMPOSE IN LIGHT OF NORTH KOREA’S CONTINUED MISSILE 

TESTING AND ADVANCING NUCLEAR WEAPONS CAPABILITY 

SEPTEMBER 28, 2017 

Printed for the use of the Committee on Banking, Housing, and Urban Affairs 

( 

Available at: http://www.govinfo.gov/ 

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS 

MIKE CRAPO, Idaho, Chairman 

RICHARD C. SHELBY, Alabama 

BOB CORKER, Tennessee 

PATRICK J. TOOMEY, Pennsylvania 

DEAN HELLER, Nevada 

TIM SCOTT, South Carolina 

BEN SASSE, Nebraska 

TOM COTTON, Arkansas 

MIKE ROUNDS, South Dakota 

DAVID PERDUE, Georgia 

THOM TILLIS, North Carolina 

JOHN KENNEDY, Louisiana 

SHERROD BROWN, Ohio 

JACK REED, Rhode Island 

ROBERT MENENDEZ, New Jersey 

JON TESTER, Montana 

MARK R. WARNER, Virginia 

ELIZABETH WARREN, Massachusetts 

HEIDI HEITKAMP, North Dakota 

JOE DONNELLY, Indiana 

BRIAN SCHATZ, Hawaii 

CHRIS VAN HOLLEN, Maryland 

CATHERINE CORTEZ MASTO, Nevada 

GREGG RICHARD, Staff Director 

MARK POWDEN, Democratic Staff Director 

ELAD ROISMAN, Chief Counsel 

JOHN V. O’HARA, Chief Counsel for National Security Policy 

SIERRA ROBINSON, Professional Staff Member 

ELISHA TUKU, Democratic Chief Counsel 

LAURA SWANSON, Democratic Deputy Staff Director 

COLIN MCGINNIS, Democratic Policy Director 

DAWN RATLIFF, Chief Clerk 

JAMES GUILIANO, Hearing Clerk 

SHELVIN SIMMONS, IT Director 

JIM CROWELL, Editor 

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C O N T E N T S 

THURSDAY, SEPTEMBER 28, 2017 

Page 

Opening statement of Chairman Crapo ................................................................. 1 

WITNESSES 

Sigal Mandelker, Under Secretary for Terrorism and Financial Intelligence, 

Department of the Treasury ................................................................................ 1 

Prepared statement .......................................................................................... 27 

Response to written questions of: 

Senator Menendez ..................................................................................... 35 

Susan A. Thornton, Acting Assistant Secretary, Bureau of East Asian and 

Pacific Affairs, Department of State ................................................................... 2 

Prepared statement .......................................................................................... 31 

Response to written questions of: 

Senator Menendez ..................................................................................... 36 

ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD

List of DPRK Sanction Violators submitted by Senator Van Hollen .................. 41 

(III)

(1) 

EVALUATING SANCTIONS ENFORCEMENT AND 

POLICY OPTIONS ON NORTH KOREA: ADMINISTRATION PERSPECTIVES 

THURSDAY, SEPTEMBER 28, 2017 

U.S. SENATE, 

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, 

Washington, DC. 

The Committee met at 9:30 a.m. in room SD–538, Dirksen Senate Office Building, Hon. Mike Crapo, Chairman of the Committee, 

presiding. 

OPENING STATEMENT OF CHAIRMAN MIKE CRAPO 

Chairman CRAPO. Good morning. This hearing will come to 

order. 

Today we are going to proceed a little differently than usual. One 

of our witnesses, Ms. Thornton, needs to leave by 10:30 in order 

to join Secretary Tillerson on a trip to China, and we have a vote 

at 10:30. In order to allow more Senators time to ask their questions, Senator Brown and I have agreed to submit our opening 

statements for the record, and we have also asked each of our witnesses to shorten their opening statements to just a couple of minutes each so that we can get right to the questions. Obviously, I 

am also going to ask the Senators to be very careful to follow the 

5-minute allocation for their questioning. 

Chairman CRAPO. First, we will receive testimony from the Honorable Sigal Mandelker, the Under Secretary of Treasury for Terrorism and Financial Crimes. And following her, we will hear testimony from Ms. Susan Thornton, Acting Assistant Secretary of 

State for East Asian and Pacific Affairs. And without anything further, let us proceed. 

Under Secretary Mandelker, please proceed. 

STATEMENT OF SIGAL MANDELKER, UNDER SECRETARY FOR 

TERRORISM AND FINANCIAL INTELLIGENCE, DEPARTMENT 

OF THE TREASURY 

Ms. MANDELKER. Thank you. Chairman Crapo, distinguished 

Members of the Committee, I am honored to appear before you to 

discuss the Treasury Department’s strategy to combat the provocative, destabilizing, and repressive actions of North Korea. 

This Administration is applying maximum economic and diplomatic pressure to counter this threat. Treasury’s tools, as you 

know, are central to this campaign and have become among this 

Administration’s top nonkinetic tools of choice. Today I will share 

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with you aspects of our strategy which we are executing at a rapid 

pace. 

We are focused on attacking North Korea’s key financial 

vulnerabilities: 

First, any revenue that North Korea generates can be used to 

support, directly or indirectly, its weapons development programs, 

and so a key part of our strategy is to suffocate North Korea financially by targeting the regime’s most profitable industries, including coal, labor, and the sale of weapons and other goods. We have 

designated dozens of individuals and entities that support these 

lines of business and are also focused on the shipping networks 

that enable them. 

Second, the regime needs to move funds through the international financial system in order to acquire foreign currency, 

transfer funds, and pay for goods. And so we are intent on stopping 

this and on thwarting their ongoing efforts to evade sanctions 

through front companies and other deceptive means. Last week, 

the President issued a new Executive order that gives us greater 

ability and leverage to target foreign banks that support the Kim 

regime. On Tuesday, we took action on North Korean banks and 

designated financial facilitators across the globe. 

In my first week on the job, we acted for the first time in over 

a decade against a non-North Korean bank, China-based Bank of 

Dandong, for facilitating North Korean financial activity through 

the U.S. financial system. Banks worldwide should take note. Of 

course, close collaboration with our international partners is critical, and we are working very actively with partners around the 

globe. 

Time is not on our side. We have an incredibly dedicated team 

at Treasury working around the clock on this urgent problem. Our 

success in curtailing North Korea’s revenue streams and severing 

its access to financial systems is essential to a peaceful resolution 

of this growing crisis. 

I look forward to working closely with this Committee and other 

Members of Congress as we seek to fulfill our shared responsibility 

to keep America safe. 

Chairman CRAPO. Thank you. 

Ms. Thornton. 

STATEMENT OF SUSAN A. THORNTON, ACTING ASSISTANT 

SECRETARY, BUREAU OF EAST ASIAN AND PACIFIC AFFAIRS, DEPARTMENT OF STATE 

Ms. THORNTON. Thank you very much, Chairman Crapo and distinguished Members of the Committee, for the opportunity to appear before you today to discuss the ever increasing threat that 

North Korea poses, and I will just make a very brief statement. 

Today we face a North Korea that has demonstrated an unwavering determination to achieve an intercontinental ballistic missile 

capable of delivering a nuclear payload to our homeland. And in 

the face of this escalating threat, we have the ability to defend ourselves and our allies from any attack, as the President and Secretary of Defense Mattis have made clear. But we also have a clear 

and aggressive strategy to counter this threat and bring about a 

diplomatic resolution employing all available levers of economic 

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and diplomatic pressure on North Korea in order to change the 

Kim regime’s strategic calculus. 

Our diplomatic pressure campaign is aimed at bringing the 

DPRK back to the negotiating table where we hope to achieve an 

agreement on the denuclearization of North Korea, and we recognize that the success of this pressure strategy will depend on heavy 

cooperation from our international partners, especially Beijing. We 

are working closely with China to execute this strategy and are 

clear-eyed in viewing the progress growing, if uneven, that China 

has made on this front. Our task now is to hold China and others 

to these internationally binding obligations and to convince China’s 

leaders to more fully exert their decisive leverage over North 

Korea. 

We do not seek an accelerated reunification of Korea nor an excuse to garrison troops north of the DMZ. What we seek is a peaceful denuclearization of the Korean peninsula and a North Korea 

that stops belligerent actions and does not threaten the United 

States and our allies. 

We appreciate the strong interest in this issue from Congress, 

and we look forward to continuing our cooperation. 

Thank you for inviting me to testify today. I am pleased to answer any questions you may have. 

Chairman CRAPO. Thank you, Ms. Thornton, and I will begin 

with you. Executive Order 13810, like other authorities before it, 

empowers Treasury to go after—excuse me, I should probably ask 

both of you this question—empowers Treasury to go after North 

Korean facilitators and evaders. Press reports suggest the United 

Nations was not able to pass stronger sanctions because of the objections of China and Russia. 

In your opinion, what must be done to put a hard stop on those 

who continue to choose to enrich the Kim regime by facilitating illicit transactions with North Korea? Are secondary financial and 

trade sanctions the answer? 

Do you want to go ahead, Ms. Mandelker? 

Ms. MANDELKER. Sure. Mr. Chairman, thank you for that question. As you know, we have the ability now in the Executive order 

to impose secondary sanctions against financial institutions, and 

we take that new authority very seriously. We believe that the 

UNSCRs, while they were the strongest measures that have ever 

been passed by the United Nations, they represent the floor and 

not the ceiling. And so we have to constantly take additional measures to make sure that they are implemented with full force and 

that we are holding all countries accountable to cut off any revenue 

stream that is going to North Korea. And we are doing that and 

will continue to do so. 

Chairman CRAPO. Thank you. 

Ms. Thornton, do you want to add anything to that? 

Ms. THORNTON. Sure. Thank you. I think what I would say is 

that we are looking very hard now at implementation. The 

UNSCRs we have passed have covered a lot of North Korea’s export hard-currency-earning trade, and what we are doing now is 

working very hard to implement—the new Executive order gives us 

a much greater tool to go ahead and work on implementing and 

trying to ferret out these illicit underground networks that North 

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Korea uses that have been much of the lifeblood of their proliferation networks. And so I think implementation is key. We are working with international partners, as the Under Secretary mentioned, 

and I think continuing a full-court press with those international 

partners on implementation is going to be the key to really upping 

the pressure on the Kim regime. 

Chairman CRAPO. And just quickly, Ms. Thornton, how successful 

do you believe we can be in getting that international cooperation? 

Ms. THORNTON. Well, what I would tell you is that we have been 

raising this issue with every single international partner that we 

have been meeting with, and we have had international partners 

coming to us and volunteering their own national measures that go 

beyond the U.N. Security Council resolutions. So what I have 

seen—and I saw also up at the high-level week at the U.N. in New 

York last week—is that all countries have been—are seized with 

this matter. They are looking actively at what more they can do to 

choke off illicit trade and other kinds of diplomatic presence and 

labor presence in their countries. So I think we will keep up that 

pressure, and we need to keep it up. We need to keep a unified 

international coalition on this. But having countries and our partners raising it with other countries as well has proven to be very 

effective. 

Chairman CRAPO. Thank you. 

And, Ms. Mandelker, when the President announced Executive 

Order 13810, he referenced a Chinese central bank directive sent 

to other Chinese banks that sounded like the central bank instructed the other banks to cut off new business with North Korea 

and to wind down existing loans. There is even less known about 

what will happen to China’s current North Korean business or future ability to deposit or transfer DPRK funds. 

Can you shed any light on this directive by the Chinese central 

bank? Basically the question is: Is the policy of China truly changing? 

Ms. THORNTON. Thank you, Chairman Crapo. Look, I think that 

China is sending very deliberate messages to its banks and to other 

companies in China. There was an announcement today, in fact, 

that the Chinese commerce department sent an announcement that 

all North Korean firms and joint ventures with China had to be 

shut down. 

We are working very closely with the Chinese. We think that 

they are taking this seriously. But we are going to continue to monitor it. We continue to share information with them on actions that 

we think that they need to take. This is obviously a very serious 

problem, and the urgency with which China takes it is going to be 

key to any successful economic pressure campaign. 

Chairman CRAPO. Thank you. 

Senator Brown. 

Senator BROWN. Thank you, Mr. Chairman. I thank you both for 

testifying and for your service to our country. 

I want to dig down a little deeper on the sanctions issues. I will 

start with you, Ms. Thornton. You have testified that, terms you 

use, ‘‘maximum pressure,’’ ‘‘peaceful pressure,’’ ‘‘strategic accountability’’ describe our ongoing U.S. policy toward Pyongyang, that 

the essential elements of the strategy have not changed to push for 

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further multilateral sanctions, continue enforcement of U.S. sanctions authorities, improved U.N. sanctions enforcement globally, 

and urging other nations to cut off, what you said, ‘‘normal political 

relations and trade’’ with North Korea.’’ 

Are you taking full advantage of the sanctions authorities you 

have, including those Congress enacted last month? Have we seen 

concrete, quantifiable outcomes at this point, especially in terms of 

reduction of Pyongyang’s revenue streams and significant impacts 

on the regime’s ability to advance its weapons program? For you, 

Ms. Thornton. Let us start with you. 

Ms. THORNTON. So I think we are taking maximum advantage of 

all of the tools that we have been given, and we are also taking 

maximum advantage of our diplomacy with countries all around 

the world. I believe that we have instituted a number of designations. We have had, you know, a series of designations. We have 

been rolling out sanctions on various entities in China, in other 

countries. All of these designations target North Korean trade, 

North Korean entities, North Korean illicit proliferation, and it certainly has had an impact on the ease with which they are able to 

make transactions. It has cut down on their ability to earn hard 

currency, and it is having an effect of increasing pressure on the 

regime. 

Senator BROWN. Thank you. This is a question for both of you, 

and I will start with you, Ms. Mandelker. Many of us here in this 

body and all of our allies are concerned about the President’s statements about the JCPOA. The President indicates he intends to 

blow up the Joint Comprehensive Plan of Action, the Iran nuclear 

agreement. Many argue this will seriously undermine U.S. credibility on nuclear issues with North Korea and others. Are you concerned that the President’s position undermines our diplomatic efforts with North Korea? 

Ms. MANDELKER. No, Senator, I am not concerned. I think these 

are two very different and distinct problems. North Korea needs to 

understand that we are very serious when it comes to applying our 

maximum—using our maximum authorities to applying economic 

pressure. And, frankly, this is an area where the world is coming 

together. We are seeing the strongest U.N. Security Council resolutions we have ever seen, and we are seeing countries take steps 

over and above our—— 

Senator BROWN. That is surely good news, but the world came 

together on the JCPOA, too. And do the Koreans think that, well, 

if the United States is going to pull out of this agreement, which 

clearly is working to keep nuclear—to stop the nuclear program in 

Iran, why would we have that credibility and why would the world 

think we have that credibility in your dealings with the Chinese 

and only the North Koreans? 

Ms. MANDELKER. Again, Senator, we are having—I am personally involved in working very closely with our allies in Europe, 

Japan, South Korea, and elsewhere. And the message that I am 

hearing is that we are very unified in this effort. We are not equating one issue with the other. I cannot tell you—— 

Senator BROWN. You are not equating one issue with the other, 

but don’t our allies see that when we as a Nation renege on one 

6 

nuclear agreement, we are not as trustworthy as they thought we 

were as a Nation for the next round? 

Ms. MANDELKER. Again, I cannot tell you what our allies think, 

but what I can tell you—— 

Senator BROWN. Well, you just did. You said our allies are all in 

the same place, and you just told us what they think. Now you are 

telling us you do not know what they think. 

Ms. MANDELKER. What I can tell you is that we are very unified 

in sending a joint message to North Korea that we are all using 

our maximum economic pressures and diplomatic pressures to get 

them to change their behavior. 

Senator BROWN. Do you disagree with our allies who all say, virtually every one, that Iran is complying? I know this hearing is not 

about Iran, but do you agree with our allies when they say that? 

Ms. MANDELKER. Senator, I would defer to the IAEA and the 

State Department with respect to Iran’s compliance with the 

JCPOA. 

Senator BROWN. Ms. Thornton, respond to that, if you would. 

And, also, does it concern you that we are working with the Chinese, as we should, in trying to work to get North Korea to change 

its policy that our allies, some of our allies question whether we 

are reneging on something we already did on nuclear weapons just 

a year and a half, 2 years ago? 

Ms. THORNTON. Yes, thank you. I am not the Iran expert, obviously, but I know that we have certified continuation of the JCPOA 

in the most recent process. 

I think on the connection between that and North Korea, the 

thing that is important to remember is we have been down this 

road with North Korea several times already and that they have 

continually undermined, cheated, and disregarded the agreements 

that we have entered into with them in an attempt to do what we 

are also attempting to do, obviously, with Iran, which is stop, 

freeze, and roll back an illegal nuclear program. 

So I think what we want to do with North Korea is make it clear 

that we are not going to go down the road again of being, you 

know, cheated or fooled, and that we are going to enter into this 

agreement and expect that they would live up to their side of the 

bargain. And that is what the maximum pressure campaign is 

about, to build that kind of pressure and leverage which will convince them that they really need to engage seriously in a discussion 

about freezing and rolling back their program. 

Senator BROWN. OK. Thank you both. 

Chairman CRAPO. Thank you. And before we go to Senator 

Toomey, since more Senators are here, I wanted to make an announcement that I made at the beginning of the hearing, and that 

is that Ms. Thornton has to leave at 10:30 for a trip with Secretary 

Tillerson overseas, and we have a vote at 10:30. So Senator Brown 

and I have both forgone our opening statements, and I am going 

to ask the Senators to pay very close attention to their time allocation. 

Senator Toomey. 

Senator TOOMEY. Thanks very much, Mr. Chairman, and thanks 

to our witnesses. 

7 

I want to draw a different parallel with Iran, if I could. But to 

back up just a second, I do not think anybody questions how grave 

a threat North Korea poses to us. We have seen a nuclear weapons 

program for over a decade, a tremendous acceleration in their missile delivery capabilities. This threat is growing, and it seems to be 

at an accelerating pace. And despite the many sanctions that we 

have on North Korea, our allies have joined us, the South Korean 

government reports that North Korea’s economy grew at the fastest 

rate in 17 years last year, and that their GDP managed to expand 

by 3.9 percent—admittedly off a low level, but they are experiencing economic growth, and it is hard to imagine that they are 

going to abandon these programs if they are discovering that they 

have greater prosperity year in and year out. 

So I want to commend—the work you guys are doing is terrific. 

It is really important. I am grateful for it. I agree fully with the 

Executive order to further pursue sanctions. But we have had witnesses who have reported to us—and I do not think that our current witnesses will disagree. We are not yet at the maximum level 

of possible sanctions against North Korea. 

For instance, we were told at past hearings that there are financial institutions conducting transactions with North Korean entities that are not subject to the secondary sanctions today. Do you 

both agree with that? 

Ms. MANDELKER. Senator, any financial institution would be subject to our authority—— 

Senator TOOMEY. OK, I understand that, but is it true that there 

are financial institutions, including Chinese institutions, that are 

conducting financial transactions and have not had sanctions imposed directly on them? 

Ms. MANDELKER. Well, Senator, as you are probably aware, in 

June we, in fact, took action against one—— 

Senator TOOMEY. Again, listen, I am in favor of that. I am glad. 

My point is there are many other institutions that are conducting 

transactions, and you have acknowledged today that there is one 

Chinese bank that has had sanctions imposed directly. 

So my point in all this is we also have learned, I think, that the 

mandatory sanctions of the Iran sanctions legislation probably 

played a big role in bringing Iran to the table. And it is my belief— 

and I think it is shared by my colleague, the Senator from Maryland, with whom I am working on legislation, and we have been 

working with Treasury, and we want to continue to work with you 

on this. But the threat of mandatory sanctions immediately once 

that legislation passes sends a very, very powerful message to financial institutions. And I think that is the tool that we need. That 

is the tool that worked with Iran. We have not adopted that yet, 

and it is my hope that we will, and I welcome your thoughts on 

it. 

Ms. MANDELKER. Senator, of course, we think that having the 

authority to go after financial institutions is incredibly important. 

That is why we had the strongest Executive order—the President 

has just signed the strongest Executive order that we have ever 

had, which gives us the authority on a going-forward basis to impose secondary sanctions against financial institutions. We think 

banks are taking note. We are very carefully monitoring their 

8 

ongoing activity and behavior, and, look, the safety and security of 

the American people come first, and we will not hesitate to act 

where we think that it is warranted. 

Senator TOOMEY. I understand that, but having the authority to 

do something is not the same thing as being required to do something, and the latter simply sends a stronger message. 

Now, I think there should be a way for an institution that ceases 

and desists, for instance, to no longer be subject to sanction, right? 

I mean, we want to have a mechanism that does not permanently 

disqualify an institution from U.S. markets if they have ceased and 

desisted. But my own view is we have not taken the most aggressive steps possible, and this is as serious a threat as I can plausibly 

imagine. 

So I hope you will continue to work with us in this effort. I want 

to thank my colleague Senator Van Hollen for the great work that 

he has done on this, and, Mr. Chairman, I think I have come in 

30 seconds short. 

Chairman CRAPO. Thank you, Senator Toomey. 

Senator Reed. 

Senator REED. Well, thank you very much. I am tempted to commend the Chairman and the Ranking Member for the best statements they have ever given. 

[Laughter.] 

Senator REED. Forgive me. 

Secretary Thornton, in the past we have used the five-party 

mechanism with South Korea, Japan, Russia, China, and the 

United States, and at this point it seems that a lot of the diplomacy is one-off. You go to China and talk to them. Someone presumably is talking to Russia, et cetera. Why don’t we, if we are 

really serious about this, convene the five-party talks and show not 

only strength but concerted effort? 

Ms. THORNTON. Yes, thank you. We are convening—I mean, we 

do not have that specific mechanism invoked, but we are doing a 

lot in the U.N. Security Council. We are doing a lot with various 

multilateral partners. We had a very strong statement out of 

ASEAN at the recent ministerial in October in Manila. We have 

gotten a lot of different actors to step up and help us with this effort. Certainly, we are doing a lot of consulting with the regional 

stakeholders, especially our two very strong allies, South Korea 

and Japan. The President met with them both in a trilateral format last week in New York. But we have also been consulting very 

closely and had long meetings and had extended discussions with 

both Russia and China. 

I think we are doing as much as we can with those regional 

stakeholders, but we do not want to be tied to one particular format, and we are certainly open to any formats or opportunities that 

would put pressure, more pressure on North Korea. And so I think 

we are open to it. We just have not found it necessary to do it in 

that format. 

Senator REED. Do you concur with Ambassador Haley that the 

United Nations has exhausted its usefulness? 

Ms. THORNTON. Well, I mean, I think she was referring to the 

issue of UNSCRs that could be passed and increasing the level of 

sanctions within the UNSCRs. I think we all agree that almost all 

9 

of North Korea’s external hard-currency-earning trade has been 

captured in one way or another through U.N. Security Council resolutions. And I think there is probably some more that could be 

done there, but mostly it has been already incorporated into the 

UNSCRs we have so far. The main task I see going forward is on 

implementation. 

Senator REED. I concur, and in that regard, Secretary 

Mandelker, you have lots of authorities, but do you have a list of 

priorities—I mean, most important is to go after this company, second important is this company, and shipping is the third, et cetera? 

Can you give us that strategy, not just, ‘‘We have lots of things we 

can do’’? 

Ms. MANDELKER. Yes, Senator. So we are constantly thinking 

about how we can exercise our authorities to achieve maximum 

strategic impact. We are looking at the biggest revenue generators 

to North Korea and taking action against those revenue generators. 

We are very focused on sanctions evasion. Of course, the reason we 

have gotten—part of the reason we are in the place that we are 

today is that North Korea has been incredibly adept at evading our 

sanctions, and we want to cut that off at the pass. And so we are 

focusing on high-revenue generators. We are focusing on going 

after those financial facilitators that they have planted all over the 

world. We just announced designations of 26 of those this week 

that were situated in different countries. And, again, always focused on maximum strategic impact. 

So just as an example, in August we went after three coal companies that had generated a half a billion dollars’ worth of revenue 

to North Korea, and we designated them to cut them off, again, at 

the pass so that they can no longer generate that sort of revenue. 

So, yes, focus on highest-priority impact always. 

Senator REED. Those three companies, you have effectively shut 

them down or you have just indicated to them, ‘‘We are going after 

you’’? 

Ms. MANDELKER. We have indicated to them that they cannot 

have access to the U.S. financial system, and we have sent a very 

strong message that it is our view that no one should be dealing 

with any company that is continuing to trade with North Korea. 

Senator REED. But companies are still dealing with those companies? 

Ms. MANDELKER. I cannot tell you in an open setting whether or 

not companies are still dealing with those companies, but the message is clear. We will go after any company that does trade with 

North Korea. 

Senator REED. I think that is a good message, but, again, I think 

apropos of some of the comments of my colleagues, you know, specific evidence that it is working—I mean, Senator Toomey mentioned that the growth in their economy was not insubstantial last 

year. And, you know, we are messaging, we have been messaging 

for two decades. 

Ms. MANDELKER. I agree with you, Senator. Look, that is why in 

this Administration we are taking the strongest measures we have 

ever taken. We have had many UNSCRs in the past, and they have 

not worked. These are the strongest U.N. Security Council resolutions we have ever had. The Executive order that the President 

10 

signed last week is the strongest across-the-board Executive order 

that we have ever had. We are taking this with utmost seriousness, 

and we are pushing countries all over the world to do the same. 

Senator REED. Thank you very much. 

Thank you, Mr. Chairman. 

Chairman CRAPO. Thank you. 

Senator Corker. 

Senator CORKER. Yes, sir, thank you. Thank you both for being 

here. 

Do we all agree that, in essence, North Korea is a de facto nuclear state? 

Ms. THORNTON. Sorry. Is that for me? 

Ms. MANDELKER. Well, look, we all know what the threats are, 

Senator, and they have been able to proliferate at an unprecedented pace. 

Senator CORKER. I do not want to get into a long debate, but we 

do agree they are a de facto nuclear state. Is that correct? 

Ms. THORNTON. I do not think that is the position of the State 

Department. It involves a number of different technologies, and I 

do not think that we would be able to say with concrete certainty 

that that is the case. 

Senator CORKER. Well, I am going to state that they are a de 

facto nuclear state. That would be my position. 

I applaud the efforts that are underway. I really do. And as you 

know, I work closely with Secretary Tillerson and others, and, you 

know, every one of our intelligence agencies tells us, publicly even, 

that there is no amount of pressure that can be placed on the leader of North Korea to get him to stop. He views this as his ticket 

to survival, and he is changing the balance in the peninsula. So I 

applaud the efforts that are underway. I really do. 

Is there any course of action, though—we have been doing this 

now for 25 years. This is the most robust effort that I applaud. But 

is there anything you see that is changing, possibly changing the 

dynamic that exists, where they are in the very short term going 

to have a deliverable to the United States, nuclear weapon, without 

a change in trajectory? I mean, Tillerson is working against—and 

I applaud what he is doing, but he is working against the unified 

view of our intelligence agencies which say there is no amount of 

pressure that can be put on them to stop. And so I am just asking, 

is there some dynamic out there that you see is going to overwhelm 

that unified view and change the trajectory? 

Ms. THORNTON. I think that that is the intelligence community’s 

assessment, or at least the assessment of many of them. But I 

think what we are doing is testing that assessment, and I think 

what has changed is the sort of growing level of international isolation and pressure, especially from the leading enabler of North 

Korea up to this point, which is China. And I think we do see 

China, as the Under Secretary mentioned earlier, policy shifting. 

We are trying to turn China’s position from looking at North Korea 

as some kind of asset to looking at them as a liability. I think that 

Secretary Tillerson has made a lot of progress on that front, and 

so the pressure that is being applied now to the Kim regime is 

greater than at any time in the past. And we need to test that 

proposition, I believe. So that is what we—— 

11 

Senator CORKER. Is denuclearization of the peninsula still the absolute objective? 

Ms. THORNTON. Yes. 

Senator CORKER. Is it helpful—you know, Congress has taken 

the lead on many things. There is no question that Congress took 

the lead for years on Iran. I do not think there is any way, without 

the pressure of many people in this Committee for a long, long 

time, and on the Foreign Relations Committee, I do not think there 

is any way that we would have ever gotten Iran into a place to negotiate. Congress passed some sanctions on Russia recently. Congress passed additional sanctions—the House actually took the 

lead—on North Korea. I am at the point personally where I wonder 

whether additional congressional activities is helpful when we are 

on the brink of something that could become a catastrophe. I applaud all those people who want to play a role, I do, and I am not 

in any way being pejorative as it relates to that effort. But from 

your perspective, is it helpful for Congress to pass additional legislation right now? And I know no Administration ever wants Congress to do anything. I got that part. But are there heightened concerns currently about Congress taking additional steps as it relates 

to sanctions? 

Ms. THORNTON. Well, what I would say is that we all want this 

to be resolved diplomatically and peacefully. We think that this 

maximum pressure campaign is the last best chance to resolve this 

peacefully, but what that also means is that eventually we will 

need to get into some diplomacy, and we will need flexibility when 

we get to that point. So I think we want to keep in mind that, you 

know, we want to get to the diplomatic solution, and when we get 

there, Secretary Tillerson will want to, you know, have space to negotiate. 

I think, you know, the Members of Congress I have spoken to, 

I know many of them travel; many of them are going around the 

world and talking to people about these issues. I spoke to one last 

night who was just in Beijing and met with Chinese officials for an 

hour and a half on North Korea alone. I think that kind of message 

coming in a unified way from every single Government official in 

the United States is very helpful, and also we have been telling all 

of our global partners, coming from all of them. 

Senator CORKER. You did not address sanctions. I am trying to— 

you are avoiding that, and that is fine. But I know my time is up. 

Ms. MANDELKER. I would be happy to quickly address—of course, 

we are grateful for the authorities that Congress has given us, and 

as I mentioned, the President has also signed the strongest Executive order that we have ever had. I think that it is also incredibly 

important that we have the ability to remain flexible. We have to 

move and strike in the use of our economic powers according to 

what the intelligence is telling us will be the best targets to exact 

an enormous amount of economic pressure. And when our hands 

are tied in different ways, it keeps us from being agile in the way 

that you would want us to be agile in order to maximize that economic pressure. So we would be happy to work—of course, always 

happy to work with the Congress on legislation. I would just caution taking away our ability to be flexible because it inadvertently 

could decrease our ability to exert maximum economic pressure. 

12 

Chairman CRAPO. Senator Heitkamp. 

Senator HEITKAMP. Thank you. I will try to run through this 

quickly. 

Can we be effective in any kind of sanction policy or regime without total cooperation from China? Yes or no. 

Ms. MANDELKER. I think total cooperation from China is key. 

Can we be effective? Absolutely. 

Senator HEITKAMP. But I am saying—now I am going to get to 

the point. Does the U.S. Government and the Chinese Government 

have identical or at least wildly similar goals in dealing with the 

Korean peninsula? 

Ms. THORNTON. So I think we do have broadly similar goals. 

Senator HEITKAMP. What would those be? 

Ms. THORNTON. The Chinese Government wants to see a 

denuclearized Korean peninsula. That is one of their main key objectives. They also want there not to be chaos, war, and war on the 

Korean peninsula for obvious reasons. It is right on their border. 

But their main goal for the current process is to denuclearize and 

rid the Korean peninsula of those programs. 

Senator HEITKAMP. If that is true, then why isn’t the Chinese 

Government doing everything that it can to achieve that goal? 

Ms. THORNTON. Well, I think that they have done a lot. 

Senator HEITKAMP. No. I am talking about, you know, full-on 

maximum effort, maximum restrictions on trade, maximum restrictions on doing business with North Korea. If that is true, then why 

hasn’t the Chinese Government exerted the kind of authority and 

force on a diplomatic and on a sanction regime that would achieve 

that result? 

Ms. THORNTON. It is hard for me to get exactly to inside what 

their policy process is and what they are thinking, but what I 

would say is that the calculus that they have about the line between war and chaos and getting to denuclearization might be 

slightly different than the line that we have, and that they seem 

to prioritize very much the, you know—the economy of North Korea 

is dependent on China, and so they have said that they want to 

make sure that the people of North Korea are not adversely affected. And, of course, we do not want that either, but they seem 

to have a different calculation about that, is how I would—— 

Senator HEITKAMP. I think that is the ultimate challenge here 

going forward, which is finding parallel purpose with the Chinese 

in achieving this result and having a coalition of, you know, extreme willingness to actually do everything that we can to achieve 

that result. And short of that, I guess, Secretary, short of that kind 

of collaboration and cooperation, how is this going to work to actually change behavior in North Korea? 

Ms. MANDELKER. Senator, of course, we are intent on working 

very closely with the Chinese to make sure that they are likewise 

maximizing economic pressure. We are in very regular discussions 

with them. We have seen some recent steps that they have taken 

that suggest that they are increasing the economic pressure that 

is going to be brought to bear, but we are monitoring it very, very 

carefully. And I think the authorities that we now have and the 

Executive order also send the message that if countries—any 

13 

country does not take this as seriously as we think that they 

should, then we will not hesitate to act. 

So it is partially working closely, coordinating carefully, collaborating, as we are doing, but also sending the message that the 

President has sent, that Secretary Mnuchin has sent, that we are 

constantly sending, that where we think it is warranted, we are 

going to continue to up the pressure that that strategy—— 

Senator HEITKAMP. If the Chinese Government did everything 

possible economically, with sanctions, with trade, with relationships, would it effectively achieve a deterrence from further progression in North Korea to acquire a nuclear weapon? 

Ms. MANDELKER. Well, Senator, that is the strategy. Time will 

tell. What we are trying to do is change the strategic calculus of 

North Korea, and we have to do that in concert with all of our partners around the globe. I cannot tell you that it is going to change 

the calculus, but I can tell you that that is our ultimate objective: 

to achieve a denuclearized peninsula by changing that calculus. 

Senator HEITKAMP. And you believe that is the Chinese ultimate 

objective? 

Ms. MANDELKER. I cannot speak for the Chinese. I can just tell 

you that they are working intently with us on this urgent matter. 

Chairman CRAPO. Thank you. 

Senator Scott. 

Senator SCOTT. Thank you. Thank you both for being here this 

morning. 

In 1994, we struck the Agreed Framework with North Korea 

with the goal of eliminating the regime’s nuclear ambitions. 

In 2000, President Clinton relaxed the sanctions under the assumption that North Korea was upholding its end of the bargain. 

In 2005, the United States, China, Japan, North Korea, Russia, 

and South Korea put out a joint statement celebrating North Korea 

agreeing to abandon its nuclear weapons program again. 

In 2006, North Korea tested its first nuclear weapon. Since then, 

North Korea has conducted five more nuclear weapon tests and 

dozens of ballistic missile flight tests, threatening American targets. 

I will ask you both: If a denuclearization agreement is reached, 

how can we ensure that the Kim regime does not fool us again like 

they have over the last couple decades? 

Ms. MANDELKER. Senator, I agree with you that that is the challenge. We are going to have to—if an agreement is reached, we are 

going to have to very carefully hold them to account. We cannot get 

to the same place—the place that we are in today. And, again, we 

would maximize the pressure that we have put on in a calibrated 

way to avoid the perilous situation that we are in today. 

Senator SCOTT. Care to comment? 

Ms. THORNTON. Yeah, I think what we would have to do is make 

sure that we have the entire international community on board for 

the enforcement of the agreement, and it is very clear what the 

stipulations are in the enforcement, that we have inspectors in, it 

would be an intrusive inspection regime. And we would have to lay 

all of that out in the process of getting to that agreement. 

Senator SCOTT. Senator Heitkamp started to talk about the Chinese influence on North Korea, and my last question goes in that 

14 

direction. The President’s recent Executive order allowed Treasury 

and State to impose secondary sanctions on financial institutions 

who continue to do business with North Korea. But the President 

gave your Departments discretion as to how to implement such 

measures and who to go after. That latitude you have been given 

is a deterrent to North Korea’s enablers. Case in point: The same 

day the Executive order was announced, the People’s Bank of 

China told financial institutions to wind down their books of business with North Korean clients. 

I have previously made the point that our deep economic interdependence with China hurts our ability to incentivize them to 

take action. Did the simple threat of secondary sanctions bring 

about the bank’s announcement? 

Ms. MANDELKER. Senator, I cannot tell you what has motivated 

the Chinese, the various announcements that we have seen from 

the Chinese. I can only tell you that, again, we are continuing to 

work with them and to put pressure on them to take the steps that 

they need to take. And I think that the Executive order sends a 

very important and careful message, that if we see continued evasion of our sanctions regimes, if we see banks not complying with 

their obligations to restrict this kind of activity, we will not hesitate to act. That in and of itself should be sending a very clear message to banks around the world. 

Senator SCOTT. Anything else? 

[No response.] 

Senator SCOTT. Good. Have the Chinese—this is, of course, in 

your opinion. I know that you cannot tell me what the Chinese 

think. I have heard you say that a couple of times. But my question 

is: Do you think the Chinese have come to a similar conclusion 

about the interdependence of their economic future on America? 

Ms. THORNTON. So you mean are they concluding because of the 

interdependence that they can stop short of fully implementing the 

sanctions? 

Senator SCOTT. I mean the reverse of it. If they send $700 to 

$800 billion of goods to America—— 

Ms. THORNTON. They need to comply. 

Senator SCOTT.——part of their challenge is that they have a lot 

to lose if we shut down. 

Ms. THORNTON. Sure, I think that is right. I think they care a 

lot about the relationship with the United States. They are very 

concerned about what is going on in North Korea and very concerned about what it implies for their picture, the strategic security 

picture in the region, and for them for their own national security. 

And I think they also are determined to comply with the international sanctions regime that they voted for in the United Nations, and they have said over and over again that they will strictly 

implement the sanctions. And I think they care about being seen 

as strictly implementing the sanctions, and so that is where I think 

a lot of their recent efforts and initiatives have come from in concert with that. 

Senator SCOTT. It certainly seems to me if compliance of the 

North Korean regime flows through the actions of China, we should 

spend as much time delving into the relationship that we have 

15 

with China to make sure that we do everything possible to control 

North Korea through that medium. 

Thank you. 

Chairman CRAPO. Senator Donnelly. 

Senator DONNELLY. Thank you, Mr. Chairman. And I want to 

thank you both for being here. 

Secretary Mandelker, I was wondering if you have met with 

Adam Szubin yet. 

Ms. MANDELKER. I have met with Adam a number of times, yes. 

Senator DONNELLY. I would recommend to you that you stay in 

contact with him, that you stay in touch with him. He has worked 

this side of the street for a long, long time. He is extraordinarily 

talented, worked for both Republican and Democratic administrations, and is a patriot above all. And so whenever I have somebody 

who can help me as a resource, I try to use them. He would be a 

great resource for you to use. 

Senator Sasse and I held a Subcommittee hearing on this subject 

in May. One of the key findings was that our sanctions efforts cannot be effective unless they are within a clear, comprehensive strategy. And, Ms. Thornton, in your written testimony to the House 

Foreign Affairs Committee on September 12th, you wrote in regard 

to the Administration’s strategy on North Korea, ‘‘We are not seeking regime change or collapse, nor do we seek an accelerated reunification of Korea or an excuse to send troops north of the DMZ.’’ 

My question is that this week there was a statement from the 

Commander in Chief that the North Korean regime will not be 

around much longer. How do we put those two things together? 

And how do we create a strategy when there appears to be two different programs rolling around here? 

Ms. THORNTON. Thank you very much, Senator. So I think our 

strategy has a primary goal of denuclearization, and that is what 

we are working toward. The President’s comments have been directed more at the issue of threats emanating from North Korea to 

our homeland and what would be our very reasonable and likely 

response to an attack from North Korea. So I think these two 

things are a little bit different, and I do not think that the clear 

statements that we are trying to make in order to make sure that 

the North Koreans understand what would happen if they made a 

miscalculation and initiated an attack on us or our allies, I do not 

think that that undermines our declarative statement of our purpose in the negotiations and in the diplomatic process of being 

aimed at denuclearization and not the other things that you mentioned. 

Senator DONNELLY. Secretary Mandelker, are sanctions efforts 

undermined if they do not follow with a clear message as to what 

we are trying to achieve? Are we making that clear message to everybody? 

Ms. MANDELKER. Yes, Senator, I believe we are making that 

clear message. 

Senator DONNELLY. OK. Well, then let me ask you in regards to 

oil exports from China to North Korea, where are we with that? 

What are our success opportunities with that? Will it be completely 

cut off and when? 

16 

Ms. MANDELKER. Well, that is in part up to the Chinese, but we 

are also, again, sending a message, writ large, that we will cut 

off—or we are able and have the authority to target any company 

that is continuing to trade with North Korea in any industry. So 

that message is coming clear from the United States. 

Senator DONNELLY. Isn’t the oil exports the key sanction that is 

needed to get the attention of Kim Jong-Un to grind their economy 

up to actually make a dent? 

Ms. MANDELKER. I think the oil exports certainly are very important, and, again, we are not limited in our ability to target any oil 

company that is continuing to do business. 

Senator DONNELLY. I understand that, but the oil continues to 

flow, doesn’t it? 

Ms. MANDELKER. It does continue—my understanding is that it 

does continue to flow, and I believe that it should stop. 

Senator DONNELLY. And what are the plans over the next 5 

months to dry that up completely? 

Ms. MANDELKER. Senator, I am not going to prognosticate what 

our next steps are going to be. All options are on the table, and we 

are going to continue to aggressively implement our sanctions regimes. We are going to continue to deploy other economic tools that 

we have. We are going to continue to engage very seriously with 

our allies and our partners. We are going to continue to have discussions with China about measures that we think that they 

should take. 

We are also sending, as you know, an important message to financial institutions that they need to cut off any activity, ongoing 

financial activity with North Korea. And to that end, we are also 

having conversations with banks around the world about steps that 

we think that they need to—— 

Senator DONNELLY. Let me ask you about the four or five biggest 

banks in China. We have been able to obtain parts from some of 

the North Korean missiles. We know who makes some of those 

parts. We know the banks that finance the companies that make 

those parts that are on the missiles that are aimed at our friends 

and allies. We know the five most significant Chinese banks that 

are the parent banks or banks with relationships to these other 

banks. What are we doing to those five banks to put pressure on 

them to make sure that these parts are no longer built? 

Ms. MANDELKER. So, Senator, again, I am not going to prognosticate the next steps that we are going to take. In terms of specific 

actions—— 

Senator DONNELLY. Well, what steps have you taken with those 

five Chinese banks? 

Ms. MANDELKER. As a general matter, the steps that we have 

taken are sending a very important signal through our action in 

June and now through this new Executive order that we are not 

going to tolerate continued financial activity that helps the Kim regime, and we are—— 

Senator DONNELLY. Have any sanctions been put on those 

banks? 

Ms. MANDELKER. Not on those banks, Senator. Not at this time. 

Senator DONNELLY. Thank you. 

Thank you, Mr. Chairman. 

17 

Senator BROWN. [Presiding.] Senator Cotton. 

Senator COTTON. Ms. Mandelker, I have seen a report recently 

that says North Korea is the fourth or fifth most sanctioned nation 

in the world by the United States. Is that accurate? 

Ms. MANDELKER. I cannot give you a comparative, Senator Cotton, but at this time we have—we, the United States, have maximum authorities to go after any problematic behavior or activity, 

economic activity with North Korea. 

Senator COTTON. Is there any reason why we should not throw 

the kitchen sink at them economically, hit them with as much as 

we can, as fast as we can, as hard as we can? 

Ms. MANDELKER. That is exactly what we are doing. 

Senator COTTON. OK. Ms. Thornton, I want to turn to something 

you said earlier that I am going to have to disagree with, and I 

think it is a fundamental disagreement, and it reminds me of what 

Yogi Berra said: ‘‘If you do not know where you are going, you 

might not get there.’’ You said that you believe that China seeks 

denuclearization of the peninsula. I know that is what Chinese 

mouthpieces say to the United States and Western audiences, but 

I just cannot agree with it. They claim that, you know, they are 

worried about a war that would lead to a refugee crisis on their 

border or a unified pro-American Korean peninsula. 

I just find this reasoning to be specious. Refugee crisis? Say what 

you will about our country, I am pretty sure that the Chinese Government can build a wall on their border. And they have proven 

that they have a backup method to deal with a refugee crisis as 

well, tanks and .50 cal’s like they used at Tiananmen Square. 

Second, if they were really worried about a refugee crisis or a 

pro-American unified state on their border, aren’t there numerous 

diplomatic measures they could take? I am pretty sure that the 

United States would agree to no forced reunification, as we did 

with East Germany and West Germany after 1989. I am pretty 

sure that we would agree to no troops north of the current DMZ, 

that we would work with the United Nations High Commissioner 

on Refugees to set up refugee camps supported by the United Nations inside of North Korea. 

And then, finally, just look at China’s actions. You know, they 

blocked us from imposing those oil export sanctions at the United 

Nations Security Council a couple weeks ago. North Korea’s economy has grown over the last 6 months. Trade with North Korea 

was up earlier this year. 

So all of these things suggest to me that when China says they 

want a denuclearized North Korea, they are misrepresenting their 

intentions, because what would be the consequences for them if 

that were the case? North Korea would become like an isolated, 

weird, Stalinist state the way East Germany or Romania was in 

the cold war, but they would not pose any real threat to the United 

States or to our allies in the region. 

And what would we be having hearings about? We would be having hearings about Chinese economic warfare and espionage 

against the United States. The Armed Services Committee would 

be having hearings about China’s building and militarizing islands 

in the South China Sea. The Senate Foreign Relations Committee 

18 

might be having hearings about their near diplomatic embargo on 

Taiwan. 

So I would say that it actually benefits China strategically in 

their competition against the United States that North Korea remain nuclearized, and, therefore, they are not going to take steps 

to denuclearize North Korea unless the costs of keeping a nuclear 

North Korea exceed the benefits they get from it. That is my perspective on what China’s motivations are here. I would like to hear 

your perspective on mine. 

Ms. THORNTON. So I think where I probably would not share exactly your assessment is what the Chinese assessment is of the security implications for them of a continued nuclear program in 

North Korea. They are very clear that would there be a nuclear 

state in North Korea, there would be nuclear proliferation in the 

region on their border, and that there would likely be a catastrophic acceleration in the breakdown of the nuclear nonproliferation regime around the globe, and that that has far-reaching security implications for them. So I think that is probably the place 

where I would have the most difference with the assessment that 

you mentioned. 

Senator COTTON. I agree that from a Beijing standpoint a nuclear Japan or a nuclear South Korea, both of which could probably 

achieve that aim in a year, maybe 2 years at most, would be detrimental to their interests. But if that is the case, why are they not 

doing the kinds of things that I just outlined? Why do they make 

us water down the Security Council sanctions? Why are they not 

seeking the kind of diplomatic agreements with the United States 

that would allay their concerns in advance of any effort to 

denuclearize, by force if necessary, North Korea? 

Ms. THORNTON. Well, I think we have seen them adopt the most 

far-reaching U.N. Security Council resolutions that we have ever 

seen in the quickest amount of time that we have ever seen. I 

think it is a reflection of their growing concern. I think they change 

slowly, and they are getting increasingly concerned about the behavior out of North Korea and about the—and they are increasingly—it is becoming clear to them the implications for them, 

which they had maybe not fathomed clearly enough earlier. 

Senator COTTON. My time is up. Thank you for the testimony. I 

would just say, though, the consensus in Washington is that China 

is a partner in this issue. I do not think that is the case. They are 

a strategic competitor, and I believe they see the current status quo 

as benefiting their interests as opposed to a denuclearized North 

Korea, and I think that our Committee needs to take that into account as we are crafting any sanctions measures to bring more coercive pressure onto Beijing. 

Chairman CRAPO. [Presiding.] Thank you. 

Senator Schatz. 

Senator SCHATZ. Thank you very much. 

Ms. Thornton—and I know you have to go at 10:30, so if I am 

still talking, I will not be offended. First of all, what is U.S. policy 

with respect to the Korean peninsula specifically? You say the primary goal is denuclearization. That is U.S. policy? 

Ms. THORNTON. Yes. 

19 

Senator SCHATZ. OK. When you say primary goal, does that indicate—should we infer from that that there is a secondary goal? 

Ms. THORNTON. No. I mean, I think that is our overarching goal 

in our current strategy that we are bringing the maximum pressure to achieve. 

Senator SCHATZ. So following up on what the Chairman of the 

Foreign Relations Committee said, that the intelligence community’s assessment is that that is vanishingly unlikely—and I understand that you have to do what you have to do, and we appreciate 

it. But understanding that here we are with a State Department 

representative and a Treasury representative, and you are all in 

your own way doing that which is strategically necessary in your 

own lane. And yet we have an objective that may not be achievable 

at all. 

So I guess the question is: Are there short-term objectives—setting aside that goal and whether or not we are going to argue 

about the extent to which it is realistic to denuclearize the peninsula, do we have a short-term objective that we are trying to 

achieve here? 

Ms. THORNTON. Well, I think the objective is to change the calculus of the regime about their nuclear weapons program and, indeed, show them that the cost of that program is unbearably high 

and that they will not be able to maintain it. 

Senator SCHATZ. But that sounds like a long-term objective, and 

I guess it goes to my second question, which is: Is it fair to say we 

are in a crisis situation right now? 

Ms. THORNTON. Well, I think almost every high-level official in 

the U.S. Government has noted North Korea as our most urgent 

and compelling national security challenge. So, you know, it has 

been said that the timetable that North Korea is moving on to develop its weapons program is much more rapid than we had foreseen, and that, you know, we are working as fast as we can and 

as intensively as we can to get sanctions regimes put in place and 

implemented. That is why we have this global pressure campaign. 

That is why we are engaging everybody in the world—— 

Senator SCHATZ. And I want to be respectful of your time, but 

those all still do not sound like crisis management enterprises. 

Those sound like—I am with you on the strategic objective of getting Kim Jong-Un to change his calculus. But I do not see that 

happening in the next 3 to 6 months or even in the next, you know, 

6 to 18 months, and yet we are in a crisis right now. 

So the question is: Is the State Department, the Department of 

Defense, the White House, the National Security Council in a crisis 

management mode which integrates that which we are doing for 

our long-term objectives, which, by the way, our intelligence community is now saying may not even be realistic? And the question 

becomes: We have these long-term objectives which have, call it, a 

30-percent chance of success, many say zero. But whatever that 

percentage chance is, they have some low likelihood of success. But 

they also may have the unintended consequence of escalating the 

short-term crisis. And so I think we need to know what we are up 

to right now, which is that all of this sounds good and, to Chairman Corker’s point, it is incredibly politically satisfying for us to 

criticize China and to pass new sanctions and to do our oversight. 

20 

But if we are in a crisis and the U.S. Government’s policy is to do 

something that most people think we cannot do, then I think we 

are in a dangerous situation. And you compound that with the fact 

that you basically have three levers: you have the sanctions, which 

I think you are doing an incredibly effective job with; you have 

readiness; and then you have diplomacy. 

But then you have this Commander in Chief who uses belligerent 

rhetoric. And I do not want to ask you to comment on that because 

you work in the Administration, but it has to be recognized that 

your strategy may work in another time with another President. 

But to the extent that you have coercive diplomacy and you have 

got bombers flying across to send, I think appropriately, the signal 

that we would be ready for any contingency, it is viewed differently 

if that is concurrent with a threat via Twitter that we are going 

to wipe them off the map. I mean, we cannot view our strategy as 

separate and apart from what the President of the United States 

says. And I just ask you to consider the possibility that we are in 

a crisis and that the Commander in Chief says things that are not 

irrelevant to what we have to do. 

My time is up. Thank you. 

Chairman CRAPO. Thank you. And, Ms. Thornton, Senator Warren has asked if you could stay 3 minutes, and she promised to 

stick to 3 minutes. 

Senator WARREN. I promise. 

Chairman CRAPO. All right. 

Senator WARREN. Thank you. I appreciate your doing that. And 

thank you, Mr. Chairman. 

Now, President Trump has made the North Korean nuclear crisis 

worse by threatening fire and fury, by vowing to totally destroy the 

regime, and by engaging in name calling with an unstable leader 

in North Korea. 

The President is struggling to deal with North Korea, which already has nuclear weapons and is advancing its capabilities. But 

he is also about to create another crisis by suggesting that he may 

not certify to Congress by the October 15th deadline that Iran is 

complying with the nuclear agreement, which so far has prevented 

Iran from getting a nuclear weapon. 

Now, the President has already certified twice that Iran is complying with this deal, and if he fails to certify again next month, 

then he could blow up the agreement and Iran may restart development of a nuclear weapon. I get it. Iran supports terrorism, engages in human rights abuses, works to develop ballistic missiles. 

But I think it is easier to counter Iran’s destabilizing behavior if 

it has no nuclear weapon than it would be if Iran had a nuclear 

weapon. 

So, Ms. Thornton, if the United States causes the Iran nuclear 

deal to fall apart, would it make it easier or harder for us to resolve the North Korea nuclear crisis through diplomacy? 

Ms. THORNTON. Well, I do not really want to speculate on a hypothetical, but I do think that it is very important to hold countries 

with which we have agreements to account for the implementation 

of those agreements. And in the case of North Korea and in the 

case of past agreements we have had with North Korea, we have 

21 

seen that these agreements have been undercut by North Korean—— 

Senator WARREN. Well, I understand you are concerned about 

their undercutting. The question is about our undercutting. So far, 

the Iranian nuclear deal is working, and my question is: If we blow 

that up, does it make it harder to get to an agreement that the 

North Koreans could believe in if we try to negotiate with them? 

Ms. THORNTON. Well, our objective here is denuclearization with 

the North Koreans. We know that they are engaged in a lot of 

other nefarious behavior that is concerning. But I think what we 

would want to focus on is that the agreement covers all of the provisions needed to stop nuclear—— 

Senator WARREN. OK, but I am asking about the relevance of 

blowing up the Iran deal on trying to get a diplomatic solution with 

Korea. 

Ms. THORNTON. I know that there is speculation about what is 

going to happen with the Iran deal, and I am not the Iran person, 

but we have—of course, the Secretary has certified compliance the 

last two times. So I cannot get inside the head of the North Koreans and tell you how they look at it, but—— 

Senator WARREN. OK. I will just quit, because I promised I 

would, by quoting Adam Szubin, who said: 

Great nations do not play games when it comes to their international agreements. Doing so would be especially short-sighted when we are trying to 

convince the world to join us in a North Korea sanctions campaign whose 

stated objective is nuclear diplomacy. 

I think he is right, and I think President Trump would be wise to 

take his advice. 

Thank you, Mr. Chairman. 

Chairman CRAPO. Thank you. And, Ms. Thornton, you are excused. 

Ms. THORNTON. Thank you. 

Chairman CRAPO. And thank you for making the effort to be here 

today when you had this problem come up. 

Senator BROWN. Thank you, Ms. Thornton. 

Chairman CRAPO. Senator Van Hollen. 

Senator VAN HOLLEN. Thank you. Thank you, Mr. Chairman. 

Senator Corker indicated in his questions that Administrations, 

whether they are Republican or Democratic administrations, prefer 

for Congress to give them the maximum authority but also the 

maximum flexibility. In fact, back in 2009, when Congress was considering the Iran sanctions legislation, the Obama administration 

indicated, ‘‘The problem with congressional measures is that you 

cannot turn them on and off as you like.’’ Similar to the response 

that you provided to Senator Corker. 

The Congress, nevertheless, on a bipartisan basis went on to 

pass the Iran sanctions legislation, and as Senator Toomey said, I 

think there is strong bipartisan consensus here in Congress and 

also ultimately in the executive branch, that those congressional 

sanctions backed up by the President’s signature are what brought 

Iran to the negotiating table. 

Do you agree with that? 

Ms. MANDELKER. Senator, I think it was the full range of authorities, from the executive branch and the Congress, that brought 

22 

Iran to the table. And, of course, we welcome working closely with 

the Congress on these critical issues. 

Senator VAN HOLLEN. Right, but the distinction that you have 

made many times this morning, as did Secretary Thornton, is between authority and implementation. And you both indicated that 

enforcement and implementation is the key right here, and the 

question is whether we are fully implementing those powers. And 

the purpose of having sanctions like the Iran sanctions legislation 

is to make sure there is a constant driver there. 

Have you had a chance to look at the U.N. Experts’ report from 

both February and then the interim report that lists a whole bunch 

of Chinese firms and banks and from other countries that they assess to be violating the U.N. sanctions? Have you seen that? 

Ms. MANDELKER. I have seen the Panel of Expert reports, and we 

have taken some action based on those reports. But the importance 

for us is that we have the ability to remain agile so that the Treasury Department can deploy our economic authorities and tools in 

a way that is going to maximize our strategic—— 

Senator VAN HOLLEN. Look, I understand. I mean, it is another 

version of, ‘‘We want a lot of authority with maximum flexibility.’’ 

But I think the question is whether we need to do more. I think 

that it was premature of President Trump to sort of heap some congratulations on President Xi. I understand we want the Chinese to 

work with us. As Secretary Thornton indicated, they have been, 

and I am quoting here, ‘‘the leading enabler of North Korea.’’ And 

as of today, there are a whole lot of Chinese banks or firms that 

we believe are continuing to violate the sanctions. 

Why aren’t you naming those banks? Why aren’t you identifying 

them publicly? Even if you are not taking action against them now, 

isn’t there a benefit in publicly shaming those banks that are engaged in that kind of activity? 

Ms. MANDELKER. So, Senator, in June, of course, we did name 

the Bank of Dandong which we thought was a gateway of funding 

that was going to North Korea. We are very actively monitoring the 

activity of the banks. We have this forward-looking authority to 

allow us to impose secondary sanctions. We take that authority 

very seriously. And we will continue to deploy our economic tools 

in the way that we think enables us to—— 

Senator VAN HOLLEN. Mr. Chairman, I—— 

Ms. MANDELKER.——maximize economic pressure. 

Senator VAN HOLLEN. I appreciate that. The Executive order 

could have been issued day one of this Administration. I mean, 

there is nothing that would have stopped you from doing that. 

If I could, Mr. Chairman, put in the record the full list of the entities that were identified in the interim report of the U.N. Panel 

of Experts that continue to evade sanctions? 

Chairman CRAPO. Without objection. 

Senator VAN HOLLEN. All right. 

The Bank of Dandong is one—right?—and they have got over 58 

here. There are others that I know that you have targeted. But the 

point is if we are serious about getting China to work with us and 

cooperate, we have got to increase the leverage. And I understand 

the desire for maximum authority combined with maximum flexibility from the Congress. But I also think on a bipartisan basis 

23 

most people agree that it was ultimately the sanctions legislation 

that sent a message that we are very serious about making sure 

that we implement these sanctions going forward. 

So I believe that there is a lot more we can do. This is why Senator Toomey and I have introduced legislation really patterned 

after the Iran sanctions legislation, and hope, Mr. Chairman and 

Ranking Member, we can move in that direction. Thank you. 

Chairman CRAPO. Thank you. 

Senator Cortez Masto. 

Senator CORTEZ MASTO. Good to see you again. 

Ms. MANDELKER. Good to see you. 

Senator CORTEZ MASTO. I noticed it seemed like when Senator 

Schatz was talking with you and kind of giving his perspectives, 

you wanted to respond. I am going to open it up to let you respond. 

Ms. MANDELKER. Thank you. I think Senator Schatz was asking 

what are our short-term and long-term objectives. One of our shortterm objectives, of course, is to cut off all revenue streams to North 

Korea to keep it from having the ability to continue to fund its 

WMD programs, and that is what we are constantly intent on 

doing, whether it is deploying our sanctions effectively, going after 

the revenue streams, or mapping out their efforts to evade sanctions, understanding how they use front companies, financial 

facilitators around the world. And we are tactically deploying those 

authorities and tools and using our intelligence in a way that will 

provide maximum strategic impact. That was what I was going to 

continue to say. Thank you. 

Senator CORTEZ MASTO. Thank you. So this is one of many hearings we have had, and thank you very much to the Chair and 

Ranking Member. During those hearings some have argued that 

imposing secondary sanctions on entities doing business with North 

Korea could cause the North Korean regime to collapse. Do you 

have concerns that imposing secondary sanctions could cause that 

collapse? 

Ms. MANDELKER. What we want to do is change their strategic 

calculus. We are not seeking a collapse. We are changing strategic—the change in their strategic calculus so that they stop escalating in the way that they have been escalating, and that we ultimately achieve a denuclearized peninsula. 

Senator CORTEZ MASTO. And so you have talked about the President’s Executive order which gives Treasury the authority to impose secondary sanctions. Have you imposed any sanctions, secondary sanctions, pursuant to that Executive order? 

Ms. MANDELKER. The Executive order, of course, was just signed 

last week. It is a going-forward—that particular section is a goingforward authority, and we are going to continue to monitor what 

the banks are doing very carefully. 

Senator CORTEZ MASTO. So you have to date, and do you intend 

to in the near future? 

Ms. MANDELKER. Well, I am not going to—what I will tell you 

is all options are on the table. I am not going to prognosticate what 

future actions we might take. 

Senator CORTEZ MASTO. OK. And then just recently, as we 

know—and we had talked about it here—the Chinese Government 

issued a directive to Chinese banks on September 21st directing 

24 

them to stop certain financial transactions with North Korean businesses. Do you have a copy of that directive? Do you know specifically what is in that directive? Or can you share that with us? 

Ms. MANDELKER. I do not have a copy of the directive. 

Senator CORTEZ MASTO. You have not seen it? Do you intend to 

get a copy of the directive? 

Ms. MANDELKER. If the Chinese would share it, of course, I 

would like to get a copy. But I do not have a copy of the directive. 

Senator CORTEZ MASTO. OK. Thank you very much. I appreciate 

your being here. 

Chairman CRAPO. Thank you. 

Senator Warner. 

Senator WARNER. Thank you, Mr. Chairman. Secretary, it is good 

to see you again. It has been a while. 

Ms. MANDELKER. Good to see you. 

Senator WARNER. I think you hear a lot of frustration, and, obviously, I am—I will not officially comment, but what Senator Corker 

said, where there may be a contradiction between the conclusions 

of the intelligence community and what the Secretary of State is 

trying to do is really—it is a really thorny issue, and, Mr. Chairman, we may want at some point to get a classified brief for the 

Members of the Committee, because, sitting on the Intel Committee, some of the conclusions are fairly chilling. 

To Senator Cortez Masto, you said you have not seen the Chinese 

order, but in terms of your view of it, are there any gaps, any visible gaps or holes in the Chinese new restrictions toward the North 

Koreans? 

Ms. MANDELKER. Again, Senator, I have not seen the order. They 

did issue an announcement today that they are shutting down all 

North Korean firms and joint ventures with China. I think that is 

a welcome step. We are working very closely with the Chinese, and 

to the extent that there are gaps—and, of course, as I have also 

mentioned, we think the UNSCR is a floor, not the ceiling, and it 

is incredibly important that they take maximum efforts to enforce 

their obligations. 

Senator WARNER. We have seen testimony in this Committee and 

elsewhere that the North Koreans are pretty good about using 

front companies. 

Ms. MANDELKER. Yes. 

Senator WARNER. And in terms of our cooperation with the Chinese at this point, how good are our efforts at ferreting out those 

front companies so that we can really get at North Korean sources? 

Ms. MANDELKER. So we are constantly working with the intelligence community and with our financial institutions to map out, 

detect, and cut off those front companies. It is something that we 

are very, very focused on. We have been able to identify certain 

front companies. 

This week, in fact, we designated 26 financial facilitators, North 

Korean financial facilitators that are around the globe, to send a 

very—and these are financial facilitators who have become experts 

in how to set up those kinds of front companies. So we are sending 

a message that nobody should be doing business with them. We are 

also sharing various typologies with our banks to make sure that 

they understand precisely what they should be looking out for to 

25 

ensure that front companies are not abusing the international financial system. 

So our efforts are increasing. We are working very closely with 

the intelligence community, as I mentioned, with our banks, we 

have—but we have to continue to escalate. 

Senator WARNER. I hope you will keep the Committee abreast of 

that, and, again, I think—— 

Ms. MANDELKER. We would be happy to do so. 

Senator WARNER.——it is a scenario where we ought to collaborate with the Intel Committee. 

I guess the final point, and let me echo some of the comments 

made on this side of the aisle. I have been concerned with the tenor 

of some of the President’s comments. The back-and-forth, you 

know, insult attacks do not make our Nation safer and, frankly, I 

think it decreased the amount of international support that the 

sanctions regime would have. But I would also acknowledge that 

this is not a problem that, you know, suddenly emerged upon the 

stage just with the beginning of the Trump administration. I think 

there are many Administrations going back, Democrat and Republican alike, where this issue has not had a high enough focus, and 

now we are reaping those results. 

And I guess what I wonder is, you know, even presuming that 

we now have a fresh approach from the Chinese, we are ratcheting 

back. I look forward to joining bipartisan legislation to even increase congressional sanctions. Kim Jong-Un has got a history of 

not exactly succumbing to international pressure or sanctions. He 

has not got a long record of—he is willing to put his people through 

enormous challenges to maintain his control. 

Do we have any sense at all that we are going to have the time 

for these sanctions to actually have real effect versus the pretty remarkable progress he has made on the nuclear front? 

Ms. MANDELKER. Well, Senator, I think what you are seeing now 

on the international stage, and I am seeing it in my conversations 

with my partners around the globe—and, frankly, the President 

has been having very constructive dialogue with our allies—is a 

unity of purpose. We have never had the UNSCRs that were 

passed in succession in August and then in September. It is going 

to be critical to be successful to have wide-scale implementation of 

those sanctions, and we also think that countries need to go over 

and above the obligations that are, in fact, in those sanctions. 

I think that economic pressure and diplomatic pressure, those 

are the tools that we want to deploy to achieve the change in strategic calculus that we are trying to achieve. And we are putting our 

maximum efforts and resources to do so. 

Senator WARNER. I think we have made progress. I just worry, 

Mr. Chairman, that this—it would have been great if we would 

have done this, pick your number—2 years, 5 years, 10 years ago. 

Thank you, Madam Secretary. 

Ms. MANDELKER. Thank you. 

Chairman CRAPO. Thank you, Senator Warner. And that concludes our questioning. We actually just had the vote called, so that 

turns out that the timing worked out pretty well for the hearing 

as well. 

26 

Ms. Mandelker, I want to thank you again for coming before us 

again, and as many of the Senators indicated, thank you for the 

great work that you are doing. And in her absence, I want to thank 

Susan Thornton as well for the work that is going on at State. So 

State and Treasury, we do deeply appreciate your work here. 

We would like to inform Senators that their questions—and 

there will be further questions, I am sure, that we would ask you 

to respond to in writing—that they submit those questions within 

1 week, and we would ask, because we are working on a timeframe 

here for the legislation we are reviewing, that you respond within 

1 week as well. 

Senator BROWN. And if I could add, Ms. Mandelker, the Ranking 

Members of the appropriate committees that worked on the Iran 

issue, on the JCPOA, have sent a letter to the Secretary of the 

Treasury, the Secretary of Defense, and the Secretary of State asking if there is, in fact, evidence of noncompliance with the Iranians 

with the agreement, that you let us know what it is specifically, 

and I renew that request for you to share with the Treasury Secretary and with the other two. And the deadline, we asked for that 

answer by early October, so I would like you to follow up with that 

with us, please. 

Ms. MANDELKER. Thank you. I would be happy to do so. And 

thank you for the hearing and our continued partnership. 

Chairman CRAPO. Thank you. If there is nothing further, then 

this hearing is adjourned. 

[Whereupon, at 10:50 a.m., the hearing was adjourned.] 

[Prepared statements, responses to written questions, and additional material supplied for the record follow:] 

27 

PREPARED STATEMENT OF SIGAL MANDELKER 

UNDER SECRETARY FOR TERRORISM AND FINANCIAL INTELLIGENCE, DEPARTMENT OF

THE TREASURY

SEPTEMBER 28, 2017 

Opening 

Chairman Crapo, Ranking Member Brown, and distinguished Members of this 

Committee, as the Under Secretary for Treasury’s Office of Terrorism and Financial 

Intelligence, I am honored to appear before you to discuss the Treasury Department’s strategy to combat one of the gravest national security threats we face today: 

the provocative, destabilizing, and repressive actions of North Korea. 

Just this year, North Korea has conducted a nuclear test and multiple ballistic 

missile tests, including two intercontinental ballistic missile (ICBM) tests and two 

missile launches that overflew Japan. Kim Jong Un continues to utter threats 

against American cities and territories and those of our allies. We are determined 

to constrain Kim Jong Un’s capacity to act on such threats in the future. We must 

not allow North Korea to extort the United States and our allies with its nuclear 

and missile programs. 

The Administration is applying maximum economic and diplomatic pressure to 

counter this threat. Treasury’s tools are central to this campaign and have become 

among this Administration’s top nonkinetic tools of choice. We have the unique ability to map out and target North Korea’s trade and financial networks. We are doing 

so at an unprecedented pace by executing a comprehensive campaign designed to 

impose maximum pressure on North Korea’s finances and economy. Today, I will 

share aspects of our strategy. 

Under the leadership of Secretary Mnuchin, my mandate is to make sure that we 

are strategically and smartly deploying all of our economic authorities—including 

sanctions, anti-money laundering (AML) measures, enforcement actions, actions 

under Section 311 of the USA PATRIOT Act, foreign engagement, private sector 

partnerships, among other tools—to identify and disrupt the regime’s ability to generate revenue and move funds in support of its weapons programs. I have directed 

each component within the Office of Terrorism and Financial Intelligence to 

prioritize the North Korea threat; to be innovative and strategic in our approach; 

to assess the impact of our actions so that we adapt our strategy as circumstances 

dictate; and to stay agile as we calibrate to ensure maximum impact against the 

regime’s finances. 

In the last 9 months, we have targeted dozens of individuals and entities facilitating North Korea’s weapons programs, including coal companies, banks, and individuals who help North Korea evade international sanctions. This, along with our 

other actions and those of our international partners, is intended to have a significant impact on North Korea’s ability to continue raising and moving funds. 

Actions taken just this past week further illustrate our seriousness of purpose. On 

September 21, the President announced a new Executive order that provides Treasury with the most robust set of North Korea-related sanctions authorities yet. Executive order 13810 authorizes Treasury to impose a range of sanctions, such as suspending U.S. correspondent account access to, or designating and freezing the assets 

of, any foreign bank that, going forward, knowingly conducts or facilitates significant transactions tied to trade with North Korea or certain persons blocked in connection with North Korea. We can also freeze assets of anyone conducting significant trade in goods, services, or technology with North Korea and of anyone supporting North Korea’s textile, fishing, and manufacturing industries. 

We are already using these new authorities to maximize our leverage. Just this 

week, we took action on a number of North Korean banks and designated 26 financial facilitators acting as representatives for North Korean banks across the globe. 

These individuals were part of North Korea’s ongoing attempts to evade sanctions 

in order to help the regime raise and move funds. We are calling them out and 

working tirelessly to put an end to this practice. 

We have an incredibly dedicated team at Treasury focused around-the-clock on 

countering these threats. We will not relent until the danger posed to the United 

States and our allies by Kim Jong Un’s nuclear and ballistic missile programs is 

eliminated. 

Identifying and Targeting North Korea’s Financial Vulnerabilities 

Our strategy is focused on attacking North Korea’s key financial vulnerabilities: 

(i) the regime requires revenue to maintain and expand its nuclear and ballistic 

missile programs, and (ii) the regime needs to move funds through the international 

28 

financial system in order to acquire foreign currency (such as dollars and euros), 

transfer funds, and pay for goods. 

All components of my office are working in concert toward this objective. Underpinning these efforts is our ability to rely on financial intelligence and analysis. 

Treasury’s Office of Intelligence and Analysis (OIA)—a member of the Intelligence 

Community—provides expert analysis of North Korea’s financial networks, identifying key nodes that enable us to take disruptive action and build impactful strategies. The Office of Foreign Assets Control (OFAC)—the beating heart of Treasury’s 

sanctions programs—tirelessly investigates and targets individuals and entities that 

support North Korea’s weapons of mass destruction (WMD) and ballistic missile programs. The Financial Crimes Enforcement Network (FinCEN) exercises its information gathering and analytical tools in novel ways to track the financial flows of 

North Korean entities and front companies, and has used Section 311 of the USA 

PATRIOT Act to further restrict North Korea’s access to the U.S. financial system. 

The Office of Terrorist Financing and Financial Crimes (TFFC), our policy coordination office, leads our international engagement efforts to work with partner countries, thereby hardening the defenses worldwide and depriving North Korea of alternative financial avenues. 

Our goal is to strategically and tactically choke off North Korea’s revenue sources 

and safeguard the international financial system from North Korea’s illicit financial 

activity. 

Targeting North Korea’s Sources of Revenue 

Any revenue that North Korea generates can be used to support, directly or indirectly, its weapons development programs. As such, President Trump and Secretary 

Mnuchin have made clear that all countries must stop trading with North Korea. 

A key part of our strategy to suffocate North Korea financially is to target the regime’s most profitable industries, including coal, exportation of overseas labor, and 

sale of weapons and other goods. 

Coal ($1 billion annually): By our estimates, prior to the latest U.N. Security 

Council resolutions (UNSCRs), coal exports brought in $1 billion in revenue annually for the regime. We are constricting this revenue source by targeting North Korean coal networks and the individuals and entities that support them, as well as 

by working multilaterally so that other countries also sever this economic lifeline. 

OFAC designations are a central part of this effort. On August 22, OFAC designated 16 individuals and entities, including three Chinese companies that are 

among the largest importers of North Korean coal. We estimate that, collectively, 

these companies were responsible for importing nearly half a billion dollars’ worth 

of North Korean coal between 2013 and 2016. These funds are used to support the 

Government of North Korea and the Workers’ Party of Korea, including its nuclear 

and ballistic missile programs. 

We are also working with the United Nations to dry up North Korea’s coal revenues. On August 5, 2017, the U.N. implemented a full coal ban under UNSCR 2371. 

Of course, the success of this and other UNSCRs depends on effective implementation. We will continue working with the State Department to engage multilaterally 

and share detailed information to assist other countries in disrupting sanctions evasion and illicit trade. 

Exportation of Overseas Labor ($500 million a year): North Korea sends its people 

to countries across the globe, many of whom work in slave-like conditions, in order 

to generate revenue for the regime. Countries around the world employ North Korean overseas labor, which entails the exploitation of tens of thousands of individuals. Despite toiling for long hours under squalid conditions, most of their wages 

are siphoned off directly to the North Korean regime. 

This is unacceptable. We must put a stop to this inhumane practice. UNSCR 

2375, adopted on September 11, 2017, prevents the regime from generating revenue 

for its weapons program through the exploitation of its people. We call on all nations to implement their obligations and put an end to this practice. Treasury and 

the State Department have actively engaged a number of countries where North Korean workers were employed, often by construction and information technology companies, restaurants, textile manufacturers, and companies in other industries. And 

we have used our authorities to counter this practice. 

As an example, on June 1 of this year, we designated three individuals and six 

entities, including the Korea Computer Center (KCC), a state-run information technology research and development center that was operating in Germany, China, 

Syria, India, and the Middle East. Using overseas North Korean laborers, KCC was 

earning foreign currency for North Korea’s Munitions Industry Department, which 

is responsible for overseeing the ballistic missile program. On August 22, 2017, 

Treasury also designated Mansudae Overseas Projects Architectural and Technical 

29 

Services (Proprietary) Limited, which is linked to a U.S. and UN-designated entity 

that has engaged in, facilitated, or been responsible for the exporting of workers 

from North Korea. 

Exportation of Additional Goods, Including Weapons and Missile Technologies: Treasury is also tracking and targeting North Korea’s exports of textiles (about $800 

million a year); iron, lead, and seafood (about $500 million a year); and additional 

revenue from the sale of weapons and missile technologies, among other areas. On 

June 29, 2017, Treasury designated Dalian Global Unity Shipping Co. Ltd., which 

reportedly transports 700,000 tons of freight annually, including coal and steel products, between China and North Korea. According to a 2013 United Nations report, 

Dalian Global Unity was actively involved in at least eight cases of luxury goods 

smuggling incidents. Middlemen from Dalian Global Unity gave specific instructions 

about how shipments and transactions could evade the UN-mandated luxury goods 

ban. 

Shipping Networks: Our targeting of Dalian Global Unity also highlights our focus 

on targeting the shipping networks that enable the Kim regime to move goods in 

and out of North Korea. These shipping networks engage in deceptive practices and 

circuitous routes to avoid international sanctions. We are also actively increasing 

our understanding of North Korea’s shipping networks, and we will expose individuals and entities that are providing insurance, maintenance, or other services to 

North Korean vessels. Our experience mapping and dismantling illicit shipping networks in the Iran context enables us to effectively target commercial shipping moving in and out of North Korea. 

New authorities in the recent Executive order highlight the importance of targeting North Korea’s shipping networks. The new Executive order directly targets 

North Korea’s shipping and trade networks and issues a 180-day ban on vessels and 

aircraft that have visited North Korea from visiting the United States. This ban also 

targets vessels that have engaged in a ship-to-ship transfer with a vessel that has 

visited North Korea within 180 days. The Executive order also allows Treasury to 

impose sanctions on persons involved in the ownership, control, or operation of any 

port in North Korea, including any seaport, airport, or land port of entry. 

Countries should aggressively implement UNSCR 2375, which provides member 

states new tools to stop high seas smuggling of prohibited products (e.g., conventional arms, coal, textiles, seafood, etc.). 

Restricting North Korea’s Access to the International Financial System 

Despite our relentless efforts and many years of U.N. Security Council Resolutions, North Korea continues to evade sanctions and generate and move money in 

support of its WMD and ballistic missile programs. The regime accesses the international financial system through front companies and other deceptive financial 

practices in order to buy goods and services abroad. We are working to map out and 

untangle these complex and opaque financial webs and target those individuals and 

entities that facilitate them. 

Financial Facilitators: North Korea maintains representatives abroad who work 

on behalf of UN- and U.S.-designated North Korean banks and trading companies, 

helping North Korea conceal their overseas footprint. These operatives have expertise that they use to establish front companies, open bank accounts, and conduct 

transactions that enable North Korea to move and launder funds. Targeting these 

financial facilitators strikes at the heart of North Korea’s ability to continue abusing 

the financial system for its illicit aims. That is why earlier this week, Treasury took 

action on a number of North Korean banks and designated 26 individuals who act 

as representatives of North Korean banks. These representatives operate around the 

world, including in China, Libya, Russia, and the United Arab Emirates. We call 

on all countries that host these representatives to expel these individuals. 

Foreign Banks: Banks that facilitate North Korean illicit financial activity are another key node that we are focusing on. In my first week on the job, Treasury acted 

for the first time in over a decade against a non-North Korean bank for facilitating 

North Korean financial activity through the U.S. financial system. On June 29, 

2017, pursuant to Section 311 of the USA PATRIOT Act, FinCEN found Chinabased Bank of Dandong to be of ‘‘primary money laundering concern’’ and issued a 

notice of proposed rulemaking, the finalization of which would essentially sever 

Bank of Dandong’s access to the U.S. financial system. 

Bank of Dandong is believed to have acted as a financial conduit for North Korea 

to access the U.S. and international financial systems, including by facilitating millions of dollars of transactions for companies involved in North Korea’s WMD and 

ballistic missile programs. FinCEN assesses that at least 17 percent of Bank of 

Dandong customer transactions conducted through the bank’s U.S. correspondent 

accounts from May 2012 to May 2015 were conducted by companies that have 

30 

transacted with, or on behalf of, U.S.- and UN-sanctioned North Korean entities, including designated North Korean financial institutions and WMD proliferators. 

FinCEN also exercised its Section 311 authority in 2016 to identify the entire jurisdiction of North Korea as a primary money laundering concern. Under this authority, FinCEN imposed a rule prohibiting U.S. banks from maintaining correspondent accounts with North Korean banks, and requiring U.S. banks to undertake special due diligence to ensure that North Korean financial institutions do not 

access the U.S. financial system indirectly through banks in other countries. 

Banks worldwide should take note that we are acting to protect the U.S. financial 

system from North Korean illicit financial activity. The new authorities granted to 

the Treasury Department by the Executive order issued last week give us even 

greater ability and leverage to target foreign banks that support the Kim regime. 

We now have the ability to suspend correspondent account access to, or designate 

and freeze the assets of, any foreign financial institution that knowingly conducts 

significant transactions in connection with any trade with North Korea or on behalf 

of any North Korea-related designated person. These new financial sanctions will 

be forward looking, and will apply to behavior that occurs following the date of the 

Executive order. These types of sanctions were used to great effect in the Iran context, and present a stark choice to banks around the world. 

Interagency Collaboration: At Treasury, we work in close partnership with other 

departments and agencies, including those within the Intelligence Community, the 

Defense Department, the Justice Department, the State Department, the Department of Homeland Security, and the Commerce Department. This Administration’s 

maximum pressure campaign requires that we collaborate closely to detect and disrupt evasive tactics by North Korea. 

As just one example, Treasury has been working closely with the U.S. Department 

of Justice (DOJ) to disrupt the ability of a Chinese coal company, Dandong Zhicheng 

Metallic Co., to launder money for North Korea. The Dandong Zhicheng case perfectly illustrates North Korea’s evasive tactics. Dandong Zhicheng imported coal 

from North Korea, brokered the sale of this coal around the world, and moved the 

proceeds from these coal sales into its front company accounts. North Korea subsequently sent payment instructions to Dandong Zhicheng for items the regime wanted to purchase from foreign suppliers, and Zhicheng used its front companies and 

the proceeds from the brokered North Korea coal sales to purchase the items that 

North Korea wanted. Once the front companies had executed the payments, the foreign suppliers shipped the items to the North Korean regime. These items included 

bulk commodities (sugar, rubber, petroleum products, soybean oil), cell phones, luxury items, and dual-use technology. By using a front company outside of North 

Korea to help it to sell and buy goods, the regime was able to make and spend 

money on goods that indirectly or directly support its weapons programs. As part 

of our disruptive activities, on August 22, 2017, Treasury designated Dandong 

Zhicheng, and on the same day, DOJ filed a complaint to seize more than $4 million 

related to the company. 

Public-Private Partnerships: The private sector also plays an essential role in 

identifying and disrupting illicit North Korean financial activity. The safeguards 

that our banks put in place, and the information they provide us about terrorist financiers, proliferators, and criminals, is what helps prevent malign actors from abusing our financial system. In this case, information provided by U.S. banks has been 

critical to our efforts to map out and disrupt the illicit financial networks upon 

which North Korea relies. 

We are enhancing the ways that we communicate with our banks and how they 

communicate with each other. We are sharing information with U.S. financial institutions in a more targeted manner in order to facilitate a more dynamic and 

iterative dialogue between the public and private sectors. We also encourage banks 

to share information with each other under Section 314(b) of the USA PATRIOT 

Act, which provides banks with safe harbor when sharing certain information. This 

is particularly important when combating North Korean illicit financial activity, 

where a single network can cut across multiple institutions. 

Two weeks ago, while in Europe, I held roundtable meetings in London, Paris, 

and Berlin with global banks to discuss the urgent threat posed by North Korea and 

to share with them typologies that they can use to identify and stop the illicit flow 

of North Korea’s finances. We discussed the aggressive measures that we in the 

United States have taken to protect our U.S. banks, and what else European banks 

could be doing to ensure that they are not unwittingly clearing euro transactions 

for North Korean representatives and their enablers. 

31 

International Cooperation 

The success of Treasury’s strategy to maximize pressure on North Korea also depends on close collaboration with international partners. In the last 2 months, our 

Administration worked with other Permanent Members of the Security Council to 

unanimously pass U.N. Security Council Resolutions 2371 and 2375. Both strike at 

the core of North Korea’s revenue generation and include embargoes on all importation of North Korean coal, iron, lead, seafood, and textiles. They also restrict North 

Korea’s ability to acquire revenue from overseas laborers, cut off over 55 percent of 

refined petroleum products going to North Korea, and ban all joint ventures with 

North Korea to cut off foreign investments. 

But UNSCRs should be the floor, not the ceiling. Despite years of increasingly restrictive UNSCRs, North Korea has been able to generate the revenue it needs to 

make progress toward the goal of building a nuclear-tipped intercontinental ballistic 

missile. As both the U.N. and the U.S. sanctions regimes expand, North Korea remains adept at sanctions evasion. All nations must join in implementing and rigorously enforcing U.N. Security Council Resolutions. We are keeping close track of 

North Korea’s trading partners, and we will not hesitate to act when we believe we 

must take additional measures to stop the flow of funding. 

Our strong bilateral and multilateral partnerships are critical in ensuring that 

this is a global effort. When I was in Europe, I also discussed with our European 

allies how we can increase our collective pressure so that no person or entity that 

facilities North Korean financial activity has a safe place to operate. I stay in close 

contact with my European counterparts and continue to share information about 

North Korean illicit finance so that they can identify the activity themselves and 

take their own disruptive actions. 

We are also working closely with partners in Asia. In particular, we appreciate 

the efforts of Japan and South Korea to match our actions with actions of their own. 

Following one of our actions this past August, Japan issued its own domestic designations on some of the same persons, and South Korea issued a public advisory 

cautioning all South Korean nationals from conducting financial transactions with 

the U.S. designated individuals and entities. These types of joint actions maximize 

the impact of our collective efforts to pressure North Korea. We are also pleased 

that, this year, Australia expanded its sanctions programs to target additional sectors of the North Korean economy. 

China and Russia are to be recognized for supporting adoption of the most recent 

U.N. Security Council Resolutions. Nevertheless, both countries can do much 

more—and with greater urgency—to implement and enforce the sanctions called for 

by the United Nations. Their enforcement and pressure are critical to stopping the 

North Korean threat. 

Finally, we work through multilateral fora such as the G7 and the Financial Action Task Force to ensure that countries have the regulatory frameworks in place 

to detect and freeze assets linked to North Korea. Kim Jong Un must realize that 

he faces a united international front. 

Partnership With Congress 

I want to emphasize the importance we place on working with Congress to combat 

the threat posed by North Korea. I am grateful for the Committee’s work to counter 

the threats we face and for your great appreciation of the importance of imposing 

maximum economic and financial pressure on North Korea. I look forward to working with this Committee and other Members of Congress as we seek to fulfill our 

shared responsibility to keep Americans safe and secure. 

Conclusion 

We all recognize that time is not on our side. Treasury is pursuing this pressure 

campaign against North Korea with utmost urgency. Our success in curtailing 

North Korea’s revenue streams and severing its access to financial systems is essential to a peaceful resolution of this growing crisis. We will not yield until our work 

is done. 

PREPARED STATEMENT OF SUSAN A. THORNTON 

ACTING ASSISTANT SECRETARY, BUREAU OF EAST ASIAN AND PACIFIC AFFAIRS, 

DEPARTMENT OF STATE

SEPTEMBER 28, 2017 

Introduction 

Chairman Crapo, Ranking Member Brown, and Members of the Committee: 

32 

Thank you for the opportunity to appear before you today for this timely hearing 

on North Korea. Thank you also for your attention to the North Korea threat and 

our active policy response to it. 

By now, it should come as no surprise that the Administration recognizes North 

Korea’s nuclear and ballistic missile program as the paramount security threat facing the United States today. We have been exceedingly vocal in our efforts to compel 

the Kim Jong-Un regime to adjust its strategic calculus and cease its belligerent 

pursuit of nuclear weapons. This is for good reason. 

Today, we face a North Korea that has demonstrated an unwavering determination to achieve an Intercontinental Ballistic Missile (ICBM) capable of delivering a 

nuclear payload to our homeland. Each North Korean missile launch and nuclear 

test furthers Pyongyang’s weapons program. The DPRK’s multiple ballistic missile 

launches this year—including two inaugural ICBM launches—and its sixth nuclear 

test earlier this month bring the regime closer to its objective. North Korea continues to make incendiary threats against Guam and our treaty allies the Republic 

of Korea (ROK or South Korea) and Japan. We take those very seriously. Let me 

emphasize that we continue to stand with our allies, in particular Japan and South 

Korea, in the face of this escalating threat, and are fully committed to defending 

Japan and South Korea with the full range of U.S. military capabilities. 

It is clear that we cannot allow such flagrant violations of international law and 

regional order to continue. 

Through clear, decisive actions, we must hold Pyongyang to account. 

Our maximum pressure campaign does just that. This strategy employs all available levers of economic and diplomatic pressure on North Korea to make the Kim 

regime’s adherence to its current behavior politically painful and financially untenable, in order to compel it to revise its strategic calculus. 

As an example, last week’s Executive order greatly broadened our authority to 

target any foreign financial institutions that facilitate significant transactions in 

connection with North Korean trade. Among other new authorities, this action puts 

financial institutions on notice going forward that they can choose to do business 

with the United States, or with North Korea, but not both. We understand that this 

action has the potential to make countries, including China and Russia, uneasy, but 

we view it as the only logical step as we increase pressure on North Korea. We call 

on all countries to join us in cutting all trade and financial ties with North Korea. 

Our Pressure Campaign 

Our pressure campaign centers around three actions: 

(1) Pressing for strong multilateral sanctions at the U.N. in response to North Korea’s reckless behavior. Recently, the U.N. Security Council unanimously adopted 

the toughest two resolutions ever to target the DPRK. UNSCRs 2371 and 2375 have 

slashed DPRK exports, including full bans on textiles, coal, iron, and seafood. Cumulative U.N. sanctions to date will deny the DPRK $2.4 billion in annual trade 

revenue if properly implemented by all Member States. 

(2) Galvanizing international action through diplomatic outreach. Secretary 

Tillerson has made the DPRK a key issue in every engagement with leaders and 

ministers around the world. That high-level message from the Secretary is aggressively reinforced by our Ambassadors in capitals everywhere and in meetings at 

every level. In daily diplomatic engagements with partner countries, we press them 

to cut off the sources of DPRK financial support, interdict WMD and arms-related 

shipments, and end North Korea’s ability to abuse commercial shipping, banking, 

and other commercial nodes to violate, evade, and undermine our sanctions. We expect all countries, at a minimum, to fully implement UNSCRs, and we press them 

to take additional actions measures to put diplomatic and economic pressure on 

Pyongyang. 

(3) Maximizing our domestic authorities—including last week’s Executive order— 

to target North Korea’s global proliferation and financial networks through actions 

focused on individuals and entities that support the regime’s ability to acquire revenue in support of its unlawful weapons and proliferation programs. In close coordination with our counterparts in Treasury, we have sent a clear message across the 

globe that we will not hesitate to take action where the evidence shows that individuals and entities are enabling the DPRK’s unlawful activities. 

Our pressure campaign is aimed at bringing the DPRK back to negotiations on 

the denuclearization of the DPRK. We also stand ready to respond to any acute 

threat from the DPRK. We are fully committed to the defense of the United States 

and our allies, and are ready to respond to any DPRK attack. We have deployed 

THAAD to the ROK and continue to take other measures to prepare 

ourselves, South Korea, and Japan to respond to a DPRK attack with force. We are 

33 

unequivocal in our messaging to North Korea that any attack on the United States 

or our allies will be met with an overwhelming response. 

Throughout the execution of this strategy, we have been clear about what our 

strategy is not: We are not seeking regime change or collapse. We do not seek an 

accelerated reunification of Korea, nor an excuse to garrison troops north of the Armistice Agreement’s Military Demarcation Line. We have no desire to inflict harm 

on the long-suffering North Korean people, whom we view as distinct from the hostile regime in Pyongyang. 

We recognize that the success of the pressure strategy will depend on heavy cooperation from international partners, especially Beijing. We are working closely 

with China to execute this strategy and are clear-eyed in viewing the progress— 

growing, if uneven—that China has made on this front. We are encouraged by China’s agreement to adopt sanctions of unprecedented strength on North Korea at the 

United Nations. Our task now is focused on ensuring that these internationally 

binding obligations are implemented in full; and to convince China’s leaders to more 

fully exert its still considerable leverage over the Kim regime. 

Secretary Tillerson said it best when he called China’s support for the pressure 

campaign ‘‘notable, but uneven,’’ though we have recently seen Chinese authorities 

take additional actions. We will work with China and Russia on the threat posed 

by North Korea and will continue to engage in a dialogue on how to further pressure 

the DPRK. We have also made clear that if China, Russia, and others do not act, 

we will use the tools we have at our disposal. While our actions are not meant to 

target countries other than North Korea, we have consistently told our foreign counterparts that we will continue to act multilaterally and unilaterally to disrupt North 

Korea’s illicit activities wherever they are located. 

Signs of Progress 

While there is more work to do, we have achieved notable results from our maximum pressure campaign to date: 

• The international community was unanimous in condemning recent DPRK 

provocations. All U.N. Security Council members voted to condemn DPRK actions, and almost all G–20 members publicly condemned the DPRK. 

• Since the beginning of the Trump administration, more than 20 countries have 

acted to restrict DPRK diplomatic activities. Mexico, Peru, Spain, and Kuwait 

recently announced the expulsion of their resident DPRK Ambassadors. 

• Bans on the DPRK’s exports of commodities continue to deprive the regime of 

valuable export revenues previously utilized to support its proscribed weapons 

program. Most notably, since China’s ban of coal imports in February, the 

DPRK has forfeited over $690 million in revenue from coal exports at current 

market prices. 

• We have convinced U.N. Security Council members and other countries to take 

action to end the practice of employing DPRK laborers overseas, which provides 

a key revenue stream to the government and often involves serious human 

rights abuses. Countries in the Middle East, Europe, and Southeast Asia halted 

visa issuances to North Korean laborers and are phasing out the use of these 

workers, whose wages are garnished to fund the regime and its unlawful nuclear and missile programs. 

• The most recent UNSCR bans the issuance of new work visas to DPRK laborers; several countries, including Kuwait, Qatar, Malaysia, and Malta, took action recently to end the practice. Poland is the only EU country still hosting 

significant numbers of DPRK laborers. The vast majority of DPRK laborers remaining outside of North Korea are in either China or Russia. 

• Other countries have recognized that U.N. sanctions are not enough and have 

adopted additional autonomous measures—including the European Union, Australia, ROK, Japan, and Latvia. Pakistan issued an official government notice 

prohibiting its companies from engaging with U.S. sanctioned persons. Other 

countries, such as the ROK, Australia, and Japan, have implemented their own 

unilateral sanctions on individuals and entities violating U.N. sanctions. 

• Key European partners, particularly the United Kingdom, France, and Germany, are collaborating with us on maximizing pressure on the DPRK. 

• We have seen countries expel sanctioned North Korean officials and North Korean diplomats engaged in illicit commercial or arms-related activities, and 

many countries have adopted measures to prevent certain North Korean individuals from entering or transiting their jurisdictions. State has also engaged 

in a sustained effort to shut down illicit DPRK shipping activities, which the 

34 

Kim regime could use to move illicit cargoes or procure items for its prohibited 

nuclear and missile programs. 

• Across the globe, countries are beginning to view visiting North Korean official 

delegations with caution, recognizing that welcoming these delegations not only 

lends tacit support to North Korea’s nuclear and ballistic missiles programs, but 

comes at a cost to their international reputation and relations with the United 

States and others. 

Next Steps 

Unfortunately, despite the international community coming together to pressure 

the DPRK, we have yet to see a notable change in DPRK’s dangerous behavior, or 

any signs that it is willing or interested in serious talks on denuclearization at this 

stage. That simply means we must increase the pressure and isolation. If the DPRK 

indicates an interest in serious engagement, and ends its missile and nuclear tests, 

we will explore that option, but we will do so with a clear view about the DPRK’s 

track record of violating the spirit and the letter of negotiated agreements and commitments. 

We are sincere in our intent to assist the DPRK government in achieving peace, 

prosperity, and international acceptance. However, absent a tangible change of intent from Pyongyang, we will continue our full-court press approach to diplomatically and financially isolate the DPRK. 

We will continue to make clear to Pyongyang that a better alternative to belligerence, poverty and isolation exists, but that the regime will need to make that 

choice. We will continue to urge countries around the world to take actions to underscore to the DPRK that its behavior is intolerable, and we will continue to build 

pressure. 

We appreciate the strong interest in this issue from Congress, and we look forward to continuing our cooperation. Thank you for inviting me to testify today. I 

am pleased to answer any questions you may have. 

(35) 

RESPONSE TO WRITTEN QUESTIONS OF SENATOR MENENDEZ 

FROM SIGAL MANDELKER 

Q.1. In your testimony you note the United States invoked Section 

311 on the Bank of Dandong. Can you discuss the effectiveness of 

sanctions—a different tool than the PATRIOT Act—that target specific Chinese banks and companies? In what ways can the United 

States employ more concerted pressure? Are you considering sanctioning other Chinese banks that provide a lifeline to the North Korean regime? 

A.1. Treasury is deploying a maximum financial pressure campaign 

on North Korea. On September 21, the President announced new 

Executive Order (E.O.) 13810, which allows Treasury’s Office of 

Foreign Assets Control (OFAC) to target, among others, any foreign 

financial institution that knowingly conducts or facilitates significant transactions tied to trade with North Korea or certain designated persons. Foreign financial institutions are now on notice 

that, going forward, they can do business with the United States 

or with North Korea, but not both. Through our bilateral engagements we know from governments and financial institutions that 

Treasury’s new authorities are having an impact. They recognize 

the power of Treasury’s tools and have received a clear message 

that we stand ready to aggressively enforce these authorities. In 

addition, E.O. 13810 allows OFAC to sanction a broad new range 

of actors, such as persons who engage in significant trade in goods, 

services, or technology with North Korea. Treasury used E.O. 

13810 on September 26 when OFAC designated eight North Korean banks and 26 individuals linked to North Korean financial 

networks. 

In addition to clearly signaling that we will aggressively enforce 

these authorities, these actions will further constrain North Korea’s 

ability to access the international financial system. For example, 

two of the China-based persons who were designated were 

operatives for Office 39, a secretive branch of the North Korean 

government that manages slush funds and raises revenue for 

North Korea’s leadership. Likewise, a Dubai-based representative 

who was designated was responsible for collecting funds from 

North Korean workers and hand carrying the funds back to 

Pyongyang. Treasury’s steps to expose these financial practices and 

individuals are vital to robbing North Korea of the few individuals 

it trusts to operate outside of North Korea. We will continue to use 

our authorities to disrupt these activities. 

Q.2. Despite prohibitions, we know that North Korea actively exports weapons to a variety of actors throughout the world. These 

sales in turn contribute to North Korea’s ability to access foreign 

capital. How can the international community do a better job of 

tracking these weapons’ sales? 

36 

A.2. I would refer your question about the tracking of weapons to 

the Intelligence Community. 

Regarding North Korea’s ability to access foreign capital from 

such sales, we are monitoring North Korea’s activities and will continue to take action to implement our powerful economic authorities. For example, on March 31, Treasury designated three overseas North Koreans who were involved in North Korea’s militaryrelated sales. Two were based in China and one was operating in 

China. 

More broadly, Treasury has focused on cutting North Korea off 

from the revenue it needs to maintain and expand its WMD and 

ballistic missile programs. North Korea raises money not just from 

exporting weapons but also from exporting missile technology, coal, 

iron and iron ore, overseas labor, seafood, and even bronze statues. 

Treasury is working to target all sources of revenue, anywhere 

North Korea earns money. 

In the last 9 months, we have targeted dozens of individuals and 

entities involved in raising funds for North Korea. For example: 

• On June 1, Treasury designated the Korea Computer Center, 

a state-run IT research and development center that was operating in Germany, China, Syria, India, and the Middle East. 

Using overseas North Korean laborers, KCC earned foreign 

currency for North Korea’s U.S.- and UN-designated Munitions 

Industry Department, which is responsible for overseeing 

North Korea’s ballistic missiles. 

• On August 22, Treasury designated three Chinese coal companies collectively responsible for importing nearly half a billion 

dollars’ worth of North Korean coal between 2013 and 2016. 

North Korea used these funds to support the Government of 

North Korea, the Workers’ Party of Korea, and the revenue 

may also have benefited North Korea’s nuclear or ballistic missile program. 

RESPONSE TO WRITTEN QUESTIONS OF SENATOR MENENDEZ 

FROM SUSAN A. THORNTON 

Q.1. One major concern on a global level is North Korea’s sharing 

and transferring of nuclear technology. North Korea has successfully subverted sanctions and export and import controls, often 

through falsely flagging cargo ships: What steps has the international community taken since March to more rigorously monitor 

and control North Korean shipping vessels? What steps can be 

taken to ensure that all countries are complying with stricter controls the U.N. Security council passed in March? Where are the 

weakest links in the system? 

A.1. In August and September 2017, the U.N. Security Council 

adopted two new resolutions imposing the strongest sanctions on 

North Korea to date. In terms of provisions specific to shipping, 

resolution 2371 (adopted 5 August 2017) authorizes the UN’s 1718 

Committee to designate for a port ban vessels that have been involved in activities prohibited by the U.N. Security Council resolutions (UNSCRs) on the DPRK. A list of ships for inclusion in such 

a port ban is under consideration at the United Nations, and we 

37 

continue to engage with the U.N. on designating additional ships. 

The resolution also clarifies measures set forth in last year’s resolution 2270 that require U.N. Member States to prohibit any entities or persons subject to their jurisdiction from owning, leasing, 

operating, or chartering any DPRK-flagged vessel. Previous resolutions also require Member States to prohibit any entities or persons subject to their jurisdiction from providing any sort of classification, certification, or insurance service to such vessels, and obligate Member States to de-register any vessel owned, operated, or 

controlled by the DPRK—and also prohibit another Member State 

re-registering such a vessel. 

Resolution 2375 (adopted 11 September 2017) includes maritime 

interdiction measures that call on all Member States to inspect vessels on the high seas, with the consent of the flag state, when a 

Member State has information that provides reasonable grounds to 

believe that a vessel contains prohibited cargo; if the flag state does 

not consent, the Member State shall direct the vessel to a suitable 

port for inspection. In addition, the resolution calls on Member 

States to cooperate with such inspections. If such vessels and their 

respective flag states fail to cooperate, the 1718 Committee is directed to consider designating the vessels making them subject to 

various measures, including a port ban and asset freeze. Resolution 

2375 further requires Member States to prohibit anyone subject to 

their jurisdiction from facilitating or engaging in ship-to-ship transfers that involve DPRK-flagged vessels. 

Over the past year, the Department of State, with strong interagency support, has conducted multiple rounds of engagement with 

many countries seeking to provide any sort of service to, or to be 

the jurisdiction of record for a company owning, a DPRK-associated 

vessel. This outreach has included engagement with ship owners, 

flag registries, and providers of insurance and classification services. The Department has also increased similar pressure on any 

countries with jurisdiction over ships visiting the DPRK or engaging in any UN-prohibited export of DPRK-origin materials such as 

coal. The DPRK has developed a variety of deceptive practices to 

evade this pressure, and we continue to work bilaterally with key 

countries on the receiving end of these practices. We have 

prioritized engagement with the likely and historical port states 

that receive DPRK-associated ships to make sure they are aware 

of their U.N. obligations as well as the deceptions that the DPRK 

is employing. We have provided these countries with a list of approximately 250 DPRK-flagged and DPRK-owned vessels and have 

recommended that they add these vessels to their watch lists for 

denial of port entry. We consistently stress during our bilateral security dialogues with partners the necessity of fully implementing 

the tough measures directed in the relevant U.N. resolutions, and 

we believe that many are realizing the seriousness of the issue and 

taking action. When we have information on specific shipments or 

ship-to-ship transfers taking place, we notify countries involved as 

soon as possible to ensure they terminate any association with the 

activity. Our engagement is paying off. For instance, we have seen 

several countries publicly announce investigations and the de-registration of DPRK-associated vessels, while other countries have 

taken such actions privately. 

38 

Q.2. Despite prohibitions, we know that North Korea actively exports weapons to a variety of actors throughout the world. These 

sales in turn contribute to North Korea’s ability to access foreign 

capital: How [can] the international community do a better job of 

tracking these weapons’ sales? 

A.2. Disrupting North Korea’s arms sales and depriving Pyongyang 

of the revenue generated from these exports is an important component of the President’s maximum pressure campaign. The Department of State, in coordination with other U.S. Government departments and agencies, as well as our international allies and 

partners, is working aggressively to detect and interdict or disrupt 

suspected North Korea’s arms transfers and to sever the underlying political and commercial relationships from which they result. 

The best way to improve the tracking and interdiction of DPRK 

arms transfers is for all states to strengthen implementation of relevant United Nations Security Council resolutions (UNSCRs). Multiple UNSCRs prohibit Member States from importing any North 

Korean arms or related materiel or contracting with North Korea 

for any support, assistance, refurbishing, manufacturing, or services related to arms or related materiel. In addition to the specific 

restrictions on arms cooperation, the Security Council has also designated over 100 individuals and entities, including many involved 

in North Korea’s arms export enterprise. States have a binding 

legal obligation to robustly implement these sanctions by freezing 

the assets and stopping the activities of these entities and individuals, as well as those acting for or on their behalf, in their jurisdictions. 

To assist states in these efforts, the U.N. Security Council established the Panel of Experts (POE), pursuant to resolution 1874. 

The POE is charged with monitoring UNSCR implementation and 

investigating violations, as well as scrutinizing and publicizing 

North Korea’s arms transfers and client base. While the DPRK has 

long engaged in deceptive practices to hide its illicit WMD and conventional arms proliferation and related revenue-generating activities, POE investigations, supported by U.N. Member States, expose 

violations and support implementation by highlighting how North 

Korea’s arms brokers are adapting to sanctions and holding North 

Korea’s arms clients accountable for violating the resolutions. The 

United States strongly supports the efforts of the POE in this regard and urges all other states to cooperate with its efforts. 

We are available to provide additional details on our efforts to 

disrupt North Korea’s arms exports in a classified setting. 

Q.3. We’ve seen some mixed messaging from the Administration on 

the role of the United Nations in countering North Korean aggression: 

Is China a partner in developing and more importantly implementing U.N. Security Council resolutions that aim to curb North 

Korea’s malign activities? Where are the United States’ best leverage points in the United Nations to counter North Korean aggression? Outside the United Nations, what other international or 

multilateral fora could we use to best counter North Korean 

aggression? 

39 

A.3. The U.N. Security Council continues to play a central role in 

reinforcing the strategy of maximum pressure that we have sought 

to bring to bear in countering the Democratic People’s Republic of 

Korea’s (DPRK) continued development of its unlawful nuclear and 

ballistic missile programs. The success of this strategy will heavily 

depend on cooperation from key international partners, especially 

Beijing. We are working closely with China to implement this 

strategy and are clear-eyed in viewing the progress—growing, if 

uneven—that China has made on this front. Overall, we have been 

encouraged in recent months by China’s agreement to support two 

new sanctions resolutions of unprecedented strength on North 

Korea at the United Nations. 

Since China’s ban of coal imports in February, the DPRK has for- feited over an estimated $805 million in revenue from coal exports 

at current market prices. On August 14, the Chinese government 

issued a notice announcing a comprehensive ban on the import of 

coal, iron, iron ore, lead, and lead ore from DPRK effective August 

15 in compliance with UNSCR 2371, as well as on the export of petroleum following the adoption of UNSCR 2375. Regional Chinese 

authorities have also tightened restrictions on the import of seafood 

coming from the DPRK after the adoption of UNSCR 2371. 

We will continue to work with China on the threat posed by the 

DPRK and will continue to engage in a dialogue on how to further 

apply pressure. Our task now is focused on ensuring that internationally binding obligations are implemented in full, and on convincing China to take additional action to exert its unique leverage 

to compel Pyongyang to return to negotiations. We have also made 

clear that if China, Russia, and others do not act, we will use the 

tools we have at our disposal, and that all options are on the table. 

While our actions are not meant to target countries other than the 

DPRK, we have consistently told our foreign counterparts that we 

will continue to act multilaterally and unilaterally to disrupt the 

DPRK’s illicit activities wherever they are located. 

We have stressed to our international partners that U.N. sanctions resolutions should be the floor, rather than the ceiling, of the 

actions countries should take in order to affect change in the 

DPRK, and our pressure strategy continues. The results have been 

promising. Since the beginning of the Administration, more than 20 

countries have acted to restrict DPRK diplomatic activities. Several 

other countries have adopted autonomous sanctions measures 

against the DPRK, including the European Union, Australia, ROK, 

Japan, Latvia, and Singapore. Pakistan issued an official government notice prohibiting its companies from engaging with individuals sanctioned under U.S. domestic authorities. The United States 

has also engaged in a sustained effort to shut down illicit DPRK 

shipping activities, which the Kim regime could use to move illicit 

cargoes or procure items for its prohibited nuclear and ballistic 

missile programs. We facilitated public identification by the 1718 

Committee of four vessels for a port entry ban due to the vessels’ 

involvement in activities prohibited under the resolutions, and continue our efforts to see that any other vessel involved in such activities is similarly listed. 

Diplomatically, we have seen increasing numbers of countries 

expel sanctioned North Korean officials and North Korean 

40 

diplomats engaged in illicit commercial or arms-related activities, 

and many countries have adopted measures to prevent certain 

North Korean individuals from entering or transiting their jurisdictions. Across the globe, countries are beginning to view visiting 

North Korean official delegations with caution, recognizing that 

welcoming these delegations not only lends tacit support to North 

Korea’s nuclear and ballistic missiles programs, but comes at a cost 

to their international reputation and relations with the United 

States and others. We will continue to raise the need to counter the 

threat from the DPRK’s weapons of mass destruction and delivery 

programs across all appropriate international and multilateral fora 

as part of the Administration’s maximum pressure strategy. 

41 

ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD

LIST OF DPRK SANCTION VIOLATORS SUBMITTED BY SENATOR VAN HOLLEN


28660001.eps