North Korea Sanctions: United States Has Increased Flexibility to Impose Sanctions, but United Nations Is Impeded by a Lack of Member State Reports
Published: 2015-05-13T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: North Korea is a closely controlled society, and its regime has taken actions that threaten the United States and other United Nations member states. North Korean tests of nuclear weapons and ballistic missiles have prompted the United States and the UN to impose sanctions on North Korea.
GAO was asked to review U.S. and UN sanctions on North Korea. This report (1) identifies the activities that are targeted by U.S. and UN sanctions specific to North Korea, (2) describes how the United States implements its sanctions specific to North Korea and examines the challenges it faces in doing so, and (3) describes how the UN implements its sanctions specific to North Korea and examines the challenges it faces in doing so. To answer these questions, GAO analyzed documents from the Departments of State, Treasury, and Commerce, and the UN. GAO also interviewed officials from the Departments of State, Treasury, and Commerce, and the UN.
section_title: What GAO Found
paragraphs: U.S. executive orders (EO) and the Iran, North Korea, and Syria Nonproliferation Act target activities for the imposition of sanctions that include North Korean (Democratic People's Republic of Korea) proliferation of weapons of mass destruction and transferring of luxury goods. The EOs and the act allow the United States to respond by imposing sanctions, such as blocking the assets of persons involved in these activities. United Nations (UN) Security Council resolutions target similar North Korean activities, and under the UN Charter, all 193 UN member states are required to implement sanctions on persons involved in them.
U.S. officials informed GAO that obtaining information on North Korean persons has hindered the U.S. interagency process for imposing sanctions, and that EO 13687, announced in January 2015, provided them with greater flexibility to sanction persons based on their status as government officials rather than evidence of specific conduct. State and Treasury impose sanctions following an interagency process that involves: reviewing intelligence and other information to develop evidence needed to meet standards set by U.S. laws and EOs, vetting possible actions within the U.S. government, determining whether to sanction, and announcing sanctions decisions. Since 2006, the United States has imposed sanctions on 86 North Korean persons, including on 13 North Korean government persons under EO 13687.
Although UN sanctions have a broader reach than U.S. sanctions, the UN lacks reports from many member states describing the steps or measures they have taken to implement specified sanctions provisions. The UN process for imposing sanctions relies on a UN Security Council committee and a UN panel of experts that investigates suspected sanctions violations and recommends actions to the UN. The Panel of Experts investigations have resulted in 32 designations of North Korean or related entities for sanctions since 2006, including a company found to be shipping armaments from Cuba in 2013. While the UN calls upon all member states to submit reports detailing plans for implementing specified sanctions provisions, fewer than half have done so because of a range of factors including a lack of technical capacity. The committee uses the reports to uncover gaps in sanctions implementation and identify member states that require additional outreach. The United States as a member state has submitted all of these reports. UN and U.S. officials agree that the lack of reports from all member states is an impediment to the UN's implementation of its sanctions.
Source: GAO | GAO-15-485
section_title: What GAO Recommends
paragraphs: GAO recommends the Secretary of State work with the UN Security Council to ensure that member states receive technical assistance to help prepare and submit reports on their implementation of UN sanctions on North Korea. The Department of State concurred with this recommendation.

section_title: Letter
paragraphs: In response to North Korea’s tests of nuclear weapons and ballistic  missiles, beginning in 2006 the United States and the United Nations  (UN) have imposed a broad range of sanctions to deter North Korea from  proliferating weapons of mass destruction (WMD) and accessing the  international financial system. The Department of State (State) and the  Department of the Treasury (Treasury) implement and enforce U.S.  sanctions, while the Department of Commerce (Commerce) enforces  sanctions by limiting the export of U.S. products to North Korea. State is  also the lead agency responsible for engagement with the United Nations.  The UN Security Council is responsible for ensuring that member states  implement and enforce UN sanctions on North Korea. It does so through  its 1718 Committee, named after the UN Security Council Resolution  (UNSCR) that imposes sanctions on North Korea.
In response to your request, we reviewed U.S. and UN sanctions related  to North Korea. This report (1) identifies the activities that are targeted by  U.S. and UN sanctions specific to North Korean sanctions, (2) describes  how the United States implements its sanctions specific to North Korea  and examines the challenges it faces in doing so, and (3) describes how  the UN implements its sanctions specific to North Korea and examines  the challenges it faces in doing so. This report also includes information  comparing U.S. and UN North Korea–specific sanctions with those  specific to Iran (see app. I.)
To address our first objective, we reviewed (1) U.S. executive orders (EO)  and laws and (2) UNSCRs. We also interviewed officials from State,  Treasury, and the UN to confirm the universe of North Korea–specific  sanctions. We also interviewed U.S. officials to determine any other  executive orders, laws, or resolutions not specific to North Korea that they  have used to impose sanctions on North Korea during this time period.  We then analyzed the executive orders, laws, and resolutions to identify  the activities targeted by the sanctions.
To address our second objective, we interviewed State and Treasury  officials to determine the process that each agency follows to impose  sanctions on North Korea and related persons. We also interviewed  Department of Commerce officials to learn about how the U.S.  government controls exports to North Korea. We also analyzed  documents and information from State and Treasury to determine the  number of North Korean persons that have been sanctioned since 2006.  The challenges discussed herein are based on our discussions with  State, Treasury, and Commerce officials. We also reviewed documents  such as Federal Register notices and press releases that provided  information about U.S. government sanctions to corroborate what officials  told us.
To address our third objective, we reviewed UN documents and records  of member state implementation reports, and interviewed relevant officials  at State, the U.S. Mission to the United Nations, members of the UN 1718  Committee, and former members of the Panel of Experts. To determine  the extent to which member states are reporting on their implementation  of specified UN sanctions provisions, we examined UN records of  member state implementation reports. To identify the challenges the UN  faces related to member state reporting and the efforts the UN has taken  to help member states report on implementation pursuant to these  provisions, we interviewed U.S. officials and Member State delegates to  the UN Security Council and representatives on the 1718 Committee, and  reviewed UN reports and documents. To examine the efforts the UN has  taken to address member state reporting, we interviewed members of the  UN 1718 Committee and reviewed documents outlining UN outreach  efforts.
To compare U.S. and UN sanctions specific to North Korea and Iran, we  reviewed U.S. executive orders and laws and UNSCRs authorizing  sanctions that specifically target North Korea and those that specifically  target Iran. We analyzed these documents to identify the activities  targeted by the sanctions. On the basis of a comprehensive literature  review, we developed a list of targeted activities frequently identified in  relation to North Korea and Iran sanctions and grouped these activities  into high-level categories. To ensure data reliability in categorizing the  targeted activities into high-level categories, we conducted a double-blind  exercise whereby we individually reviewed the activities identified within  the U.S. executive orders and laws and UN resolutions for each country  and assigned each activity to a high-level category through consensus.  We also had a State Department official review our list of activities and  high-level categories to ensure our conclusions were reliable. We then  interviewed State and Treasury officials to discuss the differences in  activities targeted by North Korea and Iran sanctions. To determine the  extent to which member states are reporting on their implementation of  specified UN sanctions provisions, we examined the UN 1718 Committee’s record of member state implementation reports.
We conducted this performance audit from July 2014 to May 2015 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: North Korea is an isolated society with a centrally planned economy and  a centrally controlled political system. The governing regime assumed  power after World War II. Successive generations of a single family have  ruled North Korea since its founding. According to the CIA World  Factbook, under dictator Kim Jong Un, the grandson of regime founder  Kim Il Sung, the regime currently controls all aspects of political life,  including the legislative, judicial, and military structures. According to a  Library of Congress country study, the North Korean leadership rewards  members of the primary political party (the Korean Workers’ Party) and  the military establishment with housing, food, education, and access to  goods. Much of the population, however, lives in poverty, with limited  education, travel restrictions, a poor health care system, no open religious  institutions or spiritual teaching, and few basic human rights.
North Korea exports commodities such as minerals, metallurgical  products, textiles, and agricultural and fishery products. According to the  CIA World Factbook, the North Korean economy is one of the world’s  least open economies. The CIA World Factbook reported that as of 2012,  its main export partners were China and South Korea. China is North  Korea’s closest ally and accounts for almost two-thirds of its trade.
North Korea has engaged in a number of acts that have threatened the  security of the United States and other UN member states. Since 2006,  North Korea has conducted a number of missile launches and detonated  three nuclear explosive devices; torpedoed a South Korean naval vessel,  the Cheonan, killing 46 crew members; and launched a disruptive  cyberattack against a U.S. company, Sony Pictures Entertainment.
In response to these actions, the United States and the UN imposed  sanctions specific to North Korea from 2006 through 2015 (see fig. 1).  The United States has imposed sanctions on North Korea and North  Korean persons under EOs and a number of laws and regulations. EOs  are issued by the President and generally direct the executive branch to  either carry out actions or clarify and further existing laws passed by  Congress. Administrations have invoked authority provided by the  International Emergency Economic Powers Act, as well as other  authorities, to issue EOs specific to North Korea. The UN Security  Council issued five UNSCRs imposing sanctions specific to North Korea  during this time period. (See fig. 1.)
section_title: U.S. and UN Sanctions Specific to North Korea Target a Range of Activities That Include Proliferation of Weapons of Mass Destruction and Transferring Luxury Goods
paragraphs: U.S. EOs specific to North Korea and the Iran, North Korea, and Syria  Nonproliferation Act (INKSNA) authorize the United States to impose  sanctions targeting activities that include weapons of mass destruction  proliferation, trade in arms and related materiel, and transferring luxury  goods. Sanctions that can be imposed pursuant to the EOs and  INKSNA include blocking property and banning U.S. government  procurement. UNSCRs target similar activities, and under the UN Charter,  all 193 UN member states are required to implement sanctions imposed  by the UNSCRs, such as travel bans, on North Korean and other persons  involved in these activities.
subsections: section_title: U.S. Sanctions Target Activities Such as Weapons Proliferation and Trade in Arms
paragraphs: U.S. EOs specific to North Korea and INKSNA authorize the United  States to impose sanctions targeting activities that include involvement in  North Korean WMD and conventional arms proliferation and transferring  luxury goods to North Korea. The most recent EO targets a person’s  status as opposed to a person’s conduct. The EO targets a person’s  status by authorizing the imposition of sanctions on persons determined,  for example, to be agencies, instrumentalities, or controlled entities of the  government of North Korea or the Workers’ Party of Korea. Table 1  provides examples of the activities and statuses targeted by EOs and  INKSNA.registration of a vessel in North Korea by a U.S. person, and EO 13570   In addition, EO 13466 prohibits activities such as the  generally prohibits a U.S. person from importing North Korean goods,  services, or technology from North Korea.
Sanctions that can be imposed pursuant to the EOs and law listed above  include blocking property and interests in property in the United States,  and banning U.S. government procurement and assistance.
The EOs listed in table 1 create a framework within which the executive  branch can decide when to impose sanctions against specific persons  within the categories established by the EOs, according to Treasury and  State officials. Treasury officials informed us that the process of  determining whether to impose sanctions on one or more persons is (1)  the result of a process wholly under the executive branch, and (2) driven  by policy directives that prioritize issues of concern for the agencies.  Treasury officials also noted that while Treasury does not consider itself  to have discretion on whether or not to implement an EO, there is  discretion at the interagency level regarding what sanctions programs  should be focused on for individual designations, and how resources  should be allocated among all relevant programs.
INKSNA requires the President to provide reports every 6 months to two  congressional committees that identify every foreign person with respect  to whom there is credible information indicating that the person, on or  after the dates specified in the act, has transferred to, or acquired from,  North Korea, Syria, or Iran certain items listed by multilateral export  control regimes, or certain nonlisted items that could materially contribute  to weapons of mass destruction systems or cruise or ballistic missile  systems. It does not require the President to sanction those persons,  although it does require him or her to notify the congressional committees  if he or she opts not to impose sanctions, including a written justification  that supports the President’s decision not to exercise this authority. The  President has delegated INKSNA authorities to the Secretary of State.
section_title: U.S. Agencies Have Used Other Executive Orders and Laws to Target North Korea–Related Activities
paragraphs: State refers to section 73 of the Arms Export Control Act and section 11B of the Export  Administration Act collectively as the Missile Sanctions laws. See 22 U.S.C. § 2797b and  50 U.S.C. App. § 2410b.
Macao bank (Banco Delta Asia SARL).facilitation of financial transactions conducted by North Korean– related accounts that related to money laundering and illicit activities,  including trade in counterfeit U.S. currency, counterfeit cigarettes, and  narcotics, as grounds for its action.
section_title: UN Sanctions Target Activities Such as Weapons Proliferation and Financial Transactions
paragraphs: Five UNSCRs target North Korean–related activities that include WMD  proliferation, cash transfers, and trade in luxury goods to North Korea  (see table 2). Under the UN Charter, all 193 UN member states are  required to implement sanctions in the UNSCRs that include imposing an  arms embargo, prohibiting travel, and freezing assets. State officials told  us that UN sanctions can amplify U.S. development of bilateral sanctions  specific to North Korea, and that the United States has imposed sanctions  beyond those required by UNSCRs. According to State officials, the  United States has implemented the sanctions within the UNSCRs,  pursuant to authorities including the United Nations Participation Act of  1945.
section_title: Recent EO Can Help Address Factor Hindering U.S. Process for Imposing Sanctions Related to North Korea
paragraphs: U.S. officials informed GAO that obtaining information on North Korean  persons has hindered the U.S. interagency process for imposing  sanctions, and that a recent EO has provided them with greater flexibility  to sanction persons based on their status as government or party officials  rather than evidence of specific conduct. EO 13687 allows State and  Treasury to sanction persons because they are officials of the North  Korean government or of the Worker’s Party of Korea, instead of based  on specific conduct. State and Treasury impose sanctions following an  interagency process that involves reviewing intelligence and other  information to develop evidence needed to meet standards set by U.S.  laws and EOs, vetting possible actions within the U.S. government,  determining whether and when to sanction, and announcing sanctions  decisions. Since 2006, the United States has imposed sanctions on 86  North Korean persons, including 13 North Korean government officials  and entities, under EO 13687. Commerce is the U.S. government agency  that controls exports by issuing licenses for shipping goods that are not  prohibited to North Korea.
subsections: section_title: A Lack of Information about North Korean Persons Hinders the Sanctions Determination Process
paragraphs: Agency officials cited obtaining sufficient information about North Korean  persons to be their greatest challenge in making sanctions  determinations. Most North Korea–specific sanctions authorities require a  determination that a person engaged in a specific activity. Officials said  that for sanctions to be effective, financial institutions need a minimum set  of identifying information so that they can ensure they are blocking the  right person. However, officials said that gathering information on the  activities of North Korean persons and personal identifying information  can be difficult because of the nature of North Korean society, whose  citizens are tightly controlled by the government. Without sufficient  information, the United States could mistakenly designate and therefore  block the assets of the wrong person, particularly one with a common  surname. State officials also cited obtaining sufficient information as a  challenge to North Korean sanctions implementation, especially if the  sanctions authority requires information indicating that the foreign person  knowingly engaged in sanctionable activities. Officials in both agencies  also said that they face challenges in obtaining information that can be  made public in the Federal Register.
section_title: New Executive Order Provides State and Treasury Greater Flexibility and Can Address Factors Hindering U.S. Sanctioning Process
paragraphs: Sony Cyberattacks  On November 24, 2014, Sony Pictures  Entertainment experienced a cyberattack that  disabled its information technology, destroyed  data, and released internal e-mails. Sony also  received e-mails threatening terrorist attacks  on theaters scheduled to show a film, The  Interview, which depicted the assassination of  Kim Jong Un. The Federal Bureau of  Investigation and the Director of National  Intelligence attributed these cyberattacks to  the North Korean government.
State and Treasury officials informed us that EO 13687, issued on  January 2, 2015, gives them greater flexibility to impose sanctions despite  the lack of complete information about persons’ activities. Treasury  officials noted that sanctions under EO 13687 are status-based rather  than conduct-based, which means that the EO allows agencies to  sanction persons, for example, based on their status as North Korean  government officials, rather than on their engagement in specific  activities. EO 13687 allows Treasury to designate persons based solely  on their status as officials, agencies, or controlled entities of the North  Korean government, and to designate other persons acting on their behalf  or providing them with material support. According to Treasury, EO  13687 represents a significant broadening of Treasury’s authority to  increase financial pressure on the North Korean government and to  further isolate North Korea from the international financial system. The  White House issued the EO in response to North Korean cyberattacks on  Sony Pictures Entertainment in November and December 2014. Treasury  officials also noted that although the new authority allows them to target  any North Korean government official, they continue to target activities  prohibited under current sanctions, such as WMD proliferation.
section_title: U.S. Agencies Use an Interagency Process to Determine When and Whether to Impose Sanctions
paragraphs: Treasury and State officials informed us that they have established  processes to determine when and if the United States should impose  sanctions related to North Korea. The processes involve reviewing  evidence to identify sanctions targets, ensuring that they have adequate  evidence to sanction, and imposing and publicizing the sanctions. (See  fig. 2.)
For North Korea–specific sanctions that fall under Treasury’s jurisdiction,  Treasury officials said they investigate and collaborate with other U.S.  government agencies to identify specific targets. The Office of Foreign  Assets Control investigates the target’s activities and communicates with  Treasury and other agency officials about the potential target. Where  appropriate, Treasury will notify foreign authorities of the activities of the  targeted person and seek commitment to stop the activity.
State’s Bureau of International Security and Nonproliferation’s Office of  Counterproliferation Initiatives leads an interagency process to evaluate  whether a person’s activities are potentially sanctionable under EO  13382, which targets proliferation of weapons of mass destruction. The  Office of Missile, Biological and Chemical Nonproliferation, also under the  Bureau of International Security and Nonproliferation, leads the process  for INKSNA, EO 12938, and the Missile Sanctions laws. The process  begins with four State-led interagency working groups responsible for  coordinating nonproliferation efforts involving (1) chemical and biological  weapons, (2) missile technology, (3) nuclear technology, and (4)  advanced conventional weapons. Each working group is chaired by a  State official and consists of representatives from several U.S.  government departments and agencies such as the Departments of  Defense, Commerce, Homeland Security, Treasury, and Energy; the  Federal Bureau of Investigation; and various intelligence community  agencies. State officials said that the working groups regularly evaluate  reports concerning proliferation-related activities and determine an  appropriate response to impede activities of concern. As part of this  review process, these groups identify transactions that may be  sanctionable under various nonproliferation sanction authorities, including  those related to North Korea. According to State and other working group  officials, the interagency review process relies on criteria defined in the  laws and EOs when assessing a transaction for the potential application  of those sanctions. State officials also said the groups do not pursue  sanctions for a target if they determine available information does not  provide a basis for applying sanctions or is not legally sufficient.
subsections: section_title: State and Treasury Seek Consensus before Making a Final Determination
paragraphs: Officials in each agency said that they follow an evidence-based process  to gain inter- and intra-agency consensus on imposing sanctions.
At Treasury, Office of Foreign Assets Control officials said that they  create an evidentiary record that contains the information they have  gathered on a targeted person to present sufficient evidence that the  person has engaged in sanctionable activity. The record contains  identifying information such as date of birth, place of birth, or passport  information, or if the targeted person is a company, the identifying  information might be an address or telephone number. After the Office  of Foreign Assets Control has approved this document, it is further  reviewed for legal sufficiency by the Department of Justice,  Department of State, and other relevant agencies.
At State, the Offices of Counterproliferation Initiatives and Missile,  Biological and Chemical Nonproliferation draft a statement of facts  that provides a summary of intelligence available on a targeted  transaction. Concurrently, State drafts a policy memo that explains the  legal justification for the case. State circulates these documents  internally and obtains advice from appropriate agencies and, in the  case of actions targeted under EO 13382, consults with Treasury’s  Office of Foreign Assets Control.  Officials from the Offices of  Counterproliferation Initiatives and Missile, Biological and Chemical  Nonproliferation also said they circulate a decision memorandum to  relevant stakeholders for approval.
Officials at State and Treasury also told us that their process includes  steps for making and announcing final sanctions determinations.
At Treasury, the Office of Foreign Assets Control makes the final  determination. Officials then publicize the sanctions in the Federal  Register.
At State, once the stakeholders have cleared the memorandum, the  Offices of Counterproliferation Initiatives and Missile, Biological and  Chemical Nonproliferation forward it to the Secretary of State or his or  her designee for a final sanctions determination. They then prepare a  report on imposed sanctions for publication in the Federal Register.
When State or Treasury makes a determination that results in blocked  assets, Treasury places the sanctioned person on the Specially  Designated Nationals and Blocked Persons (SDN) list indicating that the  person’s assets are blocked. Pursuant to regulation, U.S. persons,  including banks, are required to block any assets of such persons that are  in their possession or that come within their possession.consequence of the blocking, U.S. persons are generally prohibited from  engaging in activities with the property or interests in property of persons    As a  on the SDN list. U.S. citizens are generally prohibited from doing  business with individuals and persons on the SDN list.noted that persons’ status on this list does not expire, but persons may  apply to be taken off the list. However, no North Korean person has  asked for his or her name to be removed.
section_title: State and Treasury Have Sanctioned 86 North Korean Persons since 2006
paragraphs: Since 2006, the United States has imposed sanctions on 86 North Korean  persons under five EOs, INKSNA, and Missile Sanctions laws (see table  3). The most frequently used EO during this time period was EO 13382,  which, as noted above, is not specific to North Korea. Treasury imposed  the most recent sanctions on North Korean persons in January 2015, in  response to North Korea’s cyberattacks on Sony Pictures. In response,  Treasury placed 10 North Korean individuals on the SDN list, and  updated information about 3 persons on the list.
State and Treasury have used EO 13382 most frequently—43 times in 10  years—to impose sanctions on North Korean persons that they found had  engaged in activities related to WMD proliferation. For example, in March  2013, Treasury used EO 13382 to designate the following for sanctions:
North Korea’s primary foreign exchange bank, which facilitated  millions of dollars in transactions that benefited North Korean arms  dealing.
The chairman of the North Korean committee that oversees the  production of North Korea’s ballistic missiles.
Three North Korean government officials who were connected with  North Korea’s nuclear and ballistic weapons production. According to  the Federal Register notice, the United States imposed sanctions on  these persons because State determined that they “engaged, or  attempted to engage, in activities or transactions that have materially  contributed to, or pose a risk of materially contributing to, the  proliferation of WMD or their means of delivery (including missiles  capable of delivering such weapons), including any efforts to  manufacture, acquire, possess, develop, transport, transfer or use  such items, by any person or foreign country of proliferation  concern.”
section_title: Commerce Enforces Export Controls On Items That Are Shipped to North Korea
paragraphs: Commerce’s Bureau of Industry and Security requires those exporters  who wish to ship items to North Korea to obtain a license for dual-use  items that are subject to the Export Administration Regulations. Dual- use items are goods and technology that are designed for commercial  use but could have military applications, such as computers and  telecommunications equipment. In general, the Bureau of Industry and  Security reviews applications for items requiring a license for export or  reexport to North Korea and approves or denies applications on a case- by-case basis. According to the Bureau of Industry and Security, it will  deny a license for luxury goods or any item that could contribute to North  Korea’s nuclear-related, ballistic missile–related, or other WMD-related  programs. Commerce officials informed us that they receive relatively few  requests for licenses to export items to North Korea and in most of these  cases Commerce issues a license because most of the applications are  for humanitarian purposes. In 2014, the Bureau of Industry and Security  approved licenses for items such as telecommunications equipment and  medical devices, as well as water well–drilling equipment and volcanic  seismic measuring instruments.
Commerce does not require a license to export some items, such as food  and medicine, to North Korea. Commerce officials informed us that,  under the Export Administration Regulations, the Bureau of Industry and  Security, in consultation with the Departments of Defense and State, will  generally approve applications to export or reexport humanitarian items,  such as blankets, basic footwear, and other items meeting subsistence  needs that are intended for the benefit of the North Korean people. For  example, it will approve items in support of UN humanitarian efforts, and  agricultural commodities or medical devices that the Bureau of Industry  and Security determines are not luxury goods.
section_title: The UN Implements Sanctions on North Korea but Lacks Implementation Reports from More than Half of Member States
paragraphs: While UN sanctions have a broader reach than U.S. sanctions because  all UN member states are obligated to implement and enforce them, the  UN does not know the extent to which members are actually  implementing its sanctions. The UN process for imposing sanctions on  North Korea or related persons relies on a Security Council committee  and a UN panel of experts that investigates suspected violations of North  Korea sanctions and recommends actions to the UN. The panel has  found North Korean persons using illicit techniques to evade sanctions  and trade in arms and related material and has designated 32 North  Korean or related entities for sanctioning since 2006, including a North  Korean company found to be shipping armaments from Cuba to North  Korea. However, while the UN calls upon member states to submit  reports describing the steps or measures they have taken to implement  effectively specified sanctions provisions, fewer than half have done so.  According to UN and U.S. officials, many member states lack the  technical capacity to develop the reports and implement sanctions.  Member state delegates to the UN Security Council and U.S. officials  agree that the lack of reports from all member states is an impediment to  UN sanctions implementation.
subsections: section_title: The 1718 Committee Oversees North Korea Sanctions
paragraphs: Member state delegates to the UN Security Council informed us that the  UN has established a process to determine when and if to impose  sanctions on persons that have violated the provisions of UNSCRs. The  process involves the Security Council committee established pursuant to  Security Council Resolution 1718 that oversees UN sanctions on North  Korea; the Panel of Experts, which reviews information on violations of  North Korea sanctions sent by member states and conducts  investigations based on requests from the committee; and member states  whose role is to implement sanctions on North Korea as required by  various UN Security Council resolutions. (See fig. 3.)
The UN established the committee in 2006. It consists of 15 members,  including the 5 permanent members of the United Nations Security  Council and 10 nonpermanent members. The committee makes all  decisions by consensus and is mandated to seek information from  member states regarding their actions to implement the measures  imposed by UNSCR 1718. It is also mandated to examine and take  action on information regarding alleged sanctions violations, consider and  decide upon requests for exemptions, determine additional items to be  added to the list of sanctioned goods, designate individuals and entities  for sanctions, promulgate guidelines to facilitate the implementation of  sanctions measures, and report at least every 90 days to the UN Security  Council on its work overseeing sanctions measures set out in United  Nations Security Council resolution 1718 on North Korea.
section_title: The Panel of Experts Monitors and Facilitates Implementation of United Nations Sanctions on North Korea
paragraphs: The Panel of Experts was established in 2009 as a technical body within  the committee. Pursuant to UNSCR 1874, the panel is tasked with,  among other things, gathering, examining, and analyzing information  regarding incidents of noncompliance with United Nations Security  Council sanctions on North Korea. The panel was originally created for  a 1-year period, but the Security Council extended the panel’s mandate in  subsequent resolutions. The panel acts under the committee’s direction  to implement its mandate to gather, examine, and analyze information  from member states, relevant UN bodies, and other interested parties  regarding North Korea sanctions implementation. The panel does not  have enforcement authority and relies on the cooperation of member  states to provide information that helps it with its investigations.
The panel consists of eight subject matter experts from UN member  states, including representatives from the council’s 5 permanent  members. The Secretary General appoints panel members, who currently  are from China, France, Japan, Russia, South Africa, South Korea, the  United Kingdom, and the United States. According to the UN, these  subject matter experts specialize in technical areas such as WMD arms  control and nonproliferation policy, customs and export controls, finance,  missile technology, maritime transport, and nuclear issues. According to a  representative of the committee, panel members are not intended to  represent their countries, but to be independent in order to provide  objective assessments.
According to UN guidance, the panel reviews public information and  conducts investigative work on incidents or events, and consults foreign  governments and seeks information beyond what member states provide  them. Representatives of the U.S. Mission to the United Nations (USUN)  informed us that the United States and other countries provide the panel  with information to help facilitate investigations. The UN Security Council  encourages UN member states to respond promptly and thoroughly to the  panel’s requests for information and to invite panel members to visit and  investigate alleged violations of the sanctions regime, including inspection  of items that might have been seized by national authorities.
Following investigations of suspected sanctions violations, the panel  submits investigative reports (incident reports) to the committee detailing  its findings and recommendations on how to proceed, according to UN  guidance. The panel treats its incident reports as confidential and  provides access only to committee and Security Council members.  According to a representative of the committee, the committee considers  the violations and recommendations and makes sanctions designations  based on the consensus of committee members. According to a  representative of the committee, if the committee does not reach  consensus, it can refer the case to the UN Security Council, pending  member agreement  Ultimately, the UN Security Council determines whether or not  recommended designations meet the criteria for sanctions, according to a  representative of the committee. If the decision is affirmative, it takes  action by making sanctions designations mostly through new resolutions.  This process has resulted in 32 designations since 2006. All but one of  these designations were made through new resolutions, according to a  USUN official. For example, the committee designated the Ocean  Maritime Management Company for sanctions through the committee  process in July 2014. The panel is generally required, with each  extension of its mandate, to provide the committee with an interim and  final report, including findings and recommendations.
section_title: North Korea Uses Illicit Techniques to Evade Sanctions and Trade in Arms and Related Material
paragraphs: The panel’s final reports have identified North Korea’s use of evasive  techniques to export weapons. The panel’s 2014 final report described  North Korea’s attempt to illicitly transport arms and related materiel from  Cuba to North Korea concealed underneath thousands of bags of sugar  onboard the North Korean vessel Chong Chon Gang. North Korea’s use  of evasive techniques in this case was blocked by actions taken by  Panama, a UN member state. Panamanian authorities stopped and  examined the Chong Chon Gang vessel as it passed through Panama’s  jurisdiction. After uncovering items on the vessel that it believed to be  arms and related materiel, Panama alerted the committee of the possible  UN sanctions violation. According to representatives of the committee,  Panama cooperated with the panel as it conducted its investigation. The  panel concluded that the shipment was in violation of UN sanctions and  that it constituted the largest amount of arms and related materiel  interdicted to North Korea since the adoption of UNSCR 1718. The  committee placed the shipping company that operated the Chong Chon  Gang on its sanctioned entities list.
The panel’s investigations have also uncovered evidence of North  Korea’s efforts to evade sanctions by routing financial transactions in  support of North Korea’s procurement of sanctioned goods through  intermediaries, including those in China, Malaysia, Singapore, and  Thailand. For instance, in its investigation of the Chong Chon Gang case,  the panel found that the vessel operator, North Korea’s Ocean Maritime  Management Company, Limited, used foreign intermediaries in Hong  Kong, Thailand, and Singapore to conduct financial transactions on its  behalf. The panel also identified that in most cases the investigated  transactions were made in United States dollars from foreign-based  banks and transferred through corresponding bank accounts in the United  States. The panel’s 2015 final report indicated that North Korea has  successfully bypassed banking organizations’ due diligence processes by  initiating transactions through other entities on its behalf. The panel  expressed concern in its report regarding the ability of banks in countries  with less effective banking regulations or compliance institutions to detect  and prevent illicit transfers involving North Korea.
section_title: More than Half of All UN Member States Have Not Provided Sanctions Implementation Reports to the UN
paragraphs: The panel’s reports also reveal the essential role played by member  states in implementing UN sanctions and that some member states have  not been as well informed as others in working with the panel regarding  sanctions implementation. For example, the panel discovered that the  Ugandan government had contracted with North Korea to provide police  force training. Ugandan government officials purported that they did not  realize that UN sanctions prohibited this type of activity, according to a  USUN official.
The UN recognized the essential role that member states play when it  called upon member states to submit reports on measures or steps taken  to implement effectively provisions of specified Security Council  resolutions to the committee within 45 or 90 days, or upon request by the  committee, of the UN’s adoption of North Korea sanctions measures.  UNSCRs 1718, 1874, and 2094, adopted in 2006, 2009, and 2013  respectively, call upon member states to report on the concrete measures  they have taken in order to effectively implement the specified provisions   For instance, a member state might report on how its  of the resolutions.national export control regulations address newly adopted UN sanctions  on North Korea.
The United States has complied with UN reporting provisions calling on member states  to submit implementation reports. U.S. implementation reports can be viewed on the  committee’s website, at http://www.un.org/sc/committees/1718/mstatesreports.shtml. submitted one or more reports include member states with major  international transit points (such as the United Arab Emirates) or that  have reportedly been used by North Korea as a foreign intermediary  (such as Thailand). The panel has expressed concern in its 2015 final  report that 8 years after the adoption of UNSCR 1718, in 2006, a  consistently high proportion of member states in some regions have not  reported at all on the status of their implementation. It has also reported  that some member states have submitted reports that lack detailed  information, or were late, impeding the panel’s ability to examine and  analyze information about national implementation. The panel has also  reported that member states should improve their reporting of incidents of  noncompliance with sanctions resolutions and inspections of North  Korean cargo. Appendix III provides information on the status of member  state implementation report submissions.
U.S. officials and representatives of the committee agree that the lack of  detailed reports from all member states is an impediment to the UN’s  effective implementation of its sanctions. Through reviewing these  reports, the committee uncovers gaps in member state sanctions  implementation which helps the committee identify targets for outreach.  The panel notes that the lack of detailed information in implementation  reports impedes its ability to examine and analyze information regarding  member state implementation and its challenges. It also states that  member state underreporting increases North Korea’s opportunities to  continue its prohibited activities. The panel will not have the information it  needs to completely understand North Korea’s evasive techniques if it  does not have the full cooperation of member states.
U.S. officials and representatives of the committee told us that many  member states lack the technical capacity to enforce sanctions and  prepare reports. For instance, representatives of the committee told us  that some member states may have weak customs and border patrol  systems or export control regulatory structures because of the high  resource requirements of these programs. In addition, representatives of  the committee stated that some member states may lack awareness of  the full scope of North Korea sanctions or may not understand how to  implement the sanctions. Moreover, some countries may not make the  sanctions a high priority because they believe they are not directly  affected by North Korea. In addition, member states that are  geographically distant from North Korea or lack a diplomatic or trade  relationship with it may not see the need to implement the sanctions,  according to representatives of the committee.
The UN has taken some steps to address this impediment. The  committee and the panel provide limited assistance to member states  upon request in preparing and submitting reports. For example, the  committee has developed and issued a checklist template that helps  member states indicate the measures, procedures, legislation, and  regulations or policies that have been adopted to address various  UNSCR measures relevant to member states’ national implementation  reports. A committee member indicated that the committee developed a  list of 25 to 30 member states where outreach would most likely have an  impact on reporting outcomes. The panel reported in its 2015 final report  that it sent 95 reminder letters to the member states that have not  submitted implementation reports, emphasizing the importance of  submitting reports and that the panel is available to provide assistance.
Despite the steps the UN has taken to help member states adhere to  reporting provisions, the panel’s 2015 report continues to identify the lack  of member states’ reports as an impediment. The panel stated that it is  incumbent on member states to implement the measures in the UN  Security Council resolutions more robustly in order to counter North  Korea’s continued violations, and that while the resolutions provide  member states with tools to curb the prohibited activities of North Korea,  they are effective only when implemented.
State Department officials informed us that the United States has offered  technical assistance to some member states for preventing proliferation  and implementing sanctions. However, they were unable to determine the  extent to which the United States has provided specific assistance aimed  at ensuring that member states provide the UN with the implementation  reports it needs to assess member state implementation of UN sanctions  on North Korea.
section_title: Conclusions
paragraphs: North Korea’s actions pose threats to the security of the United States  and other UN members. Both the United States and the UN face  impediments to implementing the sanctions they have imposed in  response to these actions. While the United States has recently taken  steps to provide more flexibility to impose sanctions, and thereby possibly  impose more sanctions on North Korean persons, the United Nations is  seeking to address the challenge posed by many UN member states not  providing the UN with implementation information. According to U.S.  officials, many member states require additional technical assistance to  develop the implementation reports needed by the panel. The lack of  implementation reports from member states impedes the panel’s ability to  examine and analyze information about member state implementation of  North Korea sanctions.
section_title: Recommendation for Executive Action
paragraphs: GAO recommends the Secretary of State work with the UN Security  Council to ensure that member states receive technical assistance to help  prepare and submit reports on their implementation of UN sanctions on  North Korea.
section_title: Agency Comments
paragraphs: We provided a draft of this report to the Departments of State, Treasury,  and Commerce for comment. In its written comments, reproduced in  Appendix IV, State concurred with our recommendation.  Treasury and  Commerce declined to provide written comments. State, Treasury, and  Commerce provided technical comments, which were incorporated into  the draft as appropriate.
We are sending copies of this report to the appropriate congressional  committees, the Secretaries of State, Treasury, and Commerce, the U.S.  Ambassador to the United Nations, and other interested parties. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.
If you or your staff have any questions about this report, please contact  me at (202) 512-9601 or melitot@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix V.
section_title: Appendix I: United States and United Nations Sanctions Related to North Korea and Iran
paragraphs: The United States and the United Nations (UN) Security Council have  imposed a wide range of sanctions against North Korea and Iran as part  of their broader efforts to prevent the proliferation of weapons of mass  destruction. Table 4 compares the major activities targeted by U.S. and  UN sanctions on those countries.
Officials from the Department of State, the Department of the Treasury,  and other sources identified the following factors that may influence the  types of sanctions imposed by the United States and the UN on these  countries.
Different political systems. North Korea is an isolated society that is  under the exclusive rule of a dictator who controls all aspects of the  North Korean political system, including the legislative and judicial  processes. Though Iran operates under a theocratic political system,  with a religious leader serving as its chief of state, Iranian citizens  participate in popular elections for president and members of its  legislative branch.
Different economic systems. North Korea has a centrally planned  economy generally isolated from the rest of the world. It exports most  of its basic commodities to China, its closest ally. Iran, as a major  exporter of oil and petrochemical products, has several major trade  partners, including China, India, Turkey, South Korea, and Japan.
Different social environments. North Korea’s dictatorship tightly  controls the activities of its citizens by restricting travel; prohibiting  access to the Internet; and controlling all forms of media,  communication, and political expression. In contrast, Iranian citizens  travel abroad relatively freely, communicate with one another and the  world through the Internet and social media, and can hold political  protests and demonstrations.
section_title: Appendix II: Objectives, Scope, and Methodology
paragraphs: This report (1) identifies the activities that are targeted by U.S. and United  Nations (UN) sanctions specific to North Korea, (2) describes how the  United States implements its sanctions specific to North Korea and  examines the challenges it faces in doing so, and (3) describes how the  UN implements its sanctions specific to North Korea and examines the  challenges it faces in doing so. In appendix I, we compare U.S. and UN  North Korea–specific sanctions with those specific to Iran. (See app. I.)
To address our first objective, we reviewed U.S. executive orders and  laws and UN Security Council resolutions issued from 2006 to 2015 with  sanctions related to North Korea. We also interviewed officials from the  Department of State (State), the Department of the Treasury (Treasury),  and the UN to confirm the universe of North Korea–specific sanctions. We  also interviewed these officials to determine any other executive orders,  laws, or resolutions not specific to North Korea that they have used to  impose sanctions on North Korea during this time period. We then  analyzed the executive orders, laws, and resolutions to identify the  activities targeted by the sanctions.
To address our second objective, we interviewed State and Treasury  officials to determine the process that each agency follows to impose  sanctions on North Korea and related persons. We also spoke with State,  Treasury and Commerce officials to identify the challenges that U.S.  agencies face in implementing sanctions related to North Korea. We  interviewed Department of Commerce (Commerce) officials to learn about  how the U.S. government controls exports to North Korea. We analyzed  documents and information from State and Treasury to determine the  number of North Korean entities that have been sanctioned since 2006.
To address our third objective, we reviewed UN documents and  interviewed UN officials to determine the process that the UN uses to  impose sanctions on North Korea and related entities. We reviewed  United Nations security resolutions relevant to North Korea, 1718  Committee guidelines and reports, and Panel of Expert guidelines and  reports. We interviewed relevant officials at the U.S. State Department  and traveled to New York to visit UN headquarters and interview officials  from the U.S. Mission to the United Nations and members of the UN 1718  Committee. We interviewed two former members of the Panel of Experts  to obtain their views on the UN process for making North Korea sanctions  determinations. We also reviewed the 1718 Committee’s sanctions list to  determine the number of designations the UN has made on North Korean  or related entities and the reasons for designating. For examples of how  the Panel of Experts has investigated cases of sanctions violations and  worked with member states through the investigation process, particularly  related to the Cong Chon Gang case, we reviewed the panel’s final  reports summarizing its investigation findings and interviewed members  of the 1718 Committee involved in conducting the investigation. To  determine the extent to which member states are submitting reports on  their implementation of UN sanctions on North Korea, we examined the  1718 Committee’s record of member state implementation reports and  interviewed 1718 Committee members. To identify the challenges the UN  faces related to member state reporting and the efforts the UN has taken  to help member states meet reporting provisions of the UN Security  Council resolutions (UNSCR), we interviewed U.S. and UN officials, and  reviewed 1718 Committee and Panel of Expert reports and documents.  To examine the efforts the UN has taken to address the lack of member  state reporting, we interviewed members of the UN 1718 Committee and  reviewed documents outlining UN outreach efforts.
To compare U.S. and UN sanctions specific to North Korea and Iran (see  app. I), we reviewed U.S. executive orders, laws, and UN Security  Council resolutions with sanctions specific to North Korea and Iran. We  analyzed these documents to identify the activities targeted by the  sanctions. On the basis of a comprehensive literature review, we  developed a list of targeted activities frequently identified in relation to  North Korea and Iran sanctions and grouped these activities into high- level categories. To ensure data reliability in categorizing the targeted  activities into high-level categories, we conducted a double-blind exercise  whereby each member of our team reviewed the activities identified within  the U.S. executive orders and laws and UN resolutions for each country  and assigned each activity to a high-level category, such as financial  transactions with targeted persons. We then compared the results,  discussed any differences and reconciled our responses to reach  consensus, and developed a matrix to compare the targeted activities for  North Korea sanctions with those of Iran sanctions. We interviewed State  and Treasury officials to discuss the differences in activities targeted by  North Korea and Iran sanctions.
To develop appendix III, on United Nations member state implementation  report submissions, we examined the UN 1718 Committee’s website  record of member state implementation reports. The record of member  state implementation reports allowed us to determine the number of  member states that have either reported or not reported.
section_title: Appendix III: United Nations Member States Implementation Report Submissions, as of April 2015
subsections: section_title: Country
paragraphs: Bolivia (Plurinational State of)
section_title: Country
section_title: Country
section_title: Country
paragraphs: Micronesia (Federated States of)
section_title: Country
section_title: Country
paragraphs: Venezuela (Bolivarian Republic of)
section_title: United Nations nonmember observers 1 European Union (Finland)
section_title: Appendix IV: Comments from the Department of State
section_title: Appendix V: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Pierre Toureille (Assistant  Director), Leah DeWolf, Christina Bruff, Mason Thorpe Calhoun, Tina  Cheng, Karen Deans, Justin Fisher, Toni Gillich, Michael Hoffman, and  Grace Lui made key contributions to this report.