Einhorn and Glaser on Terrorism Financing and Financial Crimes

August 2, 2010

Weapon Program: 

  • Military
  • Missile
  • Nuclear

Related Country: 

  • North Korea

MODERATOR: Good afternoon ladies and gentleman, thank you for coming here to the Information Resource Center at the US Embassy in Seoul. It is my distinct pleasure and privilege to introduce to you the Special Advisor for Nonproliferation and Arms Control Mr. Robert Einhorn and the Deputy Assistant Secretary of Treasury for Terrorist Financing and Financial Crimes Mr. Daniel Glaser, who will speak to you shortly and will take a few questions.

MODERATOR: Once we get to the question and answer session I would ask that you identify yourself and the organization that you work for.

MODERATOR: And without further ado, may I welcome Mr. Robert Einhorn.

SPECIAL ADVISOR EINHORN: I want to thank you all for coming. I will have a statement as will Deputy Assistant Secretary Glaser and then we will be happy to answer your questions.

SPECIAL ADVISOR EINHORN: It is my pleasure to be back in Seoul to consult with our close allies in the Republic of Korea. I am here with a State Department/Treasury Department team to discuss with ROK officials two of the greatest threats to the nuclear nonproliferation regime and to international security generally - North Korea and Iran.

On July 21, here in Seoul at the historic meeting of the 2+2 Ministers, Secretary of State Hillary Clinton announced a series of steps that the United States is taking to strengthen the implementation of sanctions against North Korea, including United Nation Security Council Resolutions 1718 and 1874. These measures are not directed at the North Korean people, instead our objective is to put an end to the DPRK's destabilizing proliferation activities, to halt illicit activities that help fund its nuclear and missile programs, and to discourage further provocative actions. The purpose of my delegation's visit is to consult with South Korean officials and to consider how we can work together to promote the effective implementation of sanctions.

On specific steps, the United States will soon adopt and begin implementing new country-specific measures that will provide the United States with additional authorities to target entities engaged in the export or procurement of conventional arms by or for North Korea, the procurement of luxury goods for North Korea, and other illicit activities, which are often conducted by or for North Korea officials. These activities include counterfeiting of U.S. currency and other goods, narcotics smuggling, and other illicit and deceptive activities in the international financial and banking systems. We know that these activities bring hundreds of millions of dollars in hard currency annually into North Korea, which can be used to support DPRK nuclear or missile programs or fund luxury goods purchases - both in violation of UN Security Council Resolutions 1718 and 1874.

Our new measures will allow us to designate entities and individuals involved in these activities and to block the property or assets they possess that are under the control of a U.S. person or bank. But by publicly naming these entities, these measures can have the broader effect of isolating them from the international financial and commercial system.

In addition to adopting new measures, the United States will be aggressively implementing existing authorities and sanctions policies in the weeks and months ahead. We will designate additional entities and individuals under an existing Executive Order due to their involvement in WMD and missile-related activities. We will also seek to cut off North Korean proliferators and other illicit traffickers from the financial support they need to conduct their activities. We will urge other key governments to stop their financial institutions from providing such support.

The United States is also concerned that the DPRK continues to operate a network of trading firms around the world to help facilitate its proliferation-related and other illicit activities. Many of these firms are familiar to you, because they were designated by the United Nations under Security Council Resolutions 1718 and 1874. Companies such as Korea Mining Development and Trading Corporation or KOMID, Korea Ryonbong General Corporation, and Tanchon Commercial Bank are active in a number of countries, whether under their own name or aliases, subsidiaries, or front companies.

UN Security Council Resolutions 1718 and 1874 prohibit all countries from purchasing arms, missile technology, and other sensitive items from North Korea. We will urge customers and potential customers to desist from these purchases, and we will actively use Security Council Resolution 1874's provisions for inspecting illicit shipborne and airborne cargoes to deny North Korea hard currency earnings from these illegal activities.

While we spent a lot of time today discussing the DPRK, due to the clear regional implications of its provocative behavior, our delegation also addressed Iran's nuclear ambitions and the need to strengthen international pressures against Iran. On June 9, the United Nations Security Council enacted the broadest and strongest measures yet when it adopted Resolution 1929.

Since then, a number of countries have taken very strong and welcome steps that complemented and built on the measures described in Resolution 1929 - Australia and Canada among them, but most notably the 27 countries of the European Union (EU), which on July 26th adopted a comprehensive, rigorous set of measures affecting the trade, energy, finance, and transportation sectors.

Pressure is not an end in itself. Instead, sanctions are intended to bring Iran's leaders to the conclusion that their country would be better served by ending its non-compliance with its international obligations and starting to address its serious concerns about Iran's nuclear intentions.

It is essential for responsible countries with global interests, including of course, South Korea, to send a unified message to the leaders of Iran that it must live up to its UN, NPT, and IAEA obligations. Today, we have had discussions about the kinds of steps the ROK and other countries can take in sending this message to Iran.

My discussions today have been very good and productive. As strong allies, both the United States and the ROK face the same common dangers from the threats of North Korean and Iranian proliferation. I expect that our close cooperation will continue on these and many other issues, along with our other key allies and partners around the world.

Thank you, that concludes my prepared statement. The statement has been made available in both English and Korean. Has it been passed out already? OK so you both have copies. So let me introduce Deputy Assistant Secretary of the Treasury Department, Dan Glaser.

TREASURY DAS GLASER: Hi. I do want to thank everybody for coming today and first open up by saying how nice it is to be back here in Seoul, and see some of my old friends and very good partners [who] are here in South Korea. I think we have had a very good and constructive day of meetings. In addition to the very important remarks Mr. Einhorn just made, I would like to add a few words specific to the financial measures relating to both the DPRK and Iran.

The Treasury Department is continuing to vigorously implement new and existing measures to apply financial pressure and disrupt illicit activities of both Iran and North Korea. In the case of Iran, over the last several weeks, the international community and the United States have significantly enhanced our ability to apply financial pressure on Iran and obstruct its ability to further develop its nuclear capabilities. In particular, new sanctions adopted by the United Nations, the United States and other countries such as the European Union, Canada and Australia, highlight Iran's increasing isolation. These multilateral and national measures give us new and powerful tools that enable us, acting in concert with the private sector, to increase the financial pressure on Iran and further protect the international financial system from Iranian abuse.

It is absolutely vital that South Korea be a full partner in this effort, both in terms of implementing strong new measures, such as those recently adopted in Europe, and taking targeted action at Iranian entities involved in facilitating its nuclear activities. We are confident that South Korea will do so.

Regarding North Korea, the U.S. continues to seek vigorous global implementation of the strong financial provisions of UNSCR 1874, even as we develop new tools to strengthen our own ability to implement UNSCR 1874, and in fact go beyond it in targeting a wide variety of North Korean illicit activities. We have seen on prior occasions how powerfully the private sector reacts to U.S. actions that expose the entities that facilitate North Korean illicit activities.

The Treasury Department is committed to employing all appropriate new and existing authorities to protect the international financial system from North Korea's abuse.

With that, I can conclude my prepared remarks and Mr. Einhorn and I are happy to take questions.

QUESTION: Hello. Christian Oliver from the Financial Times. I just want to ask you how China fits into this, and what sort of measures, and sweeteners or carrots you can offer to the Chinese? They don't seem to have much interest in playing along with this. On the Iranian side, they need Iran as an energy ally, and they also deeply value stability in North Korea. So can you just give me some picture of how you can encourage the Chinese to come along, play along with these plans?

SPECIAL ADVISOR EINHORN: As you recognize, China is a critical country when it comes to implementing sanctions against North Korea and Iran. Clearly China has large and legitimate interest in ensuring energy security for itself; for promoting good commercial relationships with other countries. But at the same time, China has a great responsibility as a permanent member of the Security Council, as a strong supporter of the Nuclear Nonproliferation Regime, to make sure that when actions are taken that are provocative, or that are inconsistent with the Nonproliferation Regime that consequences result.

China, we need China's support. One concern that a number of countries expressed when approached to take measures against Iran is that if we practice restraint, China will fill in behind -- China will take advantage of our restraint. This is a serious concern that many countries have. It is a concern that has been raised at the highest levels of the U.S. Government.

We want China to be a responsible stakeholder in the international system. And that means cooperating with UN Security Council Resolutions, and it means not backfilling - not taking advantage of the responsible self-restraint of other countries.

QUESTION: I am from YTN. I heard that the State Department is reviewing a new set of financial sanctions against North Korea, and according to what I heard that does not include imposing sanctions against third countries' financial institutions that have transactions, relations with U.S. banks. Can you confirm whether this is true? Secondly, you also mentioned the importance of cooperation by third countries, in particular China. What would be the way to persuade China to draw their cooperation?

SPECIAL ADVISOR EINHORN: I spoke earlier and Secretary Clinton before me spoke earlier about new measures that we are pursuing. I would say, actually, the Treasury Department has the lead on this, but of course the State Department is working with the Treasury. As I mentioned in my statement, this, these new measures would apply to entities that are involved in certain activities having to do with North Korea. But those entities do not have to be only North Korean; they could be other countries as well. I think that answers your first question.

I will answer part of your second question, and Danny Glaser will answer the rest of it. I mentioned a number of steps that do require cooperation from third countries. If we see an illicit North Korean trading company in a third country, we will approach the government of that country and say, "Look at this activity. You need to shut it down." In a number of areas we will go out diplomatically to other countries and seek their cooperation, and their cooperation will be very important.

TREASURY DAS GLASER: To add to what Mr. Einhorn was saying, I just want to underscore again the point that he made. The measures that we are contemplating are activity-based measures, conduct-based measures. Any entity anywhere in the world that engages in that type of conduct - violations of UN Security Council Resolution 1874; facilitating North Korean illicit activities, including money laundering, counterfeiting of U.S. currency, narcotics trafficking - those types of activities. Any entity that is engaged in that would be at risk of falling on the wrong side of these measures and being targeted [inaudible] by these measures.

And as we have seen before, measures that are grounded in conduct, measures that are grounded on illicit activity do have a carry-on effect throughout the international financial system. Once it is known throughout the world that a particular entity is involved in illicit activities for North Korea, or illicit activities of any kind for that matter, it becomes increasingly difficult for that entity to gain access to the international financial system. So it is not the case that this is an action that does not have a follow-on affect. The international financial system is dynamic, and as you add information, as you take action, the dynamism of the international financial system has a follow-on affect that can be quite powerful.

QUESTION: My name is Frank Smith, I am from Press TV, Iran's international English language broadcaster. I have a two-part question for you. The first question is: You seem to have linked the pursuit of North Korea's pursuit of nuclear weapons with Iran's pursuit of peaceful use of nuclear energy. I would like to know why that is first off, and second off, I would like to know how your approach to those two countries differs. Thank you.

SPECIAL ADVISOR EINHORN: I think the actions of the two countries have linked them to each other. Both countries have been found to be in violation of their safeguards commitments to the International Atomic Energy Agency. Both countries have been sanctioned under Chapter 7 of the UN Charter. Both countries have engaged in a wide range of deceptive activities. There are differences, of course, between them. North Korea is at a far greater -- it is at a much later stage of the development of its nuclear ambitions. North Korea has conducted two nuclear tests, for example. Iran clearly has not done that. There are many similarities between the two.

Now, that said, we do not have to treat them identically. Each has its unique characteristics and we have dealt with them in a unique way. But the United States adopts a so-called dual track approach to both North Korea and to Iran. And that is to say we are prepared to engage these countries and hopefully work out, peacefully, a solution. Or if those countries are not prepared to engage with us in a constructive way, we have to take another approach and that is the pressure track. And we have in the case of Iran, in the Obama Administration, tried for over a year to make engagement work, but we were rebuffed by the Iranian regime, so we have had no choice but to resort to pressure. But as I mentioned in my statement, pressure is not an end in itself. Pressure is designed to bring Iran's leaders to the conclusion that their interests are better served when negotiating seriously with the international community.

QUESTION: I am from Kyunghyang Daily Newspaper. I pay great attention to the Iranian and North Korean issue. My question is what kind of role did you ask the South Korean Government, the South Korean companies and financial institutions to play when it comes to imposing sanctions against Iran?

SPECIAL ADVISOR EINHORN: I will say a few words and then maybe Mr. Glaser would like to add to it. We believe all countries which are responsible countries and want to support the Nuclear Nonproliferation Regime, ought to take steps - not just to implement Security Council Resolution 1929 - but to build upon that Resolution in order to encourage Iran's leaders to adopt a more constructive path.

Now, the European Union one week ago today adopted a common position - all 27 countries - a very strong common position to put some pressure on Iran in the transportation, energy, and finance sectors. We suggested to the South Korean Government that they take a look at what the Europeans have done, and look at that as a kind of very positive example, and to consider whether it could adopt similar kinds of measures. We think that would be very positive.

TREASURY DAS GLASER: Let me, let me add to that. Maybe I can give a couple of specifics. Last time I was here in Seoul consulting with our South Korean partners on Iran, it was just this past March. And when I look back at March in -- compared to where we are right now -- in the international community, it has been an incredible shift. Since that time there is a very strong UN Security Council Resolution and very strong financial provisions with respect to Iran.

Now the 27 countries of the European Union apply or go even beyond, go even beyond that resolution. We had the U.S. enact strong legislation in respect to Iran, Australia implement sanctions in respect to Iran, Canada implement sanctions in respect to Iran. So within just the past 6 weeks, we have seen 30 countries in the world implement strong financial measures with respect to Iran.

So I will give you one example. There is an Iranian bank called Bank Mellat. Within the past few weeks, the UN Security Council has identified Bank Mellat as having been involved in hundreds of millions of dollars of transactions relating to Iran's nuclear program. The 27 countries of the EU, plus Canada and Australia, applied sanctions on Bank Mellat and, of course, the United States already had in place sanctions on Bank Mellat.

So we had gone from a situation in which the United States was one of the few countries, if not the only country to have sanctions against Bank Mellat, to that being the international norm.

And again I think it is important that we -- as we see that progress throughout the world -- that we come to places like South Korea, which is an absolutely vital center in the international financial system, to ensure that those types of actions occur throughout the international financial system.

QUESTION: Hello, my name is Park Myun-yoon. I am a reporter for Joong-ang Ilbo. You talked about the dual track approach for both Iran and North Korea. Is that your way of telling North Korea to come back to the Six-Party Talks? Then could we see this as an exit strategy concerning the Cheonan incident? That is my first question and my second question is you mentioned the Bank Mellat that sounds something like Banco Delta Asia case [sic], in which you froze $25 million of North Korean assets at the Macau bank in 2005. Are you considering taking those measures?

SPECIAL ADVISOR EINHORN: The United States continues to regard the Six-Party Talks as an appropriate forum for addressing international concerns about North Korea's nuclear program.

But the Six-Party Talks have not been active for quite some time. And since North Korea last walked out of the talks, it has engaged in a variety of very provocative activities, including a nuclear test, including the torpedoing of the Cheonan.

We cannot repeat the kind of cycles that we went through in number of previous occasions, where North Korea engages in talks, makes commitments, and then abandons those talks, and reneges on its commitments. We have to break that cycle. Especially in the wake of the Cheonan incident, it is essential for North Korea to demonstrate in a concrete way that it is sincere about meeting its commitments to denuclearization.

So before the Six-Party Talks can reconvene, it is essential that North Korea demonstrate in tangible ways that it is prepared this time to make commitments and to fulfill them. There are some important commitments already existing, the September 2005 commitment. The North Koreans have to demonstrate that they are serious about abiding by their commitments. Unless they do, then talks for talks' sake are not interesting to us.

TREASURY DAS GLASER: To your follow up question on Bank Mellat, the United States designated Bank Mellat under our own counter proliferation authority on October 25, 2007. It was subsequently designated nationally by the United Kingdom. In recent weeks, in very recent weeks, the international community is taking similar actions with respective Bank Mellat, as we said, the 27 countries of the European Union, Canada and Australia. And in fact, in our view, this decision has been ratified by the U.N. Security Council, which specifically highlights the very significant role that Bank Mellat plays in proliferation finance.

Now, Bank Mellat is an Iranian bank. You asked, you drew a comparison with the action that we took in September 2005 with respect to Banco Delta Asia. Now BDA was targeted under a different authority, and for a different type of conduct. In that case, they were facilitating a full range of North Korean illicit activities.

But what both Bank Mellat and BDA demonstrate is that both North Korea and Iran use the international financial system to facilitate and to further their illicit conduct and their conduct of violation of UN Security Council Resolutions. And that banks that engage in that type of conduct are going to be exposed to the international financial community and to the international community at large. And regardless of the authority we use to do that, that is going to have profound effects on the ability of these banks that continue to conduct this business.

QUESTION: At the time of the BDA incident, North Korea expressed itself as that they had panicked so much, that their 'blood had been frozen.' I think this time the sanctions being imposed are more comprehensive and more diverse. Do you think it can be as painful as the BDA sanctions? Do you feel confident that this will be as effective as it was in the past? Because we feel that North Korea might have had its learning experience and therefore it might have dispersed its investments.

TREASURY DAS GLASER: Not to nitpick, but BDA was not a sanction. BDA was an action taken by the United States to protect our financial system from penetration by illicit North Korean activities. And as a purely technical legal matter, the only thing that the BDA designation actually accomplished is cutting BDA off from the U.S. financial system. And that remains the case today. Our designation of BDA remains in place and BDA remains a primary money launderer and as a launderer it remains cut off from the U.S. financial system.

But the real importance of BDA was the impact that it had throughout the international financial system, as banks throughout the world saw what happened in the case of BDA and decided that they were going to very, very seriously re-examine their financial relationship with North Korea. Because it was so clear to the international financial system that this is how North Korea conducts its international finance transactions, through deceptive and illicit financial practices. And that remains true today. So regardless of what specific authorities we are talking about or what package of measures, or what package of sanctions and protective measures that we might decide to take, they are going to have resonance throughout the international financial system.

And I think that the international financial institutions throughout the world are going to re-examine the business that they have remaining and or are going to take into account the information that we provide and are going to take appropriate actions. So I think we can continue to have an important impact on how North Korea conducts its financial activities throughout the world.

MODERATOR: Any additional questions? Joong-ang Daily.

QUESTION: I am (inaudible) from Joong-ang Daily. I have two questions for Mr. Einhorn. I understand that you have plans to visit China later this month and how would you define the character of your visit to China later this month. I understand that also you are, have a plan to visit the major opposition Democratic Party of South Korea and I would like to learn what are the meeting agenda [sic] and the purpose of the visit. Thank you.

SPECIAL ADVISOR EINHORN: You are from Joong-ang? Did you say you are from Joong-ang? Is there anyone left in the news room? (laughter)

QUESTIONER: Quite a few, yes.

SPECIAL ADVISOR EINHORN: I will travel to China. It is not exactly clear what dates we will be going, but both Mr. Glaser and I plan to travel to China. And our agenda will be a broad one. We want to talk about sanctions toward North Korea, but we also want to talk about sanctions toward Iran, and specifically the issues that are raised before -- the concern, universal concern, about possible Chinese backfilling when countries step back from their own operations with Iran, the concern is that China might fill in. So, that is an issue that we will want to raise with Chinese authorities. As far as our meetings with opposition party members here in Seoul, I understand because of travel and other schedules that may not be possible.

MODERATOR: We have time for one more, any final questions? The gentleman right here.

QUESTION: Hello, I am from Kyodo news agency. Two questions: First, when will you be announcing this new set of sanctions against North Korea? Will it be next week? The second question is, can you give us, can you perhaps tell us the list of entities or individuals that is [sic] to be included in the announcements if at all possible? And I would like to know also the size of the number of individuals or entities to be included.

SPECIAL ADVISOR EINHORN: You have asked two questions that are difficult to be responsive to. As to when, there are a number of legal and other questions that have to be resolved. We are in the process of finalizing these new measures, I cannot give you a definite date, but I believe it will be the next several weeks. We do expect that there will be some specific entities named when we release this measure, but I cannot divulge the names to you now. We have not even finalized them at this point.

MODERATOR: Thank you very much for coming.