The United States Department of Treasury Office of Foreign Assets Control (“OFAC”) has placed a Korean banking corporation on the Specially Designated National (“SDN”) list. The company, Korean Kwangson Banking Corp. (“KKBC”) is accused of providing financial support to both Tanchon Commercial Bank (Tanchon) and Korea Hyoksin Trading Corporation (Hyoksin). While being based in North Korea, KKBC does have one overseas branch located in China.

Hyoksin was just recently designated by OFAC in July 2009 for being owned or controlled by another SDN, Korean Ryonbong General Corporation (“Ryonbong”). All three of these entities are thought to have played a role in North Korea’s WMD and missile programs.

According to Under Secretary for Terrorism and Financial Intelligence, Stuart Levey, “North Korea’s use of a little-known bank, KKBC, to mask the international financial business of sanctioned proliferators demonstrates the lengths to which the regime will go to continue its proliferation activities and the high risk that any business with North Korea may well be illicit.”

It is thought that KKBC has been used to facilitate funds transfers of millions of dollars, including transfers involving Korea Mining Development Trading Corporation (KOMID)-related funds from Burma to China in 2009.

KOMID, is thought to be North Korea’s premier arms dealer and main exporter of goods and equipment related to ballistic missiles and conventional weapons. Tanchon constitutes the financial arm of KOMID, thereby facilitating the financing of KOMID’s sales of ballistic missiles. Moreover, Hyoksin also sought to use KKBC in connection with a purchase of dual-use equipment in 2008.

From the looks of it a number of different agencies and departments were involved in this investigation which is not too uncommon given the circumstances. However, it begs the question: will North Korea not just find another small bank to utilize in the financing of its nuclear program? While the designations are surely warranted, I don’t know how effective they are as a long term strategy. Maybe we need to send Bill Clinton back over there to figure the whole thing out. Just a thought.