Proposed legislation would create the “toughest financial sanctions ever directed at North Korea.” That’s the promise from members of the House Financial Services Committee’s Subcommittee on Monetary Policy and Subcommittee Considers

The legislation touted with superlatives in a subcommittee memo is the “Impeding North Korea’s Access to Finance Act of 2017.” It would greatly extend current sanctions against North Korea through “secondary sanctions,” banning foreign banks that have business relationships with the rogue nation from the U.S. financial system.

“North Korea’s sixth nuclear test on September 3, coupled with its repeated launching of intermediate and long-range ballistic missiles, underlines that more must be done to stop this rogue regime’s aggression and threats,” Subcommittee Chairman Andy Bar (R-Ky.) said. “The legislative draft we are considering lays out a choice: foreign banks can either do business that benefits North Korea, or they can do business with the United States. They cannot do both. By encompassing virtually all of North Korea’s economic activity, these measures would represent the toughest financial sanctions yet directed at Pyongyang.”

“Foreign banks must put an end to business that benefits North Korea,” a memo accompanying the bill says. “Tough secondary sanctions can help cut off Pyongyang’s ability to obtain hard currency and financing for its weapons development. Foreign banks that support North Korean exports and expatriate labor should face consequences, as these are Pyongyang’s primary means of obtaining hard currency.”

No later than 45 days after passage of the proposed legislation, the Secretary of the Treasury “shall prescribe regulations to prohibit, or impose strict conditions on, the opening or maintaining in the United States of a correspondent account or a payable-through account by a foreign financial institution if the foreign financial institution: knowingly facilitates a significant transaction or transactions or provides significant financial services for a covered person; or fails to apply reasonable due diligence to prevent these] activities.”

The Secretary “shall prescribe regulations to prohibit a United States financial institution, and any person owned or controlled by a United States financial institution, from knowingly engaging in a transaction with or benefitting a covered person, a political figure or official of a foreign official,” associated with North Korea.

Violators will be subject to a civil penalty in an amount not to exceed the greater of $250,000; or an amount that is twice the amount of the transaction that is the basis of the violation with respect to which the penalty is imposed.

A person who willfully commits, willfully attempts to commit, or willfully conspires to commit, or aids or abets in the commission of, a violation of regulations prescribed under this subsection shall, upon conviction, be fined not more than $1,000,000, or if a natural person, may be imprisoned for not more than 20 years, or both.

“If pressure does not lead to successful negotiations, then it is better to have a further weakened North Korea and to make it more difficult for Pyongyang to create a functioning nuclear arsenal,” testified David Albright, president, of the Institute for Science and International Security at a Sept. 13 hearing held by the subcommittee. “In parallel, the U.S. needs to work with its allies in the region to build up defensive capabilities and increase deterrent postures.”

“A successful financial sanctions approach will focus on increasing the efforts of U.S. and foreign financial institutions to search for North Korea’s illicit financial activities,” said Anthony Ruggiero, senior fellow at the Foundation for Defense of Democracies. “While Pyongyang is experienced in hiding its activities behind front companies, the linkage can be found. Chinese financial institutions certainly could have found that same information if they wanted to ask the right questions. Facing significant fines or losing access to the U.S. dollar should heighten Chinese banks’ desire to start asking those questions.”

Bruce Klingner, the Heritage Foundation’s senior fellow for Northeast Asia, also supported the enhanced sanctions regime.

 “Washington should lead a world-wide effort to inspect and interdict North Korean shipping, aggressively target all illicit activity, sanction entities including Chinese banks and businesses that are facilitating Pyongyang’s prohibited nuclear and missile programs, expand information operations against the regime, highlight and condemn Pyongyang’s crimes against humanity, and wean away even North Korea’s legitimate business partners,” he said.

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