The Democratic People’s Republic of Korea (hereinafter “DPRK,” “the North,” “North Korea,” or “the country”) has made significant advances in its nuclear capabilities in defiance of one of the most comprehensive sanctions regimes in US history. These advances pose a great threat to US national security. While President Trump has described the state of relations with DPRK positively, even claiming to have neutralized the DPRK nuclear threat,1 the past 70 years of sanctioning efforts have produced little-to-no meaningful progress. In fact, recent satellite images suggest the country has been engaged in substantial deception: publicly offering to dismantle launching sites while subversively expanding dozens of operations.2 To date, “There is no evidence that North Korea feels weak, economically or otherwise. And there is no indication that Kim is willing to surrender his nuclear arsenal for economic benefits, security guarantees or any other incentive Trump might offer.”3 Ultimately, US efforts to reduce the DPRK nuclear threat have proven ineffective as a result of DPRK’s technological evasion schemes, including illicit maritime deceptions, outsourcing, and cybercrime.
(1) Illicit Maritime Tactics
DRPK has employed an array of technology-based maritime deceptions to continue procuring the goods and services it desires amidst US sanctions. Fake flags, fake ship names, and forged customs manifests are some of the DPRK’s most commonly employed evasion tactics.4 Such techniques serve to obscure the ship’s links to Pyongyang. Additionally, North Korean crews sometimes manipulate transponders to relay false information, such as by changing the ship’s registration information, relaying false location information, or by manipulating signals to make the ship appear smaller than its actual size to confuse authorities into thinking that a freighter is actually just a fishing vessel.5 Other times, ships evade sanctions by simply turning off their transponders altogether.6 For example, a WSJ investigation found that transmission data from DPRK since the heightening of sanctions has plummeted, “with less than a dozen out of nearly 170 ships sending out signals.”7 While maritime guidelines allow ship captains to turn off location transmission to avoid pirates, they certainly do not allow captains to turn the transponders off permanently.8 Together, these strategies have made it incredibly difficult to track the true identities and cargo of DPRK vessels, hence complicating sanction enforcement.
Concerningly, DPRK is using these deceptive maritime tactics to obtain weapons and nuclear materials. In July 2013, US law enforcement received a tip indicating that a North Koran vessel, which hadn’t visited the US since 2009 and was supposed to be carrying sugar, was actually “hiding drugs or weapons in its cargo.”9 The vessel was intercepted in Panama and, following a five-day standoff with the ship’s crew, officials discovered “Cold War-era military equipment on its way to be [sic] repaired in North Korea.”10 This is not the first time that DPRK vessels have been intercepted carrying weapons materials. Three years prior, the “largest seizure of ammunition in the history of sanctions”11 occurred when a DPRK vessel was intercepted carrying 30,000 rocket-propelled grenades. Thus, despite severe sanctions banning most DPRK exports and imports, substantial evidence indicates that the country has successfully circumnavigated these bans using a broad array of illicit maritime tactics.
(2) Deceptive Financial Practices: Outsourcing & Cybercrime
DPRK relies on foreign currency for survival and has repeatedly employed deceptive financial tactics to ensure continued access to it. First, many citizens rely on it as a way to “store their assets and make daily purchases”12 In fact, a 2017 study conducted by the Bank of Korea, interviewing 231 DPRK defectors, found that foreign currency had become a basic necessity, with many defectors reporting that, in some areas, the citizens no longer use NKW as the primary currency to store their wealth.13 In the same survey, over 70 percent of respondents held 90 percent or more of their assets in US dollars or Chinese Renminbi.14
At the same time, the government relies on foreign currency both to finance the nation’s nuclear endeavors and obtain international goods.15 Having defaulted on its international debt, Pyongyang cannot receive loans from the international financial community.16 Further, the country has very few legitimate, money-earning endeavors. Hence, DPRK has turned to a “small number of foreign exchange banks” to effectively create an “inter-bank clearing system.”17 This has provided a pathway for DPRK to illicitly transact billions of dollars on the regime’s behalf.18 This outsourcing has also meant that, even amidst severe sanctions, the regime has “procure[d] financial and material support for its WMD ambitions.”19 At the same time, DPRK has also used a series of “front and trade companies to disguise, move, and launder funds.”20 Together, these tactics have allowed DPRK to continue financing its nuclear programs.
In an effort to obtain foreign currency, DPRK has also turned to cybercrime as a means for generating income.21 In fact, cyberattacks have been particularly fruitful for the nation because they are relatively low cost and “notoriously difficult to attribute.”22 DPRK has reportedly used such crime for a variety of purposes, including hacking Sony Pictures for personal information23 and stealing US-South Korean war plans.24 Many analysts even suspect the North to be behind a massive, meticulously-planned 2016 cyber heist where hackers manipulated the Bangladesh Central Bank’s (BCB) access to SWIFT, an international financial network through which banks send financial messages, and were able to reroute $81 million dollars.25 By the time regulators were able to send out freezes to repatriate the funds, the money had been “withdrawn, redeposited, and transferred through different accounts several times over.”26
The ability of DPRK to obtain the resources it needs, despite harsh US sanctions designed to put pressure on the target country, has meant that US efforts to force the country to denuclearize have had a little-to-no effect. While debate in Washington has focused on deterrence and the question of whether Washington can provide Pyongyang with the security assurances it needs to relinquish its nuclear weapon programs,27 such debate has ultimately failed to fully account for the country’s reliance on illicit tactics to evade sanctions. Given these facts, if the US is dedicated to pursuing sanctions, it must focus on implementing focused sanctions aimed directly at cutting off the country’s nuclear funding, such as by unraveling DPRK’s illicit network.