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address: The target population to which DEPARTMENT OF THE TREASURY the primary concern. generalizations will be made, the For purposes of the finding contained in sampling frame, the sample design Financial Crimes Enforcement Network this notice, the Secretary has delegated (including stratification and clustering), his authority under Section 311 to the Finding That the Democratic People’s the precision requirements or power Director of FinCEN.1 Republic of Korea Is a Jurisdiction of Taken as a whole, Section 311 calculations that justify the proposed Primary Money Laundering Concern sample size, the expected response rate, provides the Secretary with a range of methods for assessing potential AGENCY: The Financial Crimes options that can be adapted to target nonresponse bias, the protocols for data Enforcement Network (‘‘FinCEN’’), specific money laundering and terrorist collection, and any testing procedures Treasury. financing concerns most effectively. that were or will be undertaken prior to ACTION: Notice of finding. Through the imposition of various fielding the study. Depending on the special measures, the Secretary can gain SUMMARY: This document provides more information about the degree of influence the results are likely notice that, pursuant to the authority jurisdictions, institutions, transactions, to have, such collections may still be contained in the USA PATRIOT Act, the or accounts of concern; can more eligible for submission for other generic Director of FinCEN found on May 27, effectively monitor the respective mechanisms that are designed to yield 2016 that reasonable grounds exist for jurisdictions, institutions, transactions, quantitative results. As a general matter, concluding that the Democratic People’s or accounts; or can prohibit U.S. information collections will not result Republic of Korea (‘‘DPRK’’ or ‘‘North financial institutions from involvement in any new system of records containing Korea’’) is a jurisdiction of primary with jurisdictions, institutions, privacy information and will not ask money laundering concern. transactions, or accounts that pose a questions of a sensitive nature, such as FOR FURTHER INFORMATION CONTACT: money laundering concern. sexual behavior and attitudes, religious FinCEN, (800) 949–2732. Before making a finding that beliefs, and other matters that are SUPPLEMENTARY INFORMATION: reasonable grounds exist for concluding commonly considered private. that a jurisdiction is of primary money I. Background Respondents: Individuals and laundering concern, the Secretary is Households, Businesses and A. Statutory Provisions required to consult with both the Organizations, State, Local or Tribal On October 26, 2001, the President Secretary of State and the Attorney Government. signed into law the Uniting and General. The Secretary is also required 2 Strengthening America by Providing by Section 311, as amended, to Estimated Expected Annual Number consider ‘‘such information as the of Activities: 15. Appropriate Tools Required to Intercept and Obstruct Act of 2001 (the Secretary determines to be relevant, Estimated Annual Responses: 5,900. ‘‘USA PATRIOT Act’’), Public Law 107– including the following potentially Frequency of Response: Once per 56. Title III of the USA PATRIOT Act relevant factors,’’ which extend the Request. amends the anti-money laundering Secretary’s consideration beyond provisions of the Bank Secrecy Act traditional money laundering concerns Estimated Annual Burden: 1,758. (‘‘BSA’’), codified at 12 U.S.C. 1829b, 12 to issues involving, inter alia, terrorist Public Comments Invited: You are U.S.C 1951–1959, and 31 U.S.C. 5311– financing and the proliferation of asked to comment on any aspect of this 5314 and 5316–5332, to promote weapons of mass destruction (‘‘WMD’’) information collection, including (a) prevention, detection, and prosecution or missiles: • whether the proposed collection of of international money laundering and Evidence that organized criminal information is necessary for the the financing of terrorism. Regulations groups, international terrorists, or Department’s performance; (b) the implementing the BSA appear at 31 CFR entities involved in the proliferation of accuracy of the estimated burden; (c) Chapter X. WMD or missiles, have transacted Section 311 of the USA PATRIOT Act business in that jurisdiction; ways for the Department to enhance the • quality, utility and clarity of the (‘‘Section 311’’) added 31 U.S.C. 5318A The extent to which that information collection; and (d) ways to the BSA, granting the Secretary of the jurisdiction or financial institutions operating in that jurisdiction offer bank that the burden could be minimized Treasury (the ‘‘Secretary’’) the authority, secrecy or special regulatory advantages without reducing the quality of the upon finding that reasonable grounds to nonresidents or nondomiciliaries of collected information. The agency will exist for concluding that a foreign jurisdiction, institution, class of that jurisdiction; summarize and/or include your • The substance and quality of comments in the request for OMB’s transactions, or type of account is of ‘‘primary money laundering concern,’’ administration of the bank supervisory clearance of this information collection. to require domestic financial and counter- money laundering laws of Authority: The Paperwork Reduction Act institutions and financial agencies to that jurisdiction; of 1995; 44 U.S.C. Chapter 35, as amended; take certain ‘‘special measures’’ against • The relationship between the and 49 CFR 1:93. the primary money laundering concern. volume of financial transactions Dated: May 24, 2016. Section 311 identifies factors for the occurring in that jurisdiction and the size of the economy of the jurisdiction; T. Mitchell Hudson, Jr., Secretary to consider and requires Federal agencies to consult before the • The extent to which that Secretary, Maritime Administration. Secretary may conclude that a jurisdiction is characterized as an [FR Doc. 2016–12973 Filed 6–1–16; 8:45 am] jurisdiction, institution, class of offshore banking or secrecy haven by BILLING CODE 4910–81–P transaction, or type of account is of primary money laundering concern. The 1 Therefore, references to the authority and statute also provides similar procedures, findings of the Secretary in this document apply equally to the Director of FinCEN. i.e., factors and consultation 2 31 U.S.C. 5318A was amended by section 501 requirements, for selecting the specific of the Freedom Support Act of 2006, Public special measures to be imposed against Law 109–293.

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credible international organizations or • The effect of the action on U.S. transactions disassociated from the multilateral expert groups; national security and foreign policy. movement of goods or services.6 • Whether the has a The Treaty on the Non-Proliferation of mutual legal assistance treaty with that B. Democratic People’s Republic of Nuclear Weapons and the International jurisdiction, and the experience of U.S. Korea Atomic Energy Agency Safeguards Agreement work together to prevent the law enforcement officials and regulatory As set out in detail below, North development of nuclear weapons and officials in obtaining information about Korea continues to advance its nuclear transactions originating in or routed promote the peaceful use of nuclear and ballistic missile programs in through or to such jurisdiction; and energy. Although acceded violation of international treaties, • The extent to which that to the Treaty on the Non-Proliferation of international censure and sanctions jurisdiction is characterized by high Nuclear Weapons (‘‘NPT’’) in 1985, it levels of official or institutional measures, and U.S. law. North Korea withdrew from the Treaty in 2003. corruption. does this using an extensive overseas Subsequently, North Korea If the Secretary determines that network of front companies, shell demonstrated its nuclear weapons reasonable grounds exist for concluding companies, joint ventures, and opaque capacity with nuclear tests in 2006, that a jurisdiction is of primary money business relationships. North Korea 2009, 2013, and 2016.7 laundering concern, the Secretary is conducts almost no banking in true Since 2005, North Korea has been authorized to impose one or more of the name in the formal financial system sanctioned repeatedly for its special measures in Section 311 to given that many of its outward facing proliferation of WMD and the address the specific money laundering agencies and financial institutions have development of nuclear and ballistic risks. Section 311 provides a range of been sanctioned by the United States, missile programs. Between June 2006 special measures that can be imposed the , or both. and 2016, the United Nations (UN) Security Council issued five UNSCRs— individually, jointly, and in any While none of North Korea’s financial 3 1718, 1874, 2087, 2094, and 2270— sequence. Before imposing special institutions maintain correspondent measures, the statute requires the restricting North Korea’s financial and accounts with U.S. financial operational activities related to its Secretary to consult with appropriate institutions,5 North Korea does have federal agencies and other interested nuclear and missile programs and access to the U.S. financial system 8 parties 4 and to consider the following conventional arms sales. In addition, through a system of front companies, specific factors: the President of the United States has business arrangements, and • Whether similar action has been or issued Executive Orders (‘‘E.O.s’’) is being taken by other nations or representatives that obfuscate the true 13466, 13551, 13570, 13687, and 13722 multilateral groups; originator, beneficiary, and purpose of to impose sanctions on North Korea pursuant to the International Emergency • Whether the imposition of any transactions. We assess that these Economic Powers Act, and the particular special measures would deceptive practices have allowed Department of the Treasury has create significant competitive millions of U.S. dollars of DPRK illicit designated North Korea targets for asset disadvantage, including any undue cost activity to flow through U.S. freezes pursuant to other E.O.s, such as or burden associated with compliance, correspondent accounts. E.O. 13382, which targets WMD for financial institutions organized or Moreover, although U.S. and proliferators worldwide. A designation licensed in the United States; have served to under any one of the targeting E.O.s • The extent to which the action or significantly isolate North Korean banks generally blocks the property and the timing of the action would have a from the international financial system, interests in property in the United significant adverse systemic impact on the North Korean government continues States or in the possession or control of the international payment, clearance, to access the international financial a U.S. person of a designated person, and settlement system, or on legitimate system to support its WMD and and prohibits U.S. persons from business activities involving the conventional weapons programs. This is engaging in transactions with, or dealing particular jurisdiction; and made possible through its use of aliases, in property interests of, a designated agents, foreign individuals in multiple person. 3 Available special measures include requiring: On June 28, 2005, the President (1) Recordkeeping and reporting of certain financial jurisdictions, and a long-standing transactions; (2) collection of information relating to network of front companies and North issued E.O. 13382, ‘‘Blocking Property beneficial ownership; (3) collection of information Korean embassy personnel which of Weapons of Mass Destruction relating to certain payable-through accounts; (4) support illicit activities through Proliferators and Their Supporters,’’ collection of information relating to certain banking, bulk cash, and trade. Front which orders certain measures to be correspondent accounts; and (5) prohibition or taken to address the threat posed to the conditions on the opening or maintaining of company transactions originating in United States by the proliferation of correspondent or payable-through accounts. 31 foreign-based banks have been U.S.C. 5318A(b)(1)–(5). 4 Section 5318A(a)(4)(A) requires the Secretary to processed through correspondent bank 6 See ‘‘Report of the Panel of Experts established consult with the Chairman of the Board of accounts in the United States and pursuant to resolution 1874 (2009),’’ February, Governors of the Federal Reserve System, any other Europe. Further, the enhanced due 2016. appropriate Federal banking agency, the Secretary diligence required by United Nations 7 See ‘‘IAEA and DPRK: Chronology of Key of State, the Securities and Exchange Commission Events,’’ (https://www.iaea.org/newscenter/focus/ (‘‘SEC’’), the Commodity Futures Trading Security Council Resolutions (UNSCRs) dprk/chronology-of-key-events). Commission (‘‘CFTC’’), the National Credit Union related to North Korea is undermined by 8 See UNSCR 1718 (http://www.un.org/en/ga/ Administration (‘‘NCUA’’), and, in the sole North Korean-linked front companies, search/view_doc.asp?symbol=S/RES/1718(2006)); discretion of the Secretary, ‘‘such other agencies which are often registered by non-North UNSCR 1874 (http://www.un.org/en/ga/search/ and interested parties as the Secretary may find to view_doc.asp?symbol=S/RES/1874(2009)); UNSCR be appropriate.’’ The consultation process must also Korean citizens, and which conceal 2087 (http://www.un.org/en/ga/search/ include the Attorney General if the Secretary is their activity through the use of indirect view_doc.asp?symbol=S/RES/2087(2013)); UNSCR considering prohibiting or imposing conditions on payment methods and circuitous 2094 (http://www.un.org/en/ga/search/ domestic financial institutions opening or view_doc.asp?symbol=S/RES/2094(2013)); UNSCR maintaining correspondent account relationships 2270 (http://www.un.org/en/ga/search/ with the targeted entity. 5 Bankers Almanac, accessed February 12, 2016. view_doc.asp?symbol=S/RES/2270(2016)).

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WMD and their means of delivery.9 The to be officials, agencies, relevant federal agencies and following two North Korean entities instrumentalities, or controlled entities departments, and in consideration of the were sanctioned in the Annex to E.O. of the Government of North Korea or the factors enumerated in Section 311 of the 13382: Korea Mining Development Workers’ Party of Korea.13 USA PATRIOT Act, the Director of Trading Corporation (KOMID), North On March 15, 2016, the President FinCEN has determined that reasonable Korea’s primary arms exporter; and issued E.O. 13722, ‘‘Blocking Property grounds exist for concluding that North Tanchon Commercial Bank (TCB), the of the Government of North Korea and Korea is a jurisdiction of primary money financial arm of KOMID. As noted the Workers’ Party of Korea, and laundering concern. While FinCEN has Prohibiting Certain Transactions with further below, additional North Korean considered all potentially relevant Respect to North Korea,’’ which, among financial institutions, including Korea factors set forth in Section 5318A, a Kwangson Banking Corporation (KKBC), other things, blocks the property and interests in property of the Government discussion of those most pertinent to Foreign Trade Bank (FTB), and Daedong this finding follows. FinCEN has Credit Bank (DCB), were subsequently of North Korea and the Workers’ Party determined that North Korea (A) uses designated pursuant to E.O. 13382. of Korea and authorizes further asset state-controlled financial institutions On June 26, 2008, the President blockings on persons determined to be issued E.O. 13466, ‘‘Continuing Certain operating in industries of the North and front companies to conduct Restrictions With Respect to North Korean economy determined by the international financial transactions that Korea and North Korean Nationals,’’ Secretary of the Treasury, in support the proliferation of WMD and declaring a national emergency to deal consultation with the Secretary of State, the development of ballistic missiles in with the unusual and extraordinary to be subject to the measure. To date violation of international and U.S. threat to the national security and those industries include the sanctions; (B) is subject to little or no foreign policy of the United States transportation, mining, energy and bank supervision or anti-money constituted by the existence and risk of financial services industries.14 laundering or combating the financing the proliferation of weapons-usable Additionally, FinCEN issued advisories of terrorism (‘‘AML/CFT’’) controls; (C) fissile material on the Korean in 2005, 2009, and 2013 regarding the has no mutual legal assistance treaty peninsula.10 threat posed by the North Korean with the United States; and (D) relies on On August 30, 2010, the President government to U.S. and international the illicit and corrupt activity of high- issued E.O. 13551, ‘‘Blocking Property financial institutions. Specifically, these level officials to support its government. of Certain Persons with Respect to North advisories have urged caution when Korea,’’ which authorized asset dealing with North Korean financial A. Evidence That Organized Criminal blockings against those determined, institutions due to their use of front Groups, International Terrorists, or among other things, to have engaged in companies and other deceptive financial Entities Involved in the Proliferation of 15 the importation or exportation of North practices. Weapons of Mass Destruction or Numerous North Korean individuals, Korean arms or the exportation to North Missiles, Have Transacted Business in financial institutions, and other entities Korea of luxury goods.11 That Jurisdiction facilitating financial transactions in On April 18, 2011, the President support of North Korea’s proliferation of issued E.O. 13570, ‘‘Prohibiting Certain North Korea uses state-owned entities WMD or ballistic missiles have been Transactions with Respect to North and banks to conduct transactions in listed in or designated pursuant to these Korea,’’ which takes additional steps to support of North Korea’s proliferation of UNSCRs or E.O.s. In many cases, these address the national emergency WMD or ballistic missiles. The United sanctions have targeted front companies declared in E.O. 13466 and expanded in States and United Nations have or the individual representatives of E.O. 13551.12 This E.O. was designed in identified Korea Mining Development sanctioned entities who operate outside Trading Corporation (KOMID), Tanchon part to ensure implementation of the of North Korea. import restrictions contained in Commercial Bank (TCB), Korea UNSCRs 1718 and 1874. II. Analysis of Factors Kwangson Banking Corporation (KKBC), On January 2, 2015, the President Based upon a review of information and Daedong Credit Bank (DCB) as issued E.O. 13687, ‘‘Imposing available to FinCEN, consultations with entities that conduct financial Additional Sanctions with Respect to transactions in support of North Korea’s North Korea,’’ which blocks the 13 See E.O. 13687 ‘‘Imposing Additional proliferation of WMD or ballistic property of persons who are determined Sanctions with Respect to North Korea,’’ (2015) missiles; the United States has also (https://www.federalregister.gov/articles/2015/01/ 06/2015-00058/imposing-additional-sanctions-with- sanctioned Foreign Trade Bank (FTB) 9 See E.O. 13382 ‘‘Blocking Property of Weapons respect-to-north-korea). for this activity. Directing business from of Mass Destruction Proliferators and Their 14 Supporters,’’ (2005) (https:// See E.O. 13722 ‘‘Blocking Property of the North Korea, these state-owned entities Government of North Korea and the Workers’ Party www.federalregister.gov/articles/2005/07/01/05- and banks use front companies or covert of Korea, and Prohibiting Certain Transactions with 13214/blocking-property-of-weapons-of-mass- Respect to North Korea,’’ (2016) (https:// representatives to obfuscate the true destruction-proliferators-and-their-supporters). www.gpo.gov/fdsys/pkg/FR-2016-03-18/pdf/FR- 10 originator, beneficiary, and purpose of See E.O. 13466 ‘‘Continuing Certain 2016-03-18.pdf). Restrictions With Respect to North Korea and North transactions. Doing so has allowed 15 See ‘‘Guidance to Financial Institutions on the Korean Nationals,’’ (2008) (https:// Provision of Banking Services to North Korean millions of U.S. dollars of DPRK illicit www.federalregister.gov/articles/2008/06/27/08- Government Agencies and Associated Front activity to flow through U.S. 1399/continuing-certain-restrictions-with-respect- Companies Engaged in Illicit Activities,’’ FinCEN correspondent accounts. Entities in to-north-korea-and-north-korean-nationals). (2005) (https://www.fincen.gov/statutes_regs/ 11 See E.O. 13551 ‘‘Blocking Property of Certain guidance/pdf/advisory.pdf); ‘‘North Korea North Korea involved in the Persons with Respect to North Korea,’’ (2010) Government Agencies’ and Front Companies’ proliferation of WMD or ballistic (https://www.gpo.gov/fdsys/pkg/FR-2010-09-01/ Involvement in Illicit Financial Activities,’’ FinCEN missiles conduct business in, from, or pdf/X10-10901.pdf). (2009) (https://www.fincen.gov/statutes_regs/ 12 See E.O. 13570 ‘‘Prohibiting Certain guidance/pdf/fin-2009-a002.pdf); ‘‘Update on the through North Korea, or at the direction Transactions with Respect to North Korea,’’ (2011) Continuing Illicit Finance Threat Emanating from of the North Korean government, have (https://www.federalregister.gov/articles/2011/04/ North Korea,’’ FinCEN (2013) (https:// evaded the prohibitions set forth in _ 20/2011-9739/prohibiting-certain-transactions-with- www.fincen.gov/statutes regs/guidance/pdf/FIN- relevant UNSCRs and E.O.s. respect-to-north-korea). 2013-A005.pdf).

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The Korea Mining Development Trading weapons through its representatives in individuals is also listed under UNSCR Corporation Burma and its office in Indonesia. In 1718.26 The President subjected the Korea 2015, KOMID also sold dual-use WMD- North Korea has a long history of Mining Development Trading related equipment to Egypt, and using TCB and front companies to Corporation (KOMID) to an asset engaged with Egypt on missile facilitate proliferation and missile- blocking by listing it in the Annex of cooperation and development. related transactions. Dating as far back E.O. 13382 in June 2005,16 and the Additionally, KOMID occasionally as 2005, TCB, Korea Namchongang Department of the Treasury designated procures equipment and materials for Trading Corporation (‘‘Namchongang’’), KOMID pursuant to E.O. 13687 in Second Academy of Natural Sciences and front companies have facilitated January 2015 17 for being North Korea’s (SANS) research—an entity subject to an deals that could be associated with primary arms dealer and its main asset blocking by the U.S. under E.O. proliferation. The U.S. Department of exporter of goods and equipment related 13382 in August 2010 for using State designated Namchongang in June subordinate organizations to obtain 2009 under E.O. 13382 for WMD to ballistic missiles and conventional 27 weapons.18 The UN Security Council technology, equipment, and information proliferation activities; the UN listed also listed KOMID under UNSCR 1718 for use in North Korea’s weapons and Namchongang under UNSCR 1718 in 21 28 in April 2009, subjecting it to a nuclear programs. July 2009, and also listed its successor worldwide asset blocking.19 Further, Payments for weapons were often organization—Namhung Trading funneled through front companies Corporation—under UNSCR 2270 in between 2013 and 2016, the Department 29 of the Treasury designated a number of operating at the direction of North March 2016. TCB also received individuals under E.O. 13382 or E.O. Korean banks. The Department of the millions of U.S. dollars in 2009 from a 13687 for their roles acting on behalf of Treasury designated one of these front -based representative as partial KOMID in, or as KOMID representatives companies, Leader () payment for weapons exported to to, Burma, China, Egypt, Iran, Namibia, International Trading Limited, under Burma, Iran, and other countries. , , and .20 E.O. 13382 in January 2013 for Additionally, in 2015 TCB accounts Despite the sanctions placed on facilitating the shipment of machinery were used to purchase technology and KOMID and its network, North Korea and equipment to customers on behalf equipment in support of U.S.-designated continues to sell weapons abroad. of KOMID and directly to KOMID SANS research and development Between 2001 and 2007, North Korean representatives located outside of North activities. 22 weapons manufacturers marketed or Korea. Between January 2009 and The Korea Kwangson Banking exported North Korean weapons to November 2012, Leader (Hong Kong) Corporation Angola, , Iran, , Pakistan, International cleared at least $13.5 As noted, the Department of the Uganda, , and million through correspondent accounts Treasury sanctioned Korea Kwangson . As recently as 2015, KOMID at U.S. banks. Banking Corporation (KKBC) under E.O. marketed or exported North Korean The Tanchon Commercial Bank 13382 in August 2009 for facilitating ballistic missiles or conventional As noted above, Tanchon Commercial financial transactions for E.O. 13382-

16 Bank (TCB) was listed by the President sanctioned TCB and the Korea Hyoksin See E.O. 13382. 30 17 See ‘‘Issuance of new North Korea-related in the Annex of E.O. 13382 in June Trading Corporation (‘‘Hyoksin’’); the Executive Order; North Korea Designations,’’ 2005, subjecting it to an asset blocking, UN listed KKBC under UNSCR 2270 in January 2, 2015 (https://www.treasury.gov/resource- and the UN Security Council listed TCB March 2016.31 As noted above, TCB was center/sanctions/OFAC-Enforcement/Pages/ under UNSCR 1718 in April 2009.23 sanctioned by the United States in June 20150102.aspx). 2005 and listed by the UN under 18 See ‘‘Treasury Imposes Sanctions Against the TCB is the financial arm of KOMID and Government of the Democratic People’s Republic of the main North Korean financial UNSCR 1718 in April 2009; further, in Korea,’’ January 2, 2015 (https://www.treasury.gov/ institution for the sale of conventional July 2009 the Department of the press-center/press-releases/Pages/jl9733.aspx). arms, ballistic missiles, and goods Treasury designated Hyoksin under E.O. 19 See ‘‘Letter dated 24 April 2009 from the Chairman of the Security Council Committee related to the assembly and manufacture 24 Of Mass Destruction Program,’’ January 24, 2013 established pursuant to resolution 1718 (2006) of such weapons. Between 2009 and (https://www.treasury.gov/press-center/press- addressed to the President of the Security Council,’’ 2015 the Department of the Treasury releases/Pages/tg1828.aspx); ‘‘Treasury Targets April 24, 2009 (http:// designated nine individuals under E.O. North Korea’s Global Weapons Proliferation www.securitycouncilreport.org/atf/cf/ Network,’’ December 8, 2015 (https:// %7B65BFCF9B-6D27-4E9C-8CD3- 13382 for working on behalf of TCB, www.treasury.gov/press-center/press-releases/ CF6E4FF96FF9%7D/ including as representatives to China, Pages/jl0295.aspx); ‘‘Non-proliferation NKorea%20S2009%20222.pdf). 25 Syria, and . Each of these Designations,’’ March 7, 2013 (https:// 20 See ‘‘United States Sanctions Individuals www.treasury.gov/resource-center/sanctions/OFAC- Linked to North Korea Weapons of Mass 21 See ‘‘United States Designates North Korean Enforcement/Pages/20130307.aspx). Destruction Programs,’’ March 7, 2013 (https:// Entities and Individuals for Activities Related to 26 See ‘‘The List Established and Maintained by www.treasury.gov/press-center/press-releases/ North Korea’s Weapons of Mass Destruction the 1718 (2006) Committee,’’ (https://www.un.org/ Pages/jl1872.aspx); ‘‘Treasury Imposes Sanctions Program,’’ August 30, 2010 (https:// sc/suborg/sites/www.un.org.sc.suborg/files/ Against the Government of the Democratic People’s www.treasury.gov/press-center/press-releases/ 1718.pdf). Republic of Korea,’’ January 2, 2015 (https:// Pages/tg840.aspx). 27 www.treasury.gov/press-center/press-releases/ See ‘‘State Designation of North Korean 22 Pages/jl9733.aspx); ‘‘Treasury Sanctions Supporters See ‘‘Treasury Sanctions Company And Nuclear Entity,’’ June 30, 2009 (www.state.gov/r/pa/ of North Korea’s Weapons of Mass Destruction and Individuals Linked To North Korean Weapons Of prs/ps/2009/06a/125505.htm). Illicit Finance Networks,’’ November 13, 2015 Mass Destruction Program,’’ January 24, 2013 28 See ‘‘Security Council Committee Determines (https://www.treasury.gov/press-center/press- (https://www.treasury.gov/press-center/press- Entities, Goods, Individuals, Subject to Measures releases/Pages/jl0269.aspx); ‘‘Treasury Sanctions releases/Pages/tg1828.aspx). Imposed on Democratic People’s Republic of Korea Those Involved in Ballistic Missile Procurement for 23 See UNSCR 1718. by Resolution 1718 (2006),’’ July 16, 2009 Iran,’’ January 17, 2016 (https://www.treasury.gov/ 24 See E.O. 13382; see also Footnote 28. (www.un.org/press/en/2009/sc9708.doc.htm). press-center/press-releases/Pages/jl0322.aspx); 25 See ‘‘Treasury Designates North Korean Bank 29 See UNSCR 2270. ‘‘The United States Sanctions North Korean and Banking Official as Proliferators of Weapons of 30 See ‘‘Treasury Designates Financial Institution Government Officials and Organizations Tied to its Mass Destruction,’’ October 23, 2009 (https:// Tied to North Korea’s WMD Proliferation,’’ August Missile and Nuclear Programs,’’ March 2, 2016 www.treasury.gov/press-center/press-releases/ 11, 2009 (https://www.treasury.gov/press-center/ (https://www.treasury.gov/press-center/press- Pages/tg330.aspx); ‘‘Treasury Sanctions Company press-releases/Pages/tg260.aspx). releases/Pages/jl0372.aspx). And Individuals Linked To North Korean Weapons 31 See UNSCR 2270.

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13382, and the UN listed Hyoksin under under E.O. 13382 in June 2013 for members in implementing necessary UNSCR 1718 for WMD proliferation managing millions of dollars of measures, reviews money laundering activity.32 In spite of its designation, transactions in support of the North and terrorist financing techniques and KKBC has continued to evade sanctions Korean regime’s countermeasures, and promotes the and process financial transactions that and missile-related activities.34 The UN adoption and implementation of support the proliferation of WMD and listed DCB under UNSCR 2270 in March appropriate measures globally. In ballistic missiles by using front 2016. DCB has demonstrated through its collaboration with other international companies to clear U.S. dollar activity that it is willing to facilitate stakeholders, the FATF works to transactions through U.S. correspondent transactions at the direction of, and in identify national-level vulnerabilities accounts. In 2013, senior North Korean coordination with, the government of with the aim of protecting the leadership utilized a KKBC front North Korea. Since at least 2007, DCB international financial system from company to open accounts at a major has facilitated hundreds of financial Chinese bank under the names of transactions worth millions of dollars misuse. Due to North Korea’s ongoing Chinese citizens, and deposited millions on behalf of designated actors, KOMID failure to address its AML/CFT of U.S. dollars into the accounts. The and TCB. Some of these transactions deficiencies, the FATF has publicly same KKBC front company processed involved deceptive practices that identified substantial money laundering transactions through U.S. correspondent include the use of front companies and terrorist financing risks emanating accounts as recently as 2013. located outside of North Korea to from the jurisdiction and has identified process cross-border payments. DCB North Korea as one of only two The Foreign Trade Bank also directed a front company, DCB jurisdictions in the world subject to The Department of the Treasury Finance Limited, to carry out FATF counter-measures since 2011. designated Foreign Trade Bank (FTB) international financial transactions as a In FATF’s Public Statement dated under E.O. 13382 in March 2013 for means to avoid scrutiny by financial February 19, 2016, the FATF reiterated facilitating transactions on behalf of institutions. DCB Finance Limited has actors linked to North Korea’s nuclear its concern about North Korea’s failure conducted transactions through to address the significant deficiencies in proliferation networks.33 Headquartered correspondent accounts at U.S. banks. in Pyongyang, FTB acts as North Korea’s Based upon the information above, its AML/CFT regime, and the serious primary foreign exchange bank and has the North Korean government, through threat such deficiencies pose to the provided financial support to KOMID entities and financial institutions based integrity of the international financial and KKBC. As noted above, KOMID was in North Korea, facilitates financial system. The FATF called on its sanctioned by the United States in July transactions in support of the members and urged all jurisdictions to 2005 under E.O. 13382, and listed by proliferation of WMD and ballistic advise their financial institutions to give the UN in April 2009 under UNSCR missiles in violation of UNSCR 1718. special attention to business 1718; the Department of the Treasury Additionally, by creating and using relationships and transactions with designated KKBC under E.O. 13382 in front companies with the intent to North Korea, including North Korean August 2009, and the UN listed KKBC obfuscate the true originator, companies and financial institutions. under UNSCR 2270 in March 2016. beneficiary, or purpose of transactions, The FATF also warned that jurisdictions The following examples are these state-owned entities and financial should protect against correspondent representative of the activities of FTB institutions have engaged in a pattern of relationships being used to bypass or and its front companies. Between 2008 deceptive financial activity to evade evade countermeasures and risk and 2012, FTB used front companies in international sanctions, circumvent U.S. mitigation practices, and take into multiple countries to make and receive sanctions and AML controls, and account AML/CFT risks when payments equivalent to tens of millions penetrate the U.S. financial system considering requests by North Korean of U.S. dollars. In 2011, an FTB front when such activity would otherwise be company was involved with U.S.- financial institutions to open branches prohibited. This activity represents a and subsidiaries in their jurisdiction.36 designated KKBC and Korea 5 Trading direct threat to the integrity of the U.S. While steps may have been taken by Corporation, a subordinate of U.S. and financial system. UN-designated Korea Ryonbong General North Korea to engage with the FATF, Corporation, in financial dealings B. The Substance and Quality of including becoming an observer to the totaling several millions of U.S. dollars. Administration of the Bank Supervisory Asia Pacific Group, a FATF-style The same FTB front company processed and Counter-Money Laundering Laws of regional body, North Korea lacks basic transactions through U.S. correspondent That Jurisdiction AML/CFT controls and has failed to accounts as recently as April 2014. The Financial Action Task Force address the deficiencies in its AML/CFT 37 The Daedong Credit Bank (FATF) is an inter-governmental body regime identified by FATF. that sets international standards and The Department of the Treasury promotes the implementation of legal, designated Daedong Credit Bank (DCB) regulatory, and operational measures for combatting money laundering, terrorist 32 See ‘‘Treasury Designates North Korean Entity Tied to Weapons of Mass Destruction financing, WMD proliferation financing, Development,’’ July 30, 2009 (https:// and other related threats to the integrity www.treasury.gov/press-center/press-releases/ of the international financial system.35 Pages/tg247.aspx); ‘‘Security Council Determines The FATF monitors the progress of its 36 See ‘‘FATF Public Statement—19 February Entities, Goods, Individuals Subject To Measures 2016,’’ (2016) (http://www.fatf-gafi.org/ Imposed on Democratic People’s Republic of Korea publications/high-riskandnon- 34 See ‘‘Treasury Sanctions Bank, Front Company, by Resolution 1718 (2006),’’ July 16, 2009 (http:// cooperativejurisdictions/documents/public- www.un.org/press/en/2009/sc9708.doc.htm). and Official Linked to North Korean Weapons of statement-february-2016.html). 33 See ‘‘Treasury Sanctions Bank and Official Mass Destruction Programs,’’ June 27, 2013 (https:// 37 Linked to North Korean Weapons of Mass www.treasury.gov/press-center/press-releases/ See ‘‘North Korea Adopts Anti-Money Destruction Programs,’’ March 11, 2013 (https:// Pages/jl1994.aspx). Laundering Law,’’ NK News, May 18, 2016 (https:// www.treasury.gov/press-center/press-releases/ 35 See Financial Action Task Force Web site www.nknews.org/2016/05/north-korea-adopts-anti- Pages/jl1876.aspx). (http://www.fatf-gafi.org/). money-laundering-law/).

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C. Whether the United States Has a under UNSCRs 1718 and 2270 in March DATES: Written comments should be Mutual Legal Assistance Treaty With 2016.43 Examples of Office 39 activity received on or before August 1, 2016 to That Jurisdiction, and the Experience of include collecting a significant portion be assured of consideration. U.S. Law Enforcement Officials and of loyalty funds paid by DPRK officials ADDRESSES: Direct all written comments Regulatory Officials in Obtaining to the regime annually, and using to Tuawana Pinkston, Internal Revenue Information About Transactions deceptive financial practices such as Service, Room 6526, 1111 Constitution Originating in or Routed Through or to smuggling U.S. dollars into North Korea. Avenue NW., Washington, DC 20224. That Jurisdiction To support its efforts, Office 39 FOR FURTHER INFORMATION CONTACT: The United States and North Korea do controls Korea Daesong Bank (KDB), Requests for additional information or not have diplomatic relations. North which is used to facilitate financial copies of the form and instructions Korea has no mutual legal assistance transactions supporting the should be directed to Sara Covington, at treaty with the United States and does procurement of luxury goods. Treasury Internal Revenue Service, Room 6526, not cooperate with U.S. law designated KDB under E.O. 13551 in 1111 Constitution Avenue NW., enforcement officials and regulatory November 2010 as an instrumentality of Washington, DC 20224, or through the officials in obtaining information about Office 39.44 In spite of its designation, internet at [email protected]. transactions originating in, or routed KDB continues to conduct illicit SUPPLEMENTARY INFORMATION: 38 through or to, North Korea. transactions on behalf of the regime, Title: Annual Return To Report including by operating front companies D. The Extent To Which That Transactions With Foreign Trusts and on behalf of organizations such as Office Jurisdiction Is Characterized by High Receipts of Certain Foreign Gifts. 39 abroad; by using an overseas branch Levels of Official or Institutional OMB Number: 1545–0159. office to both pay a number of overseas Corruption Form Number: Form 3520. companies that provide labor and Abstract: U.S. persons who create a The North Korean government has services on behalf of North Korea, and foreign trust or transfer property to a long demonstrated institutional and to remit funds to Pyongyang; and by foreign trust must file Form 3520 to official corruption. According to utilizing KDB representatives abroad to report the establishment of the trust or Transparency International’s Corruption make payments for goods imported into the transfer of property to the trust. Perceptions Index, which ranks North Korea. Form 3520 must also be filed by U.S. countries and territories based on how persons who are treated as owners of corrupt their public sectors are Jamal El-Hindi, any part of the assets of a trust under perceived to be, North Korea ranks 167 Acting Director, Financial Crimes subpart E of Part I or subchapter J of out of 168.39 As noted above, UNSCRs Enforcement Network. Chapter 1; who received a distribution 1718, 2094, and 2270 require UN [FR Doc. 2016–13038 Filed 6–1–16; 8:45 am] from a foreign trust; or who received member states to prohibit the provision BILLING CODE 4810–02–P to North Korea of luxury goods, which large gifts during the tax year from a are used by North Korean leaders to foreign person. Current Actions: There is no change consolidate power and appease DEPARTMENT OF THE TREASURY members of the political elite by in the paperwork burden previously increasing their personal wealth. North Internal Revenue Service approved by OMB. This form is being Korea has also utilized Office 39 of the submitted for renewal purposes only. Proposed Collection; Comment Type of Review: Extension of a Korean Workers’ Party (KWP) to Request for Form 3520 influence and maintain the support of currently approved collection. Affected Public: Businesses and other North Korea’s elite citizens.40 AGENCY: Internal Revenue Service (IRS), for-profit organizations. Office 39 was listed for an asset Treasury. blocking by the President in the Annex Estimated Number of Respondents: ACTION: to E.O. 13551 in August 2010,41 and is Notice and request for 1,320. the branch of the North Korean comments. Estimated Time per Respondent: 54 Government that provides illicit hours 35 minutes. SUMMARY: The Department of the Estimated Total Annual Burden economic support to North Korean Treasury, as part of its continuing effort leadership, including managing slush Hours: 71,742. to reduce paperwork and respondent The following paragraph applies to all funds for North Korean government burden, invites the general public and of the collections of information covered officials.42 The UN listed Office 39 other Federal agencies to take this by this notice: opportunity to comment on proposed 38 See ‘‘U.S. Relations with North Korea,’’ An agency may not conduct or (www.state.gov/r/pa/ei/bgn/2792.htm). and/or continuing information sponsor, and a person is not required to 39 See ‘‘North Korea: Facts & Figures,’’ collections, as required by the respond to, a collection of information Transparency International (https:// Paperwork Reduction Act of 1995, unless the collection of information www.transparency.org/country/#PRK). Public Law 104–13 (44 U.S.C. displays a valid OMB control number. 40 See ‘‘Defectors Detail How North Korea’s Office 3506(c)(2)(A)). Currently, the IRS is 39 Feeds Leader’s Slush Fund: Private Fund Books or records relating to a collection Underwrites Comfortable Lifestyles for Pyongyang’s soliciting comments concerning Form of information must be retained as long Elite,’’ Wall Street Journal, September 15, 2014 3520, Annual Return To Report as their contents may become material (www.wsj.com/articles/defectors-detail-how-north- Transactions With Foreign Trusts and in the administration of any internal koreas-office-39-filters-money-to-kims-private- Receipts of Certain Foreign Gifts. slush-fund-1410823969); see also ‘‘Criminal revenue law. Generally, tax returns and Sovereignty: Understanding North Korea’s Illicit tax return information are confidential, International Activities,’’ Strategic Studies Institute, November 18, 2010 (https://www.treasury.gov/ as required by 26 U.S.C. 6103. March 2010. press-center/press-releases/Pages/tg962.aspx). Request for Comments: Comments (www.strategicstudiesinstitute.army.mil/pdffiles/ 43 See UNSCR 1718; UNSCR 2270. submitted in response to this notice will pub975.pdf) 44 See ‘‘Treasury Designates Key Nodes of the 41 See E.O. 13551. Illicit Financing Network of North Korea’s Office be summarized and/or included in the 42 ‘‘Treasury Designates Key Nodes of the Illicit 39,’’ November 18, 2010 (https://www.treasury.gov/ request for OMB approval. All Financing Network of North Korea’s Office 39,’’ press-center/press-releases/Pages/tg962.aspx). comments will become a matter of

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