Should Foreign Banks That Handle Transactions Involving North Korea Face Sanctions? (H.R. 3898)

What is H.R. 3898?

(Updated May 21, 2018)

This bill would sanction foreign financial institutions that facilitate a significant transaction for essentially entity that does business with the North Korean government or associated individuals, including businesses and North Korean laborers who work abroad. The sanctions would make it more difficult for the North Korean regime to accrue hard currency through the confiscation of the laborers wages.

The Secretary of the Treasury would be responsible for issuing regulations that would prohibit or strictly limit the use of “correspondent financial accounts” by foreign banks that process transactions involving North Korea. Correspondent accounts allow banks to send money to each other internationally and are essential for accessing foreign financial systems and customer payments. The secretary would provide regular updates on the sanctions to Congress and the public.

Additionally, the bill would direct the U.S. executive directors of international financial institutions (like the International Monetary Fund) to support the denial of financial assistance to foreign governments that don’t comply with this legislation’s requirements. In the case of the IMF, it’d be also be encouraged to support the use of administrative funds to prevent money laundering and the financing of terrorism.

Argument in favor

Foreign banks that process transactions benefitting North Korea’s government need to be sanctioned so it’s harder for the regime to finance its nuclear program.

Argument opposed

Sanctioning foreign banks that handle transactions related to North Korea won’t do enough to stop the regime’s nuclear program or stop its belligerence.

Impact

Foreign banks that handle transactions involving North Korea; the Treasury Department.

Cost of H.R. 3898

The CBO estimates that enacting this bill would cost less than $500,000 over the 2018-2022 period.

Additional Info

In-Depth: Sponsoring Rep. Andy Barr (R-KY) introduced this bill to sanction foreign banks that process transactions related to North Korea:

“For more than two decades, foreign aid and half-hearted sanctions have been deployed in vain to thwart the Kim regime’s ambitions, a strategy of ‘strategic patience’ that has proven highly ineffective. That is why I have introduced this legislation that would, if enacted, impose the most far-reaching financial sanctions ever aimed at North Korea.  In addition to bringing about an economic reckoning for Pyongyang, these sanctions will strengthen the American negotiating position by sending a strong signal to North Korea and its enablers that the status quo is unacceptable.”

This legislation passed the House Financial Services Committee on a 56-0 vote and has the support of 17 bipartisan cosponsors, including nine Democrats and eight Republicans.

Media:

• Sponsoring Rep. Andy Barr (R-KY) Press Release
  
• CBO Cost Estimate
  
• KyForward
  
• Ripon Advance