The House Financial Services Committee is considering a bill that would ban any foreign bank that does business with North Korea from the United States financial system.
The potential move comes as the North Korean government expands the scope and power of its missile program.
The Financial Services panel is exploring ways to further isolate North Korean leader Kim Jong Un by putting pressure on his allies to stop supporting the North Korean economy and military.
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Committee members from both parties have expressed support for the Financial Services bill, currently circulating as a discussion draft, while other panels in both chambers of Congress work on their own offerings.
The bill could have massive economic implications for the United States and its relationship with China. But supporters say North Korea’s belligerent behavior and recent test of what appeared to be a hydrogen bomb requires a major response.
“More must be done to stop this rogue regime’s aggression and threats,” said Rep. Andy Barr (R-Ky.), chairman of the Financial Services subpanel on monetary policy and trade, during a Wednesday hearing on the bill.
“Foreign banks can either do business that benefits North Korea, or they can do business with the United States. They cannot do both.”
The bill would ban any foreign bank that services North Korea’s government or regime-connected shell companies from opening a correspondent account with a U.S. bank.
Multinational banks with U.S. operations are already banned from transactions with the North Korean regime, but foreign banks with North Korean ties could slip through the cracks and open accounts with U.S. banks.
While China offers direct economic and military aid to North Korea, it also hosts a slew of shell companies the regime uses to support itself through money laundering and smuggling. The Treasury Department’s Office of Foreign Assets Control (OFAC), which administers sanctions, can list these companies and banks as they’re revealed, but experts say they need more help from China to identify them.
“[China] can certainly do a lot more to recognize some of the trusted agents of the North Korean government that change their names and change their legal entities to launder money,” said Elizabeth Rosenberg, senior fellow at the Center for a New American Security, a center-left think tank.
Anthony Ruggiero, a senior fellow at the right-leaning Foundation for Defense of Democracies, added that “there is much more to do” after years of North Korea being a lower foreign policy.
“If we’re not having Chinese banks and United States banks looking for this activity, that’s the problem here,” Ruggiero said.
Republicans and Democrats have both called for boosting sanctions on North Korea in response to a series of medium and long-range missile tests. The regime shocked the world earlier this month after an apparent test of a hydrogen bomb, which would prove that the regime is closer to threatening the United States with nuclear attack.
While President Trump initially warned North Korea would face “fire and fury” if it continued missile tests, he’s since promised a massive financial crackdown on the regime’s allies. Trump has embraced aggressive trade policies to advance his foreign policy goals, and threatened to cut off trade with China if it didn’t do more to restrain North Korea.
Lawmakers are less interested in starting a potentially devastating trade war with China, but agree that Washington needs to step up the pressure on North Korea’s main benefactor.
{mosads}“For all the breathless talk of China exerting influence around the globe,” Barr said, “we’re curiously asked to believe that their hands are tied for a small, economically dependent nation next door.”
The Chinese government has long insisted that it has exhausted its options with North Korea, and that additional U.S. pressure could jeopardize future efforts to reel in the regime’s threatening behavior. It’s difficult to predict what impact Chinese retaliation could have on the U.S. economy, given the countries’ close economic ties, but lawmakers say it’s worth the risk.
The Financial Services proposal has also earned praise from Democrats for including a five-year sunset and specific, verifiable conditions.
Rep. Brad Sherman (D-Calif.), a senior Financial Services panel and House Foreign Affairs Committee member called the bill “a small step in the right direction” after years of ineffective and superficial sanctions on North Korea.
“The goal of the politicians in Washington is don’t make any tough decisions, so you have sanctions that don’t offend anybody,” said Sherman, a House member since 1997.
“We’ve assured the American people we’re doing something, we’ve done nothing difficult, we’ve offended no business interests in the United States or anywhere else in the world that we care about, and we haven’t been realistic in our objectives.”
Even so, Democrats have refused to accept sanctions as the only response to North Korea’s threats, calling on Trump and Secretary of State Rex Tillerson to re-staff the depleted U.S. diplomatic corps.
“There are no good options for dealing with North Korea,” said Rep. Gwen Moore (D-Wis.), ranking member on the Financial Services trade subpanel. “I like the idea of tougher sanctions, but we should not confuse either of those things with a coherent strategy.”