Washington, December 17, 2024
Action taken in partnership with the United Arab Emirates targets a key node in the Kim regime’s illicit revenue generation schemes
On December 17, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) is sanctioning two individuals and one entity involved in a network that launders millions of dollars of illicit funds generated by the Democratic People’s Republic of Korea (DPRK) information technology (IT) workers and cybercrime to support the DPRK Government.
Based in the United Arab Emirates (UAE), Lu Huaying and Zhang Jian worked through a UAE-based front company to facilitate money laundering and cryptocurrency conversion services that funneled the illicit proceeds back to Pyongyang.
This network is led by OFAC-sanctioned Sim Hyon Sop (Sim), a PRC-based banking representative for the DPRK who orchestrates money laundering schemes to fund the regime.
Today’s sanctions are a part of ongoing efforts to disrupt the DPRK’s money laundering operations, which finance the regime’s unlawful weapons of mass destruction (WMD) and ballistic missile programs. These sanctions are part of a close cooperative effort with the UAE government.
“As the DPRK continues to use complex criminal schemes to fund its WMD and ballistic missile programs—including through the exploitation of digital assets—Treasury remains focused on disrupting the networks that facilitate this flow of funds to the regime,” said Acting Under Secretary of the Treasury for Terrorism and Financial Intelligence Bradley T. Smith. “The United States, along with the UAE and our other partners, will continue to target the financial networks that enable the Kim regime’s destabilizing activities.”
DPRK Laundering Digital Assets to Fund Regime’s Activities
The DPRK continues to use agents and proxies to access the international financial system to conduct illicit financial activities, including fraudulent IT work, digital assets heists, and money laundering, in support of its unlawful WMD and ballistic missile programs. These illicit activities contribute to the DPRK’s destabilization efforts, which now extend into the European theater as Pyongyang increases military cooperation with Russia.
Sim Hyon Sop, a PRC-based representative of DPRK’s Korea Kwangson Banking Corp (KKBC), is one such DPRK agent. According to the Financial Crimes Enforcement Network, representatives like Kim operate as agents for DPRK financial institutions. In this capacity, these representatives orchestrate schemes, set up shell companies, and manage bank accounts to move and disguise illicit funds that can then be used to finance the DPRK’s WMD and ballistic missile programs. OFAC previously designated both Sim Hyon Sop and KKBC pursuant to Executive Order (E.O.) 13382, an authority that targets proliferators of WMD and their supporters. KKBC is a DPRK state-run organization and designated entity on the United Nations Security Council 1718 (DPRK) Sanctions List. From his safe haven in the PRC, Sim Hyon Sop orchestrates vast money laundering schemes, often involving digital assets, to funnel money back to the DPRK for use in its WMD and ballistic missile programs.
Since at least early 2022, UAE-based PRC national Lu Huaying has cashed out cryptocurrency derived from obfuscated DPRK revenue-generation projects into fiat cash on behalf of OFAC-sanctioned Sim Hyon Sop. Between early 2022 and approximately September 2023, Lu Huaying has laundered several million dollars of Sim Hyon Sop’s money through a combination of cryptocurrency cash-outs and money mules. The laundered funds were then used as payment for purchases of products and services assessed to be destined for use by the DPRK or its proxies.
In late 2022 and early 2023, UAE-based PRC national Zhang Jian (Zhang) has also helped facilitate the exchange of fiat currency for Sim. Additionally, Zhang himself has purportedly acted as a courier for Sim Hyon Sop.
OFAC is designating Lu Huaying and Zhang Jian for being owned or controlled by or having acted or purported to act for or on behalf of, directly or indirectly, Sim Hyon Sop, an individual whose property and interests in property are blocked pursuant to E.O. 13382.
Green Alpine Trading, LLC is a UAE-based front company that has served as a key component of this money-laundering network. OFAC is designating Green Alpine Trading, LLC for having provided, or attempted to provide, financial, material, technological or other support for, or goods or services in support of, Sim Hyon Sop, an individual whose property and interests in property are blocked pursuant to E.O. 13382.
Sanction Implications
As a result of today’s action, all property and interests in property of the designated persons described above that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. In addition, any entities that are owned, directly or indirectly, individually or in the aggregate, 50 percent or more by one or more blocked persons are also blocked. Unless authorized by a general or specific license issued by OFAC, or exempt, OFAC’s regulations generally prohibit all transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or otherwise blocked persons.
In addition, financial institutions and other persons that engage in certain transactions or activities with the sanctioned entities and individuals may expose themselves to sanctions or be subject to an enforcement action. The prohibitions include the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any designated person, or the receipt of any contribution or provision of funds, goods, or services from any such person.
Non-U.S. persons are also prohibited from causing or conspiring to cause U.S. persons to wittingly or unwittingly violate U.S. sanctions, as well as engaging in conduct that evades U.S. sanctions. OFAC’s Economic Sanctions Enforcement Guidelines provide more information regarding OFAC’s enforcement of U.S. sanctions, including the factors that OFAC generally considers when determining an appropriate response to an apparent violation.
The power and integrity of OFAC sanctions derive not only from OFAC’s ability to designate and add persons to the SDN List, but also from its willingness to remove persons from the SDN List consistent with the law. The ultimate goal of sanctions is not to punish, but to bring about a positive change in behavior.
For information concerning the process for seeking removal from an OFAC list, including the SDN List, please refer to:
OFAC’s Frequently Asked Question 897 here.
For detailed information on the process to submit a request for removal from an OFAC sanctions list, please click here
Click here for more information on the individuals and entity designated today.
Source – U.S. Treasury