On August 5, 2017, in response to the Democratic People’s Republic of Korea’s (North Korea) recent ballistic missile tests, the United Nations Security Council (UNSC) unanimously adopted resolution 2371 (resolution), toughening the already existing sanctions against North Korea. By doing so, the UNSC hopes to pressure North Korea to recommence the Six-Party Talks (between the United States, China, Japan, Russia, South Korea and North Korea) on denuclearization which have been on hold since North Korea withdrew from them in 2009.

The resolution prohibits the supply, sale and transfer of several of North Korea’s key commodities, including coal, iron, iron ore, seafood, lead and lead ore.   It also directs member states not to increase the total number of work authorizations for North Korean nationals unless approved by the Security Council Committee established pursuant to resolution 1718 (2006) (Committee). It also directs member states to prohibit the opening of new joint ventures or cooperative entities with North Korean entities and individuals, or expand existing joint ventures through additional investments.

The UNSC reaffirms that the measures imposed by the resolution are not intended to have adverse humanitarian consequences for the civilian population of North Korea or to affect negatively those activities.  On a case-by-case basis, the Committee may exempt any activity from the measures imposed if it determines that such an exemption is necessary to facilitate the work of such organizations.

All member states are to report to the UNSC within 90 days of the adoption of the resolution on concrete measures they have taken in order to implement effectively its provisions. If successfully implemented and enforced, this new set of sanctions will further isolate North Korea’s economy from the international community. It is estimated that these new measures represent approximately $1 billion of North Korea’s estimated $3 billion annual export revenue.

Canada maintains its own sanctions regime against North Korea under the Special Economic Measures Act (SEMA). The Canadian sanctions already go well beyond the minimum UN requirements and the resolution. With the exception of very limited circumstances, Canadians are already prohibited from exporting and importing goods to and from North Korea. As such, the new UNSC resolution will not have any significant impact on existing Canadian businesses.  The only change the resolution will bring to Canada’s sanction regime is regarding the issuance of new work permits to North Korea nationals, although already issued permits will not be cancelled.

The lawyers at Tereposky & DeRose have significant experience in the design and implementation of sanctions-related compliance programs, including policies, procedures, employee training, and internal control mechanisms.  They also regularly assist both Canadian and international businesses, financial institutions, and individuals with internal investigations when “red flags” appear, and provide advice on compliance in these areas. Where breaches have occurred, they have worked closely with their clients in making voluntary disclosures and in engaging with the ensuing investigations conducted by the RCMP and Global Affairs Canada.