The U.S. Department of the Treasury has unveiled new designations against a North Korean national and two entities based in Russia and China that it says are controlled by the DPRK, the Office of Foreign Assets Control (OFAC) announced on Thursday.
Russia-based Volasys Silver Star and its China-based sister company Yanbian Silverstar Network Technology Co., Ltd are IT companies designated for their involvement in the export of DPRK labor and for operating in the North Korean IT industry.
The designations are pursuant to two separate executive orders.
“These actions are intended to stop the flow of illicit revenue to North Korea from overseas information technology workers disguising their true identities and hiding behind front companies, aliases, and third-party nationals,” Treasury Secretary Steven Mnuchin was quoted as saying in a press release.
According to the Treasury, China Silver star is “nominally” a Chinese company but is actually managed and controlled by North Koreans. Jong Song Hwa, the CEO of China Silver Star, was also designated on Thursday.
“As of mid-2018, China Silver Star had earned millions of dollars from collaborative projects with Chinese and other companies,” the Treasury said.
It also added that in early 2017, a North Korean IT worker started Volasys Silver Star as a “Russia-based front company, most likely to facilitate the circumvention of identification requirements on freelance job fora and obfuscate the North Korean workers’ true nationality from clients.”
Similarly, the Treasury also says that while Volasys Silver Star is nominally a Russian company, it is also managed and controlled by North Koreans.
While the U.S. Treasury had been relatively inactive in designating DPRK or DPRK-linked entities and individuals amid advanced diplomatic engagement between North Korea and the U.S. earlier this year, Thursday’s sanctions follow a recent stream of similar actions imposed since the Singapore summit in June.
However, Thursday’s designations are the first this year to focus on North Korea’s commercial IT sector specifically.
“The fact that the North Korean IT industry would be a focus for Treasury designations was foreshadowed in President Trump’s September 2017 executive order, which explicitly mentioned the information technology industry,” Andrea Berger, a Senior Research Associate at the James Martin Center for Nonproliferation Studies (CNS), told NK News on Thursday.
Significantly, Treasury also charges that China Silver Star is “associated” with two UN and U.S. sanctioned entities – the Munitions Industry Department (MID) and the Korea Kuryonggang Trading Corporation.
“The MID is responsible for overseeing North Korea’s ballistic missile programs, and Kuryonggang is primarily responsible for the procurement of commodities and technologies to support North Korea’s defense research and development programs and procurement,” it reads.
“For researchers looking into the sector, there had been this question about where the DPRK’s IT companies overseas and the revenue they generate fit into the bureaucracy back home. So additional revelations about connections to the defence sector are particularly interesting and important,” Berger said.
“We knew of convincing links between the Reconnaissance General Bureau (RGB) and overseas IT companies, and given this connection to the Munitions Industry Department, it seems steadily more apparent that the IT and defence sectors are close-knit,” she added.
On July 23, the U.S. Government issued a North Korea Sanctions & Enforcement Actions Advisory (NKSEAA), which warned individuals and entities about the evasive and opaque nature of North Korean labor, goods and services within global supply chains. The IT industry was referenced in that notice.
“Treasury is once again warning the IT industry, businesses, and individuals across the globe to take precautions to ensure that they are not unwittingly employing North Korean workers for technology projects by doing business with companies like the ones designated today,” Mnuchin added on Thursday.
Prior research published by CNS, and co-authored by Berger, also highlighted how North Korea’s commercial IT industry has operated overseas largely undetected, producing goods and services including security software and “biometric identification software with law enforcement applications”.
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