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U.S. Sanctions Chinese and Russian IT Fronts Masking North Korean Income

In this Oct. 8, 2015 file photo, North Koreans gather at a monument built 10 years ago to honor the founding of the Workers' Party of North Korea, in Pyongyang, North Korea. North Korea's ruling party says it will hold its biggest convention in decades next May. The Workers' Party …
AP Photo/Wong Maye-E
Washington, DC

The U.S. sanctioned one Chinese and one Russian front company Thursday for operating to mask overseas IT workers whose income benefits North Korea’s nuclear and ballistic missile programs.

“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,” said Treasury Secretary Steve Mnuchin on the imposition of sanctions. The action is a warning aimed at deterring worldwide IT industry, businesses, and individuals from employing North Korean workers.

“The United States will continue to fully enforce and implement sanctions until we have achieved the final, fully verified denuclearization of North Korea,” said Mnuchin.

Treasury’s Office of Foreign Assets Control (OFAC) announced sanctions Thursday on “Jilin, China-based Yanbian Silverstar Network Technology Co., Ltd. (a.k.a. “China Silver Star” or 延边银星网络科技有限公司), its North Korean CEO, Jong Song Hwa (정성화), and its Vladivostok, Russia-based sister company, Volasys Silver Star.” 

China Silver Star is managed and controlled by North Koreans, according to Treasury. Russian-based Volasys Silver Star was created by a North Korean IT worker and a China Silver Star employee in 2017. By early 2018 Volasys racked up hundreds of thousands in income while employing former China Silver Star workers who relocated to Russia.

The Treasury Department identified the activities that led to the sanctions:

China Silver Star and Volasys Silver Star were each designated under two authorities:  for having engaged in, facilitated, or been responsible for the exportation of workers from North Korea, including exportation to generate revenue for the Government of North Korea or the Workers’ Party of Korea (E.O. 13722); and for operating in the IT industry in North Korea (E.O. 13810).

United Nations Security Council Resolution 2397 of 2017 determined, “revenue generated from North Korean workers overseas contributes to North Korea’s nuclear weapons and ballistic missile programs.”

China Silver Star is associated with the UN- and U.S.-designated Munitions Industry Department (MID) of the Workers’ Part of Korea and the UN- and U.S.-designated Korea Kuryonggang Trading Corporation (Kuryonggang),” according to the Treasury release. “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.”

U.S. individuals are generally forbidden from engaging in dealings with these businesses and individuals under the sanctions or possessing any property or interests in property of those sanctioned.

The IT industry it at heightened risk of engaging with North Korean labor, according to Treasury. This includes, “website and app development, security software, and biometric identification software that have military and law enforcement applications.” North Korea employs what the Treasury Department warned are “deceptive practices” including use of front companies, aliases, and third-country nationals.

Michelle Moons is a White House Correspondent for Breitbart News — follow on Twitter @MichelleDiana and Facebook

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