Targeted financial sanctions related to Proliferation and Proliferation financing (TFS-PF) – North Korea (DPRK) and Iran

All United Nations Security Council (UNSC) designations related to the prevention and disruption of the financing of proliferation of weapons of mass destruction (WMD) (proliferation) are implemented in Jersey. Weapons include, for example, atomic explosive weapons, lethal biological and chemical weapons, radioactive material weapons and any weapons developed in the future which have comparative destructive effects.

By virtue of the Sanctions and Asset-Freezing (Jersey) Law 2019, all UNSC’s asset-freeze designations take immediate effect in Jersey. Jersey also implements export controls of dual-use goods, UK trade sanctions, arms embargoes and other trade restrictions where there are proliferation concerns.

The Financial Action Task Force’s (FATF) Recommendation 7 requires relevant financial institutions to implement targeted financial sanctions referring to the financing of proliferation (PF-TF Sanctions), including activity-based restrictions on access to the global financial system by proliferators. The purpose of PF TFS is to strengthen international peace and security by depriving UN designations of the resources that would finance specific countries WMD programmes.

The financing of proliferation covers more than simply the payment for goods. It involves financial services provided in support of any part of the procurement process, at all stages where it exists. It includes, for example, a financial transfer used to pay manufacturers, a ship mortgage or credit line for shipment of illicit sensitive goods, insurance services and agent fees.

Jersey sanctions legislation links to all regulations made under the United Kingdom’s Sanctions and Anti-Money Laundering Act 2018, including, but not being limited to, the Regulations that concern the Democratic People’s Republic of Korea (DPRK) and the Islamic Republic of Iran (Iran). The FATF calls for jurisdictions, including Jersey, to apply counter-measures related to the financing of proliferation in these two “enhanced risk states”.

It is a criminal offence to intentionally participate in any prohibited activities if the object or effect of them is directly or indirectly to circumvent the prohibitions imposed by the regulations, or to enable or facilitate the contravention of those prohibitions.

Targeted financial sanctions related to Iran nuclear proliferation

The Sanctions and Asset-Freezing (Implementation of External Sanctions) (Jersey) Order 2021 (the Jersey Order) implements the Iran (Sanctions) (Nuclear) (EU Exit) Regulations 2019 (the UK Regulations).

The UK Regulations impose financial, trade and immigration sanctions for the purpose of giving effect to the United Kingdom’s obligations under United Nations Security Council Resolution 2231 (2015) (UNSCR 2231). Though Jersey is not a UN member in its own right, the UK's membership of the UN extends to the island. Therefore, Jersey has an obligation to implement UNSC sanctions resolutions.

Targeted financial sanctions

The UK Regulations impose financial sanctions through a targeted asset freeze on designated persons and prohibitions on making funds or economic resources available. This involves the freezing of funds and economic resources (non-monetary assets, such as property or vehicles) of designated persons and ensuring that funds and economic resources are not made available to or for the benefit of designated persons, either directly or indirectly.

The Regulations also prohibit the provision of specialised financial messaging services to a designated person.

The UN list of designations is known as 2231 List and is publicly available on the UNSC website. All active UN designations are included in the UK Sanctions List and are in effect in Jersey under the Iran (Nuclear) sanctions regime.

Trade prohibitions

• Restricted goods and technology, specifically:
  
  • military goods and military technology
  • anything which falls within Chapter 93 of the Goods Classification Table], other than military goods
  • missile-related goods and technology (as specified in United Nations Security Council Document S/2015/546)
  • nuclear-related goods and technology (meaning anything specified in a relevant International Atomic Energy Agency list)
  • graphite and relevant metals (as defined in regulation 34 of the Regulations)
  • relevant enterprise resource planning software (as defined in regulation 34 of the Regulations), and
  • other restricted goods and other restricted technology (both as defined in regulation 34 of the Regulations)
• Commercial arrangements relating to uranium mining and certain restricted goods and technology
• The provision of certain services in relation to certain ships and aircraft.

PF-TF sanctions risks

All relevant financial institutions must be aware of the PF TF Sanctions risks related to this regime and ensure that no funds or economic resources are made available, directly or indirectly, to or for the benefit of listed targets, consider the following:

• sanctions imposed by the UN on several Iranian institutions, companies and persons are still effective, and it is the relevant financial institution’s responsibility to ensure compliance
• whilst the EU and the UK are trying to establish closer trade links with Iran, the USA has withdrawn from the Joint Comprehensive Plan of Action (JCPoA) and has therefore reinforced its sanctions regime against Iran. As US OFAC sanctions may be interpreted to have extraterritorial reach, this infers a risk for financial institutions to inadvertently become subject to the OFAC enforcement actions when they enter financing trade deals or make transfers related to the movement of goods
• some persons, entities and bodies subject to counter-proliferation measures use what is known as ‘shell’ or ‘front’ companies to disguise the ultimate destination of goods, funds and services, which could be connected with the Iranian Revolutionary Guard
• Iran is still prohibited from pursuing an illicit nuclear and missile programme outside the agreed-upon procurement and licensing framework established under the JCPoA
• should Iran once again seek illicit goods and technology outside the agreed channels, any services provided by relevant financial institutions in support of such procurement would be in breach of the sanctions agreement.
  Relevant financial institutions must conduct adequate risk assessments and introduce adequate control measures to mitigate the possible risk of sanctions breaches or sanctions evasion. Additional information can be found on www.gov.uk: Iran nuclear sanctions: guidance

Targeted financial sanctions related to the Democratic People’s Republic of Korea (DPRK)

The Sanctions and Asset-Freezing (Implementation of External Sanctions) (Jersey) Order 2021 (the Jersey Order) implements the Democratic People’s Republic of Korea (Sanctions) (EU Exit) Regulations 2019 (the UK Regulations).

This sanctions regime gives effect to the UK’s obligations under United Nations Security Council Resolution 1718(2006) and further resolutions that have extended its scope. Though Jersey is not a UN member in its own right, the UK's membership of the UN extends to the island. Therefore, Jersey has an obligation to implement UNSC sanctions Resolutions.

The UN adopted Resolution 1718 (2006), condemning DPRK’s nuclear test on 9 October 2006 and requiring all UN member states to apply restrictive measures against the DPRK. This sanctions regime gives effect to successor UNSCRs: 1718 (2006), 1874(2009), 2087(2013), 2094(2013), 2270(2016), 2321(2016), 2356(2017), 2371(2017), 2375(2017), and 2397(2017).

Targeted financial sanctions

The UK Regulations impose financial sanctions through a targeted asset freeze on designated persons and prohibitions on making funds or economic resources available. This involves the freezing of funds and economic resources (non-monetary assets, such as property or vehicles) of designated persons and ensuring that funds and economic resources are not made available to or for the benefit of designated persons, either directly or indirectly

The UN list of designations is known as 1718 List  and is publicly available on the UNSC website. All active UN designations are included in the UK Sanctions List and are in effect in Jersey under the Democratic People's Republic of Korea (North Korea) sanctions regime.

The UK Regulations also impose sectoral sanctions, by restricting certain investment and financial services activities and access to markets.

Trade prohibitions

Trade prohibitions include:

• military goods and military technology
• anything which falls within Chapter 93 of the Goods Classification Table, other than military goods
• dual-use goods and technology (as specified in Annex I to Council Regulation 428/2009 as retained by the European
• Union (Withdrawal) Act 2018 (‘the Dual-Use Regulation’))
• other arms- and WMD-related goods and technology (specified in Schedule 2 of the Regulation and in a number of lists adopted by the UN, as set out at regulation 64)
• goods and technology for the armed forces of DPRK, as set out in regulation 43
• “armed forces goods” and “armed forces technology”, as defined in regulation 44
• certain other goods - namely aviation fuel; condensates and natural gas liquids; crude oil; helicopters and vessels; industrial machinery, vehicles, iron, steel and other metals; luxury goods; and refined petroleum products; coal, iron and iron ore; copper, nickel, silver and zinc; earth and stone; food and agricultural products; gold ores and concentrates, titanium ore, vanadium ore and rare-earth minerals; lead and lead ore; machinery and electrical equipment; petroleum products; seafood; statues; textiles and wood
• fishing rights
• bank notes and coinage
• gold, precious metals and diamonds
• provision of mining, manufacturing and computer services
• the provision of certain services relating to ships and aircraft

PF-TF sanctions risks

According to 1718 Sanctions Committee Panel of Expert (PoE) Reports, despite financial restrictions in place, DPRK continues:

• to access the global financial system via front companies, joint ventures with foreign firms, and especially Chinese financial institutions, to obtain critical components and technology from around the world, including Europe and North America
• to conduct other illicit activities abroad, including conventional arms’ trade and trafficking of sanctioned commodities, which make resources available for their nuclear programme
• to rely on extensive networks of businesses (including front companies) and middlemen, arranged in complex corporate and ownership structures to obscure any connection on paper to DPRK.

Relevant financial institutions must conduct adequate risk assessments and introduce adequate control measures to mitigate possible risk of sanctions breach or evasion. Additional information can be found on www.gov.uk: Democratic People's Republic of Korea sanctions: guidance

List of relevant financial obligations relating to Proliferation Finance in UN Security Council Resolutions (UNSCR)

The UN has in place extensive sanctions measures targeting DPRK’s nuclear programme. These measures include financial sanctions, transport sanctions and export/import controls which aim to restrict DPRK’s access to vital funds and resources which could contribute to their proliferation activities. The UN also has a sanctions regime targeting Iran’s nuclear and ballistic missile programme.

UNSCR Operative Paragraph	Requirements
UNSCR 1540, OPs 2 and 3(d)	Criminalises proliferation financing of WMD.
UNSCR 2270, OP 11 (UNSCR 1718 OP 8(d)) UNSCR 2231, Annex B para 6(c) and 6(d)	Targeted financial sanctions (UN designations).
UNSCR 2270, OP 15	Designated entities’ offices to be closed and prohibition on participating in joint ventures and business arrangements.
UNSCR 2270, OP 32	Targeted financial sanctions (designations of DPRK state entities).
UNSCR 2270, OP 12	Clarifies that ‘economic resources’ includes vessels. Also clarifies that economic resources includes ‘actual or potential’ assets.
UNSCR 2270, OP 23 UNSCR 2321, OP 12	Freeze - vessels
UNSCR 2270, OP 6 (UNSCR 1718, OP 8(a) and (c))	Prohibit financial transactions to/from DPRK related to the provision, manufacture, maintenance or use of WMD, all arms and related materiel (including ‘catch-all’ provisions, which enable action to be taken against non-listed items).
UNSCR 2270, OPs 33, 34, 35 UNSCR 2321, OP 31	Range of prohibitions on financial institutions (DPRK banks cannot operate branches, subsidiaries etc. abroad, financial institutions cannot have joint ventures or correspondent banking relationships, financial institutions cannot open branches, accounts etc. in DPRK).
UNSCR 2321, OP 16	States must limit the number of bank accounts of DPRK diplomatic missions and consular offices and DPRK diplomats and consular officers.
UNSCR 2270, OP 36 UNSCR 2321, OP 32	Prohibition on financial support for trade with DPRK.
UNSCR 2270, OP 37 UNSCR 2094, OPs 11 and 14	Prohibits transfer of bulk cash and gold to DPRK.
UNSCR 2270, OP 29	Prohibition on supply, sale, transfer of coal, iron and iron ore, with exceptions.
UNSCR 2270, OP 30	Prohibition on supply, sale, transfer of gold, titanium ore etc.
UNSCR 2270, OP 31	Prohibition on sale or supply of aviation fuel and kerosene-type rocket fuel, with exceptions.
UNSCR 2270, OP 19 UNSCR 2321, OP 8	Prohibition on leasing or chartering vessels, aircraft, crew services to DPRK, designated entities, other DPRK entities and entities a State determines has assisted in evading sanctions.
UNSCR 2321, OP 23	Prohibition on procuring vessels and crew services from DPRK.
UNSCR 2270, OP 20 UNSCR 2321, OP 9	Prohibition on owning, leasing, operating, providing classification or certification to or insuring a DPRK flagged vessel. Prohibition on registering a vessel in DPRK or seeking authorisation to use the DPRK flag in relation to a vessel.
UNSCR 2321, OP 22	Prohibition on providing insurance or reinsurance to vessels owned, controlled or operated by DPRK.
UNSCR 2231, Annex B, Para 2 and Para 4	Prohibition on commercial activities related to Iran without the UN Security Council’s approval.
UNSCR 2231, Annex B, Para 2, Para 4 and Para 5	Prohibition on making assets or financial services available or conducting financial transactions related to certain nuclear-related items, ballistic-missile related items and arms and other materiel without the UN Security Council’s approval, as it relates to Iran.