Sanctions 2025 Comparisons

Compared to 12 months ago, the sanctions landscape may be poised for change following the inauguration of President Lee Jae-myung in June 2025. The Democratic Party, to which the new president belongs, has historically adopted a more conciliatory stance toward North Korea. As such, his administration is expected to take a more moderate approach than the previous government, which had implemented multiple sanctions against North Korea. However, as his presidency has only begun, it remains too early to assess whether any substantive changes to the existing sanctions regime have occurred.

Increased Sanctions Against North Korea

Over the past 12 months, South Korea has imposed multiple unilateral sanctions on North Korea in response to its continued nuclear and missile activities, in line with broader international sanctions regimes. Specifically, on 2 April, 24 May, 1 July, and 19 December 2024, South Korea designated individuals and entities that violated United Nations Security Council (UN) resolutions as sanctioned parties under its own sanctions framework. These individuals and entities were involved in illicit Russia-North Korea military co-operation and in the financing or supply of materials supporting North Korea’s weapons programmes. Additional sanctions were imposed on 18 July 2024 and 10 April 2025, targeting vessels, organisations and individuals similarly engaged in activities contravening UN sanctions. On 26 December 2024, the government also announced its intention to sanction overseas North Korean IT personnel and institutions involved in foreign currency-earning operations used to fund the country’s nuclear and missile programmes.

Strengthening the Export Control Framework

In the area of export controls, South Korea has continued to align its measures with those of the United States (US), particularly regarding Russia and Belarus. One key development was the expansion of the so-called situational-licence list, which covers items that are not generally classified as strategic items but still require export approval from the Ministry of Trade, Industry and Energy (MOTIE) due to their potential risk of being diverted for use in weapons of mass destruction. To this end, the MOTIE issued a notification, effective 24 February 2024, adding 682 items to the list, which included heavy construction machinery, secondary batteries, machine tools and aircraft components. A subsequent notification, effective 9 September 2024, added a further 243 items considered to have a high risk of military end use, including metal-cutting machines, machine-tool components, optical-device parts and sensors. With these additions, the total number of items requiring a situational licence for export to Russia and Belarus rose to 1,402.

Additionally, the MOTIE issued a notification, effective 28 February 28, designating an additional 21 advanced-industry items and technologies – covered under international regimes such as the Wassenaar Arrangement, the Nuclear Suppliers Group, the Missile Technology Control Regime and the Australia Group – as strategic items that could be exported despite their connections to sanctioned countries. Under this revision, certain medical devices intended for humanitarian use (eg, diagnostic X-ray and radiographic imaging systems) with a low risk of military diversion may now be exported to Russia without a situational licence, provided that appropriate documentation is submitted.

Separately, a July 2024 amendment to the Enforcement Decree of the Foreign Trade Act established a legal basis for South Korea to implement unilateral export control measures independently of international regimes. However, no such independent designations have been made to date.

The manufacturing industry, including insofar as it is related to batteries, automobiles, steel and semiconductors, continues to be most affected by the trade sanctions regulations of the US. A report dated 28 April 2025, issued by the International Trade and Commerce Research Institute of the Korea International Trade Association, revealed that over 60% of South Korean companies were considering adjusting their global supply chains to comply with US trade sanctions. This concern was particularly observed in companies trading secondary batteries, automobiles and automotive parts, steel and metals, computers, telecommunications equipment and networks, and semiconductors, among others.

Trade Sanctions

The MOTIE serves as the primary regulatory authority for trade sanctions, mainly related to dual use items, imposed under the Foreign Trade Act. The following authorities also implement trade sanctions.

• The Korean Security Agency of Trade and Industry (KOSTI) acts as the principal authority for the administration and control of dual-use items, which are goods, technologies or software that can be used for both civilian and military applications.
• The Nuclear Safety and Security Commission has the authority for dual-use items that are related to nuclear activities; it oversees the licensing and control of items that may contribute to nuclear proliferation.
• The Defence Acquisition Programme Administration is responsible for the regulation of military materials, as well as dual-use items intended for military end-use or military end-users.

Economic and Financial Sanctions

The Ministry of Economy and Finance, the Financial Services Commission and the Bank of Korea are the primary regulators overseeing economic and financial sanctions in South Korea. These sanctions, including asset freezes, are implemented under the Foreign Exchange Transactions Act and Anti-Terrorism Act, and fall within the jurisdiction of the above authorities.

Others

The Ministry of Justice, the Ministry of Land, Infrastructure and Transport, the Ministry of Oceans and Fisheries, and the Ministry of Unification, oversee matters including travel bans, aviation bans, and maritime sanctions, respectively.

The Anti-Terrorism Act requires financial companies to report to the local police if they identify that assets received from a financial transaction are being used to fund terrorist activity or the proliferation of weapons of mass destruction, or if the counterparty is conducting a transaction or making or receiving a payment without proper authorisation (Article 5(2)).

More broadly and generally, under Article 4(1) of the Act on Reporting and Using Specified Financial Transaction Information, which is the primary anti-money laundering legislation in Korea, financial institutions are required to promptly report to the Commissioner of the Korea Financial Intelligence Unit (KoFIU) when:

• there is a reasonable ground to suspect that the property received in connection with a financial transaction is illegal property;
• there is a reasonable ground to suspect that the counterparty to a financial transaction is engaging in an illegal financial transaction including money laundering or the financing of terrorism; or
• a report has been made to the competent investigative authority by an employee of a financial institution in accordance with the Anti-Terrorism Act.

Otherwise, there is no general legal obligation to self-report in relation to sanctions enforcement.

Please refer to 1.2 Key Trends regarding the expansion of export control items and 2.2.4 Criminal Enforcement Action regarding the judgments concerning sanctions.

The Anti-Terrorism Act has been amended to expand the application of financial‑transaction restrictions to downstream subsidiaries as follows.

Article 4(9) of the Anti-Terrorism Act states that “[…] the term “owning or controlling corporation” means any corporation in which an individual, corporation, or organisation involved in the proliferation of weapons of mass destruction – or a person designated as subject to financial‑transaction restrictions – directly or indirectly contributes or owns 50 percent or more of the total contributed assets, total issued shares, or total equity interests, or any corporation that in fact exercises influence, as prescribed by Presidential Decree.”

Although the Enforcement Decree of the Anti-Terrorism Act has not yet been enacted to provide detailed guidance on implementation, the Financial Services Commission issued a draft partial amendment to the Enforcement Decree for public comment on 19 March 2025. Under the draft amendment, a sanctioned person will be deemed to exercise de facto control over a subsidiary if any of the following conditions are met (Article 2-2 of the draft decree):

• the sanctioned person can exercise more than half of the voting rights in the company;
• the sanctioned person appoints a majority of the company’s representatives, managing partners, or officers;
• the sanctioned person can, in practice, influence the composition of the company’s leadership or the management of its funds or assets; or
• in any other case where the sanctioned person is deemed to exert substantial influence over the company’s major business decisions.

If enacted, the draft decree would expand the scope of entities subject to sanctions compliance obligations. In effect, companies will need to assess not only their direct dealings with sanctioned persons but also their relationships with subsidiaries or affiliates over which such persons may exercise de facto control.

The Anti-Terrorism Act and its Enforcement Decree outline the following process to object to a designation by the Financial Services Commission as a person subject to restrictions on financial transactions.

• A designated person may file an objection regarding the designation with the Financial Services Commission or the refusal of permission for financial transactions within 30 days from the date they become aware of their designation or the date of a rejection of their application for approval of financial transactions. The objection must include the applicant’s identity, details of the designation, reasons for the objection, and the date of designation (Article 4-2(1) of the Anti-Terrorism Act, Article 3(2) of the Enforcement Decree).
1. If the Financial Services Commission decides to uphold the objection, it will immediately rescind the designation or revoke the refusal of permission for financial transactions and shall without delay notify the applicant of that fact (Article 3(4) of the Enforcement Decree).
2. Where the Financial Services Commission decides to dismiss or reject an objection, it will set out in detail the reasons for its decision and the procedures by which the decision may be contested, and notify the applicant accordingly, together with the results (Article 3(5) of the Enforcement Decree). The applicant may pursue an administrative appeal or administrative litigation with respect to the decision (Article 3(5) of the Enforcement Decree).

Note that the Foreign Exchange Transactions Act does not provide a specific objection process for designations.

It is difficult to achieve any outcome other than the actual delisting through a delisting challenge.

A person subjected to sanctions may consider asserting a claim for damages under the State Compensation Act by filing a separate lawsuit. However, relief under the State Compensation Act is available only where a public servant, in the course of performing official duties, intentionally or negligently violates statutes or regulations, which results in causing harm to another (Article 2(1) of the State Compensation Act). Accordingly, absent any wilful or negligent breach of law during the sanctions‑enforcement process, a claim for damages under a separate lawsuit is unlikely to succeed. In addition, the lack of reported precedents awarding damages related to the designation of sanctions makes it difficult to estimate potential damages.

It is expected to take at least six months to obtain delisting due to administrative procedures. However, since there are no known delisting precedents, it may take longer depending on the specific facts of each case.

Under Article 11 of the Foreign Trade Act and the related export and import notifications, the export or import of goods and certain services may be restricted or prohibited for reasons including the following.

• Compliance with treaty obligations or international customary law.
• Protection of biological resources.
• Securing stable national defence supplies.
• Promotion of scientific and technological development.

The list of prohibited items and restricted items that are permitted for export or import if the MOTIE’s approval is obtained are as follows.

• Export-prohibited items – whale meat, natural granite and sandstone, and dog fur.
• Export-restricted items – certain types of silica sand and marble stone, and certain types of steel products.
• Import-restricted items – certain aircraft, satellites, spacecraft, parachutes and their materials, parts and components.

In addition, the export of goods and certain services related to military technical support or training to conflict zones or hostile countries – such as Iraq, Somalia, the Democratic Republic of the Congo and North Korea – is prohibited unless the exporter obtains prior approval from the MOTIE for limited and specified purposes.

On a separate note, there are specific restrictions regarding trade with North Korea under the Act on Inter-Korean Exchange and Cooperation. The key provisions are as follows.

• Article 13 requires the importer or exporter of goods and certain services such as transportation, warehousing, financing and insurance, healthcare, education, to obtain permission from the Minister of Unification regarding the respective import or export.
• Article 15 enables the Minister of Unification to order necessary adjustments to the price, quantity, quality or other terms and conditions of goods or services to be exported or imported. These adjustments may be imposed in connection with (i) fulfilling obligations under treaties or international customary law, (ii) contributing to the maintenance of international peace and security, (iii) ensuring compliance with the same act, (iv) preventing unfair competition, and (v) protecting South Korea’s international credibility. In addition, the Minister of Unification may require exporters or importers to submit reports – such as records of exports or imports – pursuant to the Enforcement Decree of the Act on Inter-Korean Exchange and Cooperation, in connection with trade in such goods or services.

As explained in 5.1 Services, the Foreign Trade Act imposes restrictions on export or import of certain goods.

Separately, pursuant to Article 5 of the Foreign Trade Act and the Public Notice on Special Trade Measure, the following special trade measures are implemented to fulfil obligations for maintaining international peace and security.

• Special measures concerning the trade of rough diamonds under the Kimberley Process – the export and import of rough diamonds to/from non-member countries of the Kimberley Process is prohibited. Importers of rough diamonds from member countries must obtain a Kimberley Process Certificate, and exporters of rough diamonds to member countries must obtain export approval from the MOTIE.
• Special measures concerning conflict zones/countries such as Iraq, Somalia, the Democratic Republic of the Congo, the Republic of the Sudan, Lebanon, Libya, Syria, North Korea, and South Sudan – unless the MOTIE approval has been obtained for limited purposes such as humanitarian aid or the implementation of UN resolutions, the export of military goods such as weapons and ammunition is prohibited, and the export of services such as military-related technical support and training is also prohibited.

Korean courts generally find that if sanctions make it impossible to carry out a contract, the person responsible is not at fault. The following are some example cases.

• On 29 August 2024, the Seoul Central District Court ruled that Bank A’s refusal to return funds to Bank B – after Bank B was designated as a Specially Designated National (SDN) under the Iranian Transactions and Sanctions Regulations while the funds had not matured – did not amount to a breach of contract or a tort. The court found that the SDN designation was a significant change in circumstances beyond Bank A’s control (Seoul Central District Court Judgment dated 29 August 2024, Case No 2023GaHap87561).
• On 9 January 2024, Seoul Central District Court decided that no breach of obligation or tort had occurred when an exporter did not receive payment because the importer’s bank (a Russian bank) had been designated as an SDN by the Office of Foreign Assets Control (OFAC). The court held that, under these circumstances, the exporter’s bank was not legally liable for withholding the proceeds, as the SDN designation of the importer’s bank was outside its control (Seoul Central District Court Judgment dated 9 January 2024, Case No 2023GaDan5208229).
• On 30 June 2011, the Seoul High Court ruled that the plaintiff was not at fault for failing to fully perform a supply contract for anthracite coal with Korea Coal Corporation. The plaintiff had agreed to import anthracite coal from North Korea and supply it to Korea Coal Corporation, but was unable to deliver the full quantity due to an export ban involving North Korea during the contract period. The court denied Korea Coal Corporation’s claim for liquidated damages on the basis of not receiving all of the coal promised under the supply contract, finding that the plaintiff’s non-performance was caused by circumstances beyond its control (Seoul High Court Judgment dated 30 June 2011, Case No 2010Na108984).
• On 20 August 2021, the Seoul Central District Court held that a Korean company (defendant) was not at fault for failing to supply masks after receiving full payment from a Hong Kong company (plaintiff), due to export restrictions imposed by the Korean government on selling the masks. The court found that the sales contract had been frustrated by government action, without fault attributable to either party (Seoul Central District Court Judgment dated 20 August 2021, Case No 2021GaHap50655).

A review of South Korean enforcement practice reveals no reported cases in which courts have refused or modified the enforcement of a final judgment on the grounds of sanctions-related issues.

The MOTIE is responsible for designation decisions related to export controls, while the Ministry of Economy and Finance and the Financial Services Commission are responsible for designation decisions related to financial sanctions. The Ministry of Foreign Affairs is responsible for overall co-ordination among government agencies in matters related to sanctions.

Entities are not automatically designated solely by virtue of being owned or controlled by a designated person. However, as explained in 3.2 Future Developments, the amended Anti-Terrorism Act introduced a form of indirect designation of subsidiaries “owned or controlled” by a designated person. It remains to be seen how this provision will be applied in practice. As noted in 3.2 Future Developments, the Enforcement Decree that is intended to provide detailed guidelines about the interpretation of the amended Anti-Terrorism Act has been published in draft form for public comment and has not been enforced yet.