The U.S. Treasury Department designated North Korea as a "primary money laundering concern" Wednesday, a powerful sanction designed to cut off the communist nation from the international banking system for its nuclear and missile programs.

The designation came as part of the North Korea Sanctions and Policy Enhancement Act enacted in February to punish the North for conducting its fourth nuclear test in January and a long-range rocket launch the following month in violation of U.N. resolutions.

It was the first time the U.S. has blacklisted the North as a money laundering concern and the decision also came well ahead of the August deadline for such designation under the sanctions law.

That shows the U.S. is determined to increase pressure on Pyongyang over its nuclear and missile programs.

The designation could also be a message to China not to relax pressure on the North as it came after a top envoy of North Korean leader Kim Jong-un paid a visit to Chinese President Xi Jinping and the two sides expressed their willingness to improve strained relations.

"The United States, the U.N. Security Council, and our partners worldwide remain clear-eyed about the significant threat that North Korea poses to the global financial system. The regime is notoriously deceitful in its financial transactions in order to continue its illicit weapons programs and other destabilizing activities," Adam J. Szubin, acting under secretary for terrorism and financial intelligence, said in a statement.

"Today's action is a further step toward severing banking relationships with North Korea and we expect all governments and financial authorities to do likewise pursuant to the new U.N. Security Council Resolution," Szubin said. "It is essential that we all take action to prevent the regime from abusing financial institutions around the world through their own accounts or other means."

The Treasury said the North was designated because it "uses state-controlled financial institutions and front companies to conduct international financial transactions that support the proliferation and development of WMD (weapons of mass destruction) and ballistic missiles."

It also said the North is subject to little or no banking supervision over anti-money-laundering and relies on the illicit and corrupt activity of high-level officials to support its government.

The designation calls for prohibiting U.S. financial institutions from opening or maintaining correspondent accounts with North Korean financial institutions, and prohibiting the use of U.S. correspondent accounts to process transactions for North Korean financial institutions.

It also prohibits the use of third-country banks' U.S. correspondent accounts to process transactions for North Korean financial institutions.

The measure is similar to the 2005 blacklisting of Banco Delta Asia, a bank in Macau.

The Treasury's designation of the bank as a primary money laundering concern not only froze North Korean money in the bank but also scared away other financial institutions from dealing with Pyongyang for fear they would also be blacklisted.

The measure has been considered the most effective U.S. sanction on the North yet.

But the restriction was later lifted as nuclear negotiations with Pyongyang made progress.

Sources said that Wednesday's designation could have a greater impact than the BDA sanctions because it designated the North as a whole as a money laundering concern, not just one bank as in the BDA case. (Yonhap)