WASHINGTON—Marking a new phase in the Trump administration’s pressure on North Korea, the White House said it plans to cut off China’s Bank of Dandong from the U.S. financial system, accusing it of facilitating financing for companies involved in Pyongyang’s weapons program.

The move is an escalation in Washington’s efforts to rein in North Korea’s nuclear and missile programs, using a sanctions tool that proved effective under the George W. Bush administration in forcing the regime back to negotiations by cutting off Pyongyang’s financial ties to the world.

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Treasury Secretary Steven Mnuchin, announcing the new sanctions at the White House on Thursday, said the administration would “continue to roll out sanctions” against companies involved with Pyongyang’s weapons programs. President Donald Trump will raise the issue with leaders from the Group of 20 largest economies at a summit next week as Washington seeks to coordinate international action against Pyongyang.

“We are committed to cutting off all illegal funds going to North Korea,” Mr. Mnuchin said. “North Korea’s provocative, destabilizing and inhumane behavior will not be tolerated.”

“We are committed to targeting North Korea’s external enablers and maximizing economic pressure on the regime until it ceases its nuclear and ballistic missile programs,” he said.


Mr. Mnuchin said Thursday’s action, which will take at least two months to go into force, isn’t intended as a message to China.

Still, the move represents a second phase of the Trump administration’s strategy to ratchet up pressure on North Korea and could escalate diplomatic tensions between the world’s two largest economies, said Victor Cha, a former director for Asian affairs in the Bush administration’s National Security Council.

“The first phase was to treat China as part of the solution, and if that didn’t work, then treat them as part of the problem,” Mr. Cha, now a senior adviser at the Washington-based Center for Strategic and International Studies, said.

The Trump administration had urged China to increase its leverage to roll back North Korea’s nuclear weapons and missile programs. But Mr. Trump said in a Twitter message last week ahead of high-level U.S.-China talks that Beijing’s effort “has not worked out.”


“While we will continue to seek international cooperation on North Korea, the United States is sending an emphatic message across the globe that we will not hesitate to take action against persons, companies, and financial institutions who enable this regime,” Mr. Mnuchin said in a statement accompanying the action.

China has opposed unilateral U.S. sanctions, particularly against Chinese entities.

Under the proposed sanctions, the bank won’t be able to access the U.S. financial system either directly or indirectly. Neither the Chinese embassy in Washington nor the Bank of Dandong immediately responded to a request for comment.

The move comes as North Korea steps up its ballistic missile tests and after the death ofOtto Warmbier, an American who had been held in a North Korean prison for more than a year before being released to U.S. officials when he was in a coma.


Treasury also added to its North Korea sanctions list two Chinese citizens accused of working in front companies designed to evade existing North Korea sanctions. A firm that primarily transports steel and coal between China and North Korea also was added, allegedly for violating a luxury-goods ban.

South Korean President Moon Jae-in and Mr. Trump are scheduled to hold talks in Washington on Friday and meet for dinner Thursday night.

Treasury’s Financial Crimes Enforcement Network is using a tool the Bush administration applied in 2007 against a Macao-based bank, called Banco Delta Asia, that allows the administration to declare a bank a money-laundering institution. Even though that bank was tiny, the sanction clamped down on North Korea’s financial ties to the world because other banks feared losing access to U.S. markets.

Similarly, Bank of Dandong is relatively small—in the bottom quintiles of China’s official banking system—but the action could have a chilling effect on other banks providing financial services for North Korea or firms linked to the regime.


“It’s a shot across the bow for other Chinese banks; they don’t want to get listed also,” Mr. Cha said.

Treasury said the bank, based in a port city that borders North Korea, serves as a conduit for the regime to access the U.S. and international financial systems, evading existing U.S. and international sanctions. The institution facilitated millions of dollars of transactions for companies involved in Pyongyang’s nuclear weapons and ballistic missile programs, the administration said, using a “network of front companies and embassy personnel that support illicit activities through banking, bulk cash, and trade.”

The Treasury secretary didn’t elaborate on what other sanctions might be forthcoming. But according to administration documents accompanying the sanctions, North Korea also has been using bank accounts under false names and conducting financial transactions through banks located in China, Hong Kong and various southeast Asian countries.

Write to Ian Talley at ian.talley@wsj.com