The Treasury Department says that the Bank of Dandong is a "primary money-laundering concern", and it is proposing severing the bank from the US financial system, pending a 60-day review period. The step comes ahead of President Trump's visit with South Korean President Moon Jae-in. "We will follow the money and cut off the money", he said.
The punitive measures ratchet up pressure the U.S.is applying on North Korea to halt its nuclear program by targeted Chinese entities that the administration said enable Kim Jong Un's regime.
"The administration is right to target any around the world who act as financial lifelines to Kim Jong-un, and to give them a clear choice: You can do business with North Korea or with the USA, but not both", said Royce in a statement.
The United States on Thursday imposed sanctions on two Chinese individuals and one shipping company for links to North Korea's weapons proliferation.
The U.S. action is likely to anger China, which handles about 90 percent of North Korea's external trade, and whose banks and companies are said to provide Pyongyang access to the U.S. -dominated global financial system.
At a recent summit in Washington, D.C., Secretary of State Rex Tillerson said that China has a "diplomatic responsibility to exert much greater economic and diplomatic pressure on the regime if they want to prevent further escalation in the region".
Mnuchin said cutting off the flow of money was "very effective" in bringing Iran to the negotiating table and the U.S.is seeking to do the same with North Korea.
Mnuchin said the Bank of Dandong has facilitated millions of dollars of transactions for companies involved in North Korea's weapons of mass destruction and ballistic missile programs.
Another Chinese citizen, Li Hong Ri, is being sanctioned for cooperating with a Beijing-based official who had already been sanctioned for procuring items and conducting financial transactions on North Korea's behalf.
The Trump administration in March slapped sanctions against several Chinese businesses and individuals.
OFAC said Dalian Global Unity transports goods and products between North Korea and China.
"After six months of a policy review and reinventing the wheel, they've basically arrived at exactly the point the Obama administration left off", said Ely Ratner, a senior fellow in China studies at the Council on Foreign Relations who served as Vice President Joe Biden's deputy national security adviser.