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SEOUL/UNITED NATIONS (Reuters) - Kim Kwang-jin
says that when he worked for North Korea's
state insurance company in Singapore in 2003, he
stuffed $20 million into two suitcases one day
and sent it to Pyongyang as a special gift for then
leader Kim Jong-il. He received a medal for that, Kim Kwang-jin said. North Korea, sanctioned by the United States since
the 1950s and later by the United Nations after its
nuclear tests, has been shuffling money for
decades from illicit drugs, arms and financial
scams and is now more expert at hiding it to
fund its weapons programs and its leaders' opulent lifestyles. "There is tremendous difficulty identifying bank
accounts," said a South Korean government
source who is directly involved in yet another
sanctions push in the U.N. Security Council after
the North conducted a third nuclear test this
week. A source who has access to the top levels of
government in both North Korea and China, its
only major ally, told Reuters that Pyongyang was
not afraid of sanctions and was considering two
more nuclear tests and a rocket launch this year. "It is confident agricultural and economic reforms
will boost grain harvests this year, reducing its
food reliance on China," said the source. With limited trade and natural resources,
Pyongyang's revenues are heavily reliant on
money-making scams ranging from fake $100
bills to arms sales and drugs money, according to
reports by the U.S. government. Some diplomats
and officials call it "The Soprano State" after the U.S. television series. In 2005, $25 million of the regime's cash was
frozen at Macau-based Banco Delta Asia, which
was designated a "primary money laundering
concern" by the U.S. Treasury. That case stands as practically the only public
success in seizing funds from the isolated country
that is now led by 30-year-old Kim Jong-un, the
third of the Kim dynasty to rule. The $25 million was released after protracted
negotiations led by Kim Kye-gwan, the North's
long-standing negotiator with the United States,
and U.S. envoy Christopher Hill, officials present at
the talks said. Pyongyang has learned from that episode and
buried its funds even deeper, said the South
Korean official, who spoke on condition of
anonymity. "The bank accounts are split up a lot," the official
said, meaning the money is divided into small
amounts so that a freeze on one account would
not greatly affect the total. The official has tried to identify North Korean
funds for years and was involved in previous
sanctions pushes, although he said that
identifying accounts and transactions was near
impossible because of the use of fake names. THE INSURANCE SCAM Kim Kwang-jin, now living as a defector in South
Korea, said the $20 million sent to Kim Jong-il in
2003 came from insurance scams by
Pyongyang's Korea National Insurance Corp
(KNIC), which exaggerated claims from re-insurers
and underwriters for events such as weather damage, ship and aircraft losses. When contacted by Reuters by telephone and
email, KNIC was not immediately available for
comment. Kim Kwang-jin said the money from the scams he
participated in was funneled into what he termed
North Korea's "royal court fund" - money for Kim
Jong-il and his inner circle. "Kim Jong-il sent a letter of thanks to the people in
my company (KNIC). And some of us received
presents like DVD players and blankets. I later got
a medal too," said the 46-year-old. Unlike oil-exporting Iran, which is heavily
sanctioned by the United States and United
Nations as well as others, North Korea's puny $50
billion economy produces few goods other than
minerals and seafood sold to China. Its trade with
China was put by Beijing at $5.7 billion in 2011. The U.S. Treasury Department's Financial Crimes
Enforcement Center estimated in 2005 that North
Korea may earn as much as $500 million annually
from counterfeiting, and another $100 million to
$200 million annually from narcotics trafficking. In just one known example of its role as a "narco-
state", a North Korean ship was raided by the
Australian navy in 2003 and found to be carrying
$50 million worth of heroin, according to the
government in Canberra. Kim Kwang-jin, who defected in 2003 with his
family in Singapore, estimated the Pyongyang
"royal court" fund at $4.5 billion, of which $2
billion was inside North Korea, $2 billion overseas
and a further $500 million in the underground
economy of various countries. He said he derived the estimates from his experience as a senior
officer handling funds for North Korea. It was not possible to verify Kim's estimate,
although other estimates made by defectors and
academics are roughly similar. The South Korean government source said that
part of the new sanctions regime would include
trying to intercept shipments of suitcases stuffed
with cash to Pyongyang which enable North
Korea to evade sanctions on banks. 'BULK CASH' METHOD North Korea often uses its diplomats and other
officials to ferry cash, according to Kim and other
defectors and diplomats. This method, called "bulk
cash", is largely untraceable. U.S. diplomats said new sanctions against North
Korea that the Security Council might consider
could be to add more names to a U.N. blacklist and
measures similar to those in place for Iran, which
include a U.N. arms embargo, a variety of asset
freezes and a ban on some banking relations. In addition, "you can strengthen the provisions to
do with enforcing embargoes, inspecting ships",
said a senior U.N. diplomat, speaking on condition
of anonymity. Ship inspections have been a feature of the North
Korean sanctions regime for a long time. Under a
Security Council resolution, U.N. member states
can inspect North Korean sea, air and land cargo,
and seize and destroy any goods transported in
violation of sanctions imposed for its nuclear tests. North Korean ships have been inspected in India,
Thailand, and the United Arab Emirates as well as
on the high seas. Another area where U.N. sanctions could be
strengthened is enforcement, especially in China,
diplomats say. U.N. experts who monitor
sanctions violations have said Pyongyang
regularly flouts the sanctions, sometimes by
shipping banned goods such as weapons via China. "If the Chinese would be willing to inspect half of
what goes through Dalian harbor, that would be
big," said George Lopez, a former U.N. North Korea
sanctions monitor, now at the University of Notre
Dame. China's central bank and foreign ministry did not
respond to requests for comment as it was the
Lunar New Year holiday. But the source with access to top officials in both
countries said China would again support U.N.
sanctions, although he declined to comment on
what level of sanctions it would be willing to
endorse. "There will be new sanctions which will be harsh.
China is likely to agree to it," he said, without
elaborating. He said however that Beijing would not cut food
and fuel supplies to North Korea, a measure that it
reportedly took after a previous nuclear test. THE HONG KONG LINK In January, the Security Council added a raft of
companies to a list of sanctioned entities in
response to North Korea's long-range rocket
launch late last year, which violated a ban on
Pyongyang from developing missile or nuclear
technology. These included a company called Leader (Hong
Kong) International, listed with a Hong Kong
address that was named as a subsidiary of Korea
Mining Development Corp., the country's main
arms dealer and exporter of ballistic missile
technology, according to the U.S. Treasury. Checks by Reuters journalists at multiple
addresses associated with the company in China
and Hong Kong turned up no direct trace of the
company or its managers. Corporate records show the Hong Kong address
for a similarly named company, Leader (Hong
Kong) International Trading Ltd, as the same as
that listed in the U.N. report, although the office
moved in 2007. A Chinese public security branch office is situated
at an address listed for that company's director in
Dalian, about 300 km (185 miles) from the North
Korean border. "Companies and individuals are using different
names. China may know, but wink at it," Kim, the
defector, said. (Additional reporting by Ju-min Park and Narae
Kim in SEOUL; James Pomfret in GUANGDONG;
Grace Li and Anne Marie Roantree in HONG KONG;
Michael Martina in DALIAN; Paul Eckert in
WASHINGTON; Michelle Nichols at the UNITED
NATIONS and Benjamin Kang Lim in BEIJING; Writing by David Chance; Editing by Raju
Gopalakrishnan, Claudia Parsons and Mark
Bendeich)
http://news.yahoo.com/north-korea-uses-cash-couriers-false-names-outwit-013200620.html
says that when he worked for North Korea's
state insurance company in Singapore in 2003, he
stuffed $20 million into two suitcases one day
and sent it to Pyongyang as a special gift for then
leader Kim Jong-il. He received a medal for that, Kim Kwang-jin said. North Korea, sanctioned by the United States since
the 1950s and later by the United Nations after its
nuclear tests, has been shuffling money for
decades from illicit drugs, arms and financial
scams and is now more expert at hiding it to
fund its weapons programs and its leaders' opulent lifestyles. "There is tremendous difficulty identifying bank
accounts," said a South Korean government
source who is directly involved in yet another
sanctions push in the U.N. Security Council after
the North conducted a third nuclear test this
week. A source who has access to the top levels of
government in both North Korea and China, its
only major ally, told Reuters that Pyongyang was
not afraid of sanctions and was considering two
more nuclear tests and a rocket launch this year. "It is confident agricultural and economic reforms
will boost grain harvests this year, reducing its
food reliance on China," said the source. With limited trade and natural resources,
Pyongyang's revenues are heavily reliant on
money-making scams ranging from fake $100
bills to arms sales and drugs money, according to
reports by the U.S. government. Some diplomats
and officials call it "The Soprano State" after the U.S. television series. In 2005, $25 million of the regime's cash was
frozen at Macau-based Banco Delta Asia, which
was designated a "primary money laundering
concern" by the U.S. Treasury. That case stands as practically the only public
success in seizing funds from the isolated country
that is now led by 30-year-old Kim Jong-un, the
third of the Kim dynasty to rule. The $25 million was released after protracted
negotiations led by Kim Kye-gwan, the North's
long-standing negotiator with the United States,
and U.S. envoy Christopher Hill, officials present at
the talks said. Pyongyang has learned from that episode and
buried its funds even deeper, said the South
Korean official, who spoke on condition of
anonymity. "The bank accounts are split up a lot," the official
said, meaning the money is divided into small
amounts so that a freeze on one account would
not greatly affect the total. The official has tried to identify North Korean
funds for years and was involved in previous
sanctions pushes, although he said that
identifying accounts and transactions was near
impossible because of the use of fake names. THE INSURANCE SCAM Kim Kwang-jin, now living as a defector in South
Korea, said the $20 million sent to Kim Jong-il in
2003 came from insurance scams by
Pyongyang's Korea National Insurance Corp
(KNIC), which exaggerated claims from re-insurers
and underwriters for events such as weather damage, ship and aircraft losses. When contacted by Reuters by telephone and
email, KNIC was not immediately available for
comment. Kim Kwang-jin said the money from the scams he
participated in was funneled into what he termed
North Korea's "royal court fund" - money for Kim
Jong-il and his inner circle. "Kim Jong-il sent a letter of thanks to the people in
my company (KNIC). And some of us received
presents like DVD players and blankets. I later got
a medal too," said the 46-year-old. Unlike oil-exporting Iran, which is heavily
sanctioned by the United States and United
Nations as well as others, North Korea's puny $50
billion economy produces few goods other than
minerals and seafood sold to China. Its trade with
China was put by Beijing at $5.7 billion in 2011. The U.S. Treasury Department's Financial Crimes
Enforcement Center estimated in 2005 that North
Korea may earn as much as $500 million annually
from counterfeiting, and another $100 million to
$200 million annually from narcotics trafficking. In just one known example of its role as a "narco-
state", a North Korean ship was raided by the
Australian navy in 2003 and found to be carrying
$50 million worth of heroin, according to the
government in Canberra. Kim Kwang-jin, who defected in 2003 with his
family in Singapore, estimated the Pyongyang
"royal court" fund at $4.5 billion, of which $2
billion was inside North Korea, $2 billion overseas
and a further $500 million in the underground
economy of various countries. He said he derived the estimates from his experience as a senior
officer handling funds for North Korea. It was not possible to verify Kim's estimate,
although other estimates made by defectors and
academics are roughly similar. The South Korean government source said that
part of the new sanctions regime would include
trying to intercept shipments of suitcases stuffed
with cash to Pyongyang which enable North
Korea to evade sanctions on banks. 'BULK CASH' METHOD North Korea often uses its diplomats and other
officials to ferry cash, according to Kim and other
defectors and diplomats. This method, called "bulk
cash", is largely untraceable. U.S. diplomats said new sanctions against North
Korea that the Security Council might consider
could be to add more names to a U.N. blacklist and
measures similar to those in place for Iran, which
include a U.N. arms embargo, a variety of asset
freezes and a ban on some banking relations. In addition, "you can strengthen the provisions to
do with enforcing embargoes, inspecting ships",
said a senior U.N. diplomat, speaking on condition
of anonymity. Ship inspections have been a feature of the North
Korean sanctions regime for a long time. Under a
Security Council resolution, U.N. member states
can inspect North Korean sea, air and land cargo,
and seize and destroy any goods transported in
violation of sanctions imposed for its nuclear tests. North Korean ships have been inspected in India,
Thailand, and the United Arab Emirates as well as
on the high seas. Another area where U.N. sanctions could be
strengthened is enforcement, especially in China,
diplomats say. U.N. experts who monitor
sanctions violations have said Pyongyang
regularly flouts the sanctions, sometimes by
shipping banned goods such as weapons via China. "If the Chinese would be willing to inspect half of
what goes through Dalian harbor, that would be
big," said George Lopez, a former U.N. North Korea
sanctions monitor, now at the University of Notre
Dame. China's central bank and foreign ministry did not
respond to requests for comment as it was the
Lunar New Year holiday. But the source with access to top officials in both
countries said China would again support U.N.
sanctions, although he declined to comment on
what level of sanctions it would be willing to
endorse. "There will be new sanctions which will be harsh.
China is likely to agree to it," he said, without
elaborating. He said however that Beijing would not cut food
and fuel supplies to North Korea, a measure that it
reportedly took after a previous nuclear test. THE HONG KONG LINK In January, the Security Council added a raft of
companies to a list of sanctioned entities in
response to North Korea's long-range rocket
launch late last year, which violated a ban on
Pyongyang from developing missile or nuclear
technology. These included a company called Leader (Hong
Kong) International, listed with a Hong Kong
address that was named as a subsidiary of Korea
Mining Development Corp., the country's main
arms dealer and exporter of ballistic missile
technology, according to the U.S. Treasury. Checks by Reuters journalists at multiple
addresses associated with the company in China
and Hong Kong turned up no direct trace of the
company or its managers. Corporate records show the Hong Kong address
for a similarly named company, Leader (Hong
Kong) International Trading Ltd, as the same as
that listed in the U.N. report, although the office
moved in 2007. A Chinese public security branch office is situated
at an address listed for that company's director in
Dalian, about 300 km (185 miles) from the North
Korean border. "Companies and individuals are using different
names. China may know, but wink at it," Kim, the
defector, said. (Additional reporting by Ju-min Park and Narae
Kim in SEOUL; James Pomfret in GUANGDONG;
Grace Li and Anne Marie Roantree in HONG KONG;
Michael Martina in DALIAN; Paul Eckert in
WASHINGTON; Michelle Nichols at the UNITED
NATIONS and Benjamin Kang Lim in BEIJING; Writing by David Chance; Editing by Raju
Gopalakrishnan, Claudia Parsons and Mark
Bendeich)
http://news.yahoo.com/north-korea-uses-cash-couriers-false-names-outwit-013200620.html
