Archive for the ‘Crime’ Category

The North Korean gov’t tightens the screws on foreign trade

Wednesday, June 8th, 2022

By: Benjamin Katzeff Silberstein

Over the past year, Daily NK (and primarily its stellar reporter Seulkee Jang) has reported on what seems to be a fairly consistent effort by the North Korean regime to strengthen its controls over foreign trade permits. The Covid-19 border lockdown has made this, as other repressive measures of economic policy, a much easier task than it otherwise would have been. The purpose of this post is to summarize the development to date by gathering the reports in one place, hopefully generating a somewhat holistic picture of what’s been happening.

Tight government regulation of foreign trade is, of course, nothing new in North Korea. Trade has always occurred at the mercy of the state, making it a fertile ground for corruption. From May 2019:

The continuing international sanctions on North Korea are causing difficulties for the country’s traders, who are having trouble finding items not on the sanctions list to sell as well as having to pay “loyalty payments” to the state and bribes to government officials.

“Traders are saying that the business environment in North Korea is poor and that they have a lot of difficulty importing materials from China that don’t violate the sanctions. Even if products clear Chinese customs without a problem, traders face issues in North Korea […] North Korean customs agents demand bribes and the traders say they’re left with nothing,” a source in North Hamgyong Province told Daily NK.

“The customs officials demand bribes and justify their demands with excuses like ‘The state is building this or that project so be a patriot and hand over the money’ […] Traders don’t have much choice, so they just pay the bribes.”

[…]

Traders are faced with being branded “anti-socialist” and punished if they refuse to contribute money for so-called state construction projects.

Government officials ultimately decide whether such payments really go to state construction projects or are accepted as personal bribes. Some of the customs officials may be sending some of the money to state coffers while keeping the rest for themselves.

It is not only imports of contract-manufactured materials imported from China that are facing difficulties. Traders who manufacture products in North Korea and export them to China also face demands from customs officials for bribes.

(Mun Dong Hui, “North Korean customs officials continue to demand bribes from traders,” May 5th, 2019.)

In November 2020, the Supreme People’s Assembly revised the country’s enterprise law to strengthen state control over firms engaging in foreign trade. Late that month, a source for the Daily NK claimed that the revision reduced what private traders have to pay to the state while strengthening control over these units:

According to a Daily NK source in Pyongyang, the bill to revise and supplement the Enterprise Act includes provisions that reduce what private “kiji” pay to the state and encourage foreign exchange earning and trading activities.

A kiji is a small private business organization of about seven people that is nominally attached to a trading company.

The act has permitted payments to the state (in cash or kind) to be cut by a third and private business operators are now allowed to take a greater share. The relevant cadres have been ordered to encourage the establishment of enterprises by telling prospective entrepreneurs that they “may pay just 10% of their profits.” It remains unconfirmed, however, whether this has been clearly included in the legislation.

“Since the (individual’s) take has been increased, it could also be read as an instruction to do more private business or earn more foreign currency,” the source said, speaking on condition of anonymity.

In particular, the authorities reportedly prepared the legal basis to reinvigorate trade through the latest revision to the Enterprise Act.

(Seulkee Jang, “N. Korea’s recent revision of Enterprise Act appears aimed at increasing trade,” November 25th, 2020.)

Some five months later, in April the following year, DNK reported that the state had ordered trading agencies to apply for new waku or trading permits, meaning that they would be required to submit a wide range of documents for scrutiny:

The agencies that will begin conducting trade on Apr. 20 received direct orders from the party to continue trade even after the border was closed at the end of January 2020. As companies belonging to powerful North Korean institutions, these agencies will simply have to undergo an inspection to confirm their activities. As soon as this is complete, they will be permitted to participate in official trade.

The authorities reportedly shortlisted trading companies that are a part of the Central Committee or the Munitions Industry Department (MID) to receive permission to resume trade.

Meanwhile, the authorities ordered that individual traders working for non-priority trading companies or agencies apply for new waku.

The Ministry of External Economic Relations gave each trading agency written instructions to reapply for new waku during the three days between Apr. 12 and Apr. 14. Trading agencies and companies reportedly submitted their applications and authentication materials via the North Korean intranet per the guidelines.

Even agencies and individuals who have been issued waku in the past must apply again for a new permit. If there are no issues, the firms will receive their newly-issued waku after an evaluation period of three to four weeks and be able to participate in official trade from the beginning of May.

Materials needed for the waku application reportedly include certificates regarding partner companies in China, records of previous imports and exports, and plans for future trade.

(Seulkee Jang, “N. Korea hands down order regarding issuance of trade certificates,” April 20th, 2021.)

Around the same time, the authorities reportedly began to more thoroughly investigate traders to crack down on smuggling, partially as a result of the above-mentioned scrutiny:

A Daily NK source recently reported that the authorities have been ferreting out and punishing traders involved in smuggling. This crackdown could be an attempt to encourage trade workers to be cautious until the authorities open the border.

“From the beginning of this month until recently, the authorities have been arresting anyone who engaged in smuggling and those who did not submit their ‘loyalty fees’ to the party on time. [The authorities] have exiled some of them to remote areas, or sentenced them to re-education through labor or even death,” a source in North Pyongan Province said on May 18. “They are being punished because they misappropriated trade profits for their own personal gain and not for the benefit of the country.”

The hunt for those who participated in or abetted smuggling and those who failed to pay party “loyalty fees” reportedly came to a close in late April. North Korean authorities also investigated traders and firms applying for new waku (trade certificates) during the same period.

North Korean authorities accepted new waku applications from Apr. 12 and Apr. 14. After receiving the applications, the Central Committee’s Department of Economic Affairs, the Ministry of Foreign Trade, and the Ministry of State Security began screening them.

“Twenty people ended up being targeted for punishment,” the source said. “[The authorities] arrested all of them at the same time and their punishments were meted out immediately.”

(Seulkee Jang, “North Korean authorities ferret out traders involved in smuggling,” May 24th, 2021.)

These increasingly intense investigations targeting “unauthorized trade” continued through the summer, as DNK reported in June and July:

The KPW-USD rate broke past KPW 7,000 on May 18, just before the new waku were issued. The renminbi was also going beyond KPW 1,000.

Daily NK has found that the exchange rates – which had been climbing continuously on the back of expectations surrounding the reopening of trade, and the issuance of new waku – suddenly collapsed because of new trade controls recently enacted by the North Korean authorities.

According to a high-ranking source, the Central Committee issued an order on June 3 telling recipients of new waku that their certificates did not mean they could participate in trade “right away.” If they do participate in trade without Workers’ Party approval, warned the order, it would be regarded as smuggling and subject to severe punishment.

(Seulkee Jang, “US dollar and Chinese reminbi plummet against North Korean won once again,” June 9th, 2021.)

And the report from July:

North Korean authorities are conducting large-scale inspections aimed at cracking down on unauthorized trade. This has led some North Korean trading companies involved in the trade of “unauthorized items” to cancel their transactions with Chinese traders.

According to a Daily NK source in China on Sunday, an unnamed North Korean trading company recently requested its Chinese partner suspend a transaction. The Chinese partner found this absurd as it was already prepared to ship the construction materials, paper, soap, and other sundries that had been ordered.

[…]

A Daily NK investigation – based on information from multiple sources in North Korea – has determined that the Ministry of State Security, Ministry of Social Security, and disease control authorities launched a joint inspection into illegal trading activity last month.

On June 3, North Korean authorities issued an order that warned traders against engaging in trade without prior approval from the Workers’ Party, regardless of whether they received a new waku (trade certificate). According to the order, unauthorized trade will be regarded as “smuggling” and subject to punishment.

The authorities subsequently formed inspection teams, which are now scrutinizing recent transactions by the country’s trading companies.

Trading companies that tried to import unauthorized goods along with authorized items now appear to be “scrambling” to cancel their deals with Chinese traders or are simply refusing to accept the cargo.

“North Koreans say you can trade only if you’ve gotten permission from that person [North Korean leader Kim Jong Un] – even if you’ve got a waku,” one of the sources in China told Daily NK. “Instead of trade returning to [pre-pandemic] levels, it’s getting harder [for Chinese traders] to conclude deals with North Korea.”

(Seulkee Jang, “North Korea conducts large-scale inspections aimed at ending unauthorized trade,” July 6th, 2021.)

Only days later, DNK reported that approximately 20 trading company heads had been arrested in the crackdown against unauthorized trade. The reference to quarantine procedures is a clear example of how anti-epidemic measures have often intertwined with enhanced state controls:

According to a Daily NK source in North Korea on Thursday, the authorities arrested around 20 heads of trading companies during a “joint inspection” of trade-related entities that began last month. Hundreds of trade workers have also been arrested and are undergoing questioning.

The ruling party’s Organization and Guidance Department is reportedly taking overall command of the joint inspection.

Those arrested are being charged with either importing items outside their approved import lists or distributing imported items that have not gone through proper quarantine procedures.

North Korean authorities are reportedly applying heavy punishments on importers who circumvent quarantine procedures, rather than focusing on just the import of unapproved items.

Daily NK understands that the items imported by companies busted in the latest inspection include consumer goods scarce in most of the country’s markets, including seasonings, soybean oil, sesame seeds, and sugar.

Based on Daily NK’s information, the authorities have confiscated all of the unapproved imported items. They have also confiscated the waku (trade certificates) of the relevant trading companies.

[…]

Daily NK’s source, speaking on condition of anonymity, said that the authorities are making no exemptions in this latest crackdown – not even for trading companies attached to Bureau 39, which handles the ruling Kim family’s slush funds. If companies are caught engaging in illegal trade, they apparently face severe and “merciless” punishment.

North Korean leader Kim Jong Un has reportedly ordered that individuals caught in the inspection face criminal proceedings rather than “party-related punishments”; that busted cadre-level trade officials be stripped of their party credentials; and that the authorities apply the same criteria in their crackdown to companies affiliated with “special institutions.”

Given that North Korean authorities regard illegal trade by trading companies as “political activity,” offenders apparently face the severest of punishments — including death or confinement in a political prison camp — depending on the severity of their crimes.

“At the very least, nobody will get away with a mere slap on the wrist, like time in a forced labor or reeducation camp,” the source said.

(Seulkee Jang, “North Korea arrests around 20 trading company heads in latest crackdown on unauthorized trade,” July 16th, 2021.)

The crackdown continued even in the face of food shortages that underscored the need for more imports, fast:

The source said the committee also pointed to blocked provisions of raw materials and supplies in all areas of economic activity and serious energy shortages. The committee said discussions of trade must focus on these problems, essentially calling for traders to resolve food shortages and normalize enterprise operations by promptly restarting trade.

However, the source said the committee focused more on “system compliance.” It told traders that they must abandon rushed “campaigns” and deeply analyze trade as it involves the import and export of the state’s foreign exchange.

Moreover, it criticized officials in higher-level work units for personal and institutional selfishness, bragging about their “special” status. This well worn practice must be “uprooted,” it said.

The committee targeted corruption as well. Officials said they would show no forgiveness for traders collaborating with certain individuals to “mix goods” that have nothing to do with the national economy into their imports. It warned that “non-socialist and anti-socialist behavior” would face punishment by the party, administrative organs, or through the legal system.

(Jong So Yong, “Yanggang Province’s provincial party committee discusses China-North Korea trade,” December 31st, 2021.)

For some months, DNK reports on the issue took a pause, suggesting that the campaign may have ceased to grow in intensity for some time. In early April 2022, however, Jang Seulkee reported that a large-scale restructuring appears to be going on in the foreign trade sector, strengthening cabinet control:

North Korean authorities are disbanding trading firms that fail to produce results, and restructuring the trade sector to give the Cabinet direct supervision over the import and export details of all trading companies, as well as their profits.

According to multiple Daily NK sources in North Korea on Friday, the authorities have been placing trading companies across the nation under the direct control of the Cabinet. Trading companies that have failed to take part in import or export activity over the last couple of years are being merged out of existence, even if they are under the jurisdiction of “special bodies” like the security services.

The authorities have also created a report system that allows the Cabinet to manage or supervise trading companies’ accounting records and cash flow.

[…]

North Korea has apparently started to structurally readjust the trade sector as part of efforts to restore the state’s “unitary trading system.”

In a report on economic affairs to the Supreme People’s Assembly in February, Premier Kim Tok Hun said he would continue to push activities to restore the state’s unitary trading system in the external economic relations sector.

North Korean authorities have granted enterprises some degree of trade autonomy since North Korean leader Kim Jong Un took power, but the premier’s comment could be seen as a declaration that the state would be the sole trading actor going forward.

North Korean authorities have begun merging trading companies and bringing them under Cabinet supervision as their first effort to restore the state’s unitary trading system in an apparent bid to resolve the problem of bloated trading companies making illicit gains.

(Seulkee Jang, “North Korea restructures trade sector to give Cabinet more direct supervision over imports/exports,” April 4th, 2022.)

Ten days later, Jang reported that trade certificates of several trading companies of significant size had been confiscated by the authorities, who also arrested some ten trade officials:

According to a Daily NK source in North Korea on Wednesday, the Central Public Prosecutor’s Office arrested about 10 trade officials this month, confiscating the waku of their trading companies as well.

During North Korea’s efforts over the last month to merge trading companies, the authorities have discovered cases where companies have taken on excessive debt. The government has taken issue with officials of these companies for poor accounting practices and filing false financial reports.

Daily NK recently reported that North Korean authorities have started restructuring the country’s trade sector as the first step to restoring the state’s “unitary trade system.” These efforts have included merging and disbanding trading companies and making companies directly report their trading and sales details to the country’s Cabinet.

The individuals arrested in the latest round-up include officials with trading companies attached to major state institutions, including the Supreme Guard Command, Ministry of State Security, and External Construction Guidance Bureau. North Korea has apparently punished individuals and companies when their financial audits have turned up problems, regardless of the company’s size or parent organization.

However, trading companies that had their waku confiscated are crying foul. They say it is wrong for prosecutors to take away their waku simply because “rash financial audits” turned up “excessive debts” or missing numbers when the prosecutors themselves know nothing about the companies’ trade transactions.

(Seulkee Jang, “N. Korea confiscates the trade certificates of several mid- to large-sized trading companies,” April 14th, 2022.)

All of this was, naturally, related to the state effort to collect more foreign currency in the face of what must be depleting supplies:

North Korean authorities are reviewing how well provincial trade bureaus have met their foreign currency quotas in the first quarter of the year and are auditing bureaus that failed to meet their quotas, Daily NK has learned.

“The government has assigned officials from the State Planning Commission and the Ministry of External Economic Relations to audit the provinces that failed to provide the state with the planned amount of foreign currency funds in the first quarter of the year. The auditors are supposed to review the results and correct what went wrong,” a source in North Hamgyong Province told Daily NK on Wednesday.

[…]

“The current objective of the audit is to figure out how persistently and energetically provincial trade bureaus have been in delivering foreign currency to the state. But another objective is to pressure the bureaus to unconditionally meet the state’s foreign currency quota in the future,” the source said.

The auditors have mostly been examining documents provided by managers, bookkeepers, and statisticians at trade companies in North Hamgyong Province. After marking problem areas in red, they are meeting with the people involved to check on their work processes and outcomes, the source explained.

According to him, the auditors in North Hamgyong Province have looked through all the documents not only from the first quarter of the year but from the last two years as well. They are asking hard questions about the province’s failure to meet the foreign currency quota. The auditors reportedly believe that low-level trade organizations did not make a serious effort to meet the quota.

Trade organizations did manage to get permission in Sinuiju for sending imports and exports through the Uiju quarantine center. However, the auditors were greatly disappointed by the fact that these organizations, thinking they had no way of meeting the quota, attempted to shirk responsibility for not sending any foreign currency to the government over more than two years.

(Jong So Yong, “N. Korea conducts audits on how well provincial trade bureaus met foreign currency quotas,” April 29th, 2022.)

As is often the case, provincial administration incentives appear to be misaligned with the central government’s orders:

North Hamgyong Province’s trade bureau is working hard to ensure the survival of as many trade companies as possible following orders by the central government to merge or close companies deemed ineffective.

“The provincial trade bureau is under a great deal of stress due to the government’s instructions regarding the merger and closure of trade companies,” a source in the province told Daily NK on Monday.

North Korea is carrying out several measures to either combine trade companies or eliminate them altogether as part of broader efforts to restore a system in which all trade is administered by the state, he explained.

With trade companies facing the very real prospect of elimination, many are making every effort to survive, with the hope that trade will resume in earnest once the country’s borders are reopened, the source added.

The source said that the North Korean government believes that it does not need trade companies that focus solely on either imports or imports. During the trade company registration process, the government is setting precise figures for imports and exports and emphasizing that only trade companies that can actively pursue both activities serve the state’s economic interest.

(Jong So Yong, N. Hamgyong Province’s trade bureau under stress to save as many trade companies as possible,” May 4th, 2022.)

As of last month, the process to tighten trade administration was still ongoing. The aforementioned state surveys of trading companies revealed that all of them carry substantial amounts of debt:

North Korean authorities are pushing the dissolution and merging of trading companies as the first stage of the restoration of the unitary state-led trading system. However, things are reportedly moving slowly due to debt problems with the trading companies.

According to a high-ranking Daily NK source in North Korea on Thursday, North Korean authorities started dissolving and merging trading companies to build a state-led trading system in March, making the Cabinet responsible for managing all import and export breakdowns. They have yet to complete the process, however.

This is because financial surveys conducted to dissolve and merge the companies revealed that every firm carried significant debt.

[…]

The source said the most likely plan is for the North Korean authorities and trading companies to split the debts 50/50.

The problem is that North Korean authorities lack the financial wherewithal to assume 50% of the debts. Another Daily NK source familiar with North Korea’s trade situation said no trading officials believe the authorities will take care of 50% of the debts, even if they say they will.

North Korean authorities currently set the official exchange rate at a very low KPW 150 to the dollar. Compared to the rate of KPW 6,500 to the dollar at a market in Pyongyang on May 1, the government currently sells the dollar at a price over 40 times lower than market value.

Because of this, if the North Korean authorities assume the debt using the official exchange rate, the high-level trade agencies will assume virtually all the debt.

This being the case, both the subordinate trading companies and the superordinate ones that will absorb them are complaining.

(Seulkee Jang, “N. Korea’s efforts to dissolve and merge trading companies are hitting snags,” May 16th, 2022.)

It seems fairly clear that the state intends to fully subordinate foreign trade under cabinet control, drastically tightening the screws on companies that engage in foreign commerce. It is an ambitious project given that foreign trade was relatively decentralized for some years, but it is an ambition that the state has held since at least 2018. We may see some limited measures of retreat but the overall goal will likely persist for some time.

Share

Public executions curtailed in North Korea

Wednesday, May 10th, 2017

By Benjamin Katzeff Silberstein

How does international pressure on its human rights situation impact things on the ground in North Korea? Daily NK reports on one result. Those public executions that have previously been filmed on occasion and seen globally are now moving indoors, they report:

The North Korean authorities have been refraining from the conduct of public trials and executions, which were previously carried out to  maintain control over the residents, following a mandate issued last December.
“Until last year, individuals accused of sowing discontent or creating social disorder by offenses including cutting into electric lines [to steal power] , watching South Korean media, or attempting to defect, underwent public trials and execution by firing squad. But this year, the Ministry of State Security and the Ministry of People’s Security have been laying low,” a source in North Hamgyong Province told Daily NK on May 2.
“For example, a man in his 40s who helped dozens of defectors in Hoeryong was arrested in early March but not put to a public trial. The arrest went quietly, unlike a similar case that preceded it, when the state broadcast the news and conducted a series of executions to send a strong message.”
Kim Jong Un has ruthlessly executed a number of high-ranking executives, including his uncle Jang Song Thaek, in order to consolidate his grip on power. Open trials are conducted on residents to instill fear among the population.
They also cite public sentiment as a reason:
The Institute for National Security Strategy (under the National Intelligence Service) stated in its assessment last December of Kim Jong Un’s five years in power that Kim Jong Un continues to commit crimes against humanity through cycles of purges and executions of high-ranking officials.
However, as public sentiment towards the regime has worsened, law enforcement agencies are said to be becoming marginally softer in their approach. In fact, Kim Jong Un ordered a probe into human rights abuses perpetrated by the Ministry of State Security and banned public trials and executions in December 2016.
“The authorities acknowledge that the residents are going through difficulties, and thus are refraining from open trials and executions. They seem to be aware of the danger of worsening public sentiment,” the source noted.
North Korean authorities curtail public trials and executions
Kim Chae Hwan
Daily NK
2017-05-10
The development stems from a decree issued in December last year. Daily NK reported on it when it was issued:
Kim Jong Un has reportedly issued instructions to government bodies including the Ministry of People’s Security to ban further public executions.
“Kim Jong Un has issued instructions to ‘prohibit public executions’ to judicial and prosecution bodies including the Ministry of People’s Security (police). The instruction containing the orders forbids both public trials and executions,” a source in South Pyongan Province told Daily NK on December 13.
“The instruction is not aimed at reducing or abolishing executions. It just means that capital punishment will be conducted privately in future.”
The North Korean authorities have often been documented carrying out public executions against those who break its draconian laws, including the distribution of South Korean TV shows. Such acts serve as an example to spread fear among residents and deter them from engaging in such activities. Under the Kim Jong Un regime, ruthless executions of high-ranking officials have been conducted for actions running ‘counter to the Party and the revolution.’
South Korea’s National Intelligence Service (NIS) reported in October that the Kim Jong Un regime has resumed purges which were in temporary decline following the execution of Hyon Yong Chol, former defense chief of the People’s Armed Forces (MPAF). The number of people publicly executed by the regime reportedly reached 64 by September, according to the NIS.
Some suspect that Kim Jong Un’s decision to revert to private executions has been influenced by recent momentum built up by the UN and NGOs highlighting North Korea’s human rights violations, even suggesting that the North Korean authorities may be put on trial at the ICC (International Criminal Court).
“(The authorities) have been continuously conducting public executions in order to instill fear among the population, but it seems to have realized the drawbacks of the measure. The regime is presumably becoming sensitive about scenes of public executions escaping to the outside world,” a source in North Pyongan Province explained.

Full article:

North Korea orders ban on public trials and executions
Choi Song Min
Daily NK
2016-12-16
Share

Cyber attack capabilities and speculation

Tuesday, June 5th, 2012

According to the Joong Ang Ilbo:

North Korea was caught attempting cyberattacks on Incheon International Airport using viruses planted in game programs, according to the Seoul Metropolitan Police Agency.

A 39-year-old South Korean game distributor was arrested on Sunday for involvement and charged with violating the National Security Law. The National Intelligence Service helped arrest him, police said.

According to the police, the South Korean man, identified by the surname Jo, traveled to Shenyang, northeastern China, starting in September 2009 and met agents of an alleged North Korean trading company. He allegedly asked them to develop game software to be used in the South.

The North Koreans were actually agents from the North’s Reconnaissance General Bureau, and Jo was aware of that, police said.

Jo purchased dozens of computer game software for tens of millions of won, which was a third the cost of the same kind of software in the South. The games were infected with malignant viruses, of which Jo knew, an official at the police agency said.

Jo sold the games to South Korean operators of online games. When people played the games, the viruses used their computers as zombies, through which the cyberattack was launched.

So-called “a distributed denial-of-service attack,” this cyberattack against Incheon International Airport occurred two or three times in March 2011, police said. The attack was fended off by the intelligence authorities in the South.

The police and intelligence authorities also suspect that the North’s Reconnaissance General Bureau is behind a technical glitch in the flight data processor that paralyzed air traffic control at Incheon International Airport for nearly an hour last Sept. 15. It’s not clear if Jo’s viruses were linked. The glitch disrupted the departures of 18 airplanes from the airport. Initially, the Ministry of Land, Transport and Maritime Affairs said it wasn’t linked to North Korea.

AFP reports some slightly different details:

Cho, who was detained on May 23, sold the programmes to South Korean game operators, according to police.

They said the malicious software would paralyse users’ computers and steal personal information. It was not immediately clear how many computers may have been infected.

Cho is also accused of allowing North Korean agents to use his server for distributing denial-of-service (DDoS) attacks on the South’s online systems.

He is alleged to have kept personal information on hundreds of thousands of people from major portals at his home.

Read the full stories here:
Incheon Airport cyberattack traced to Pyongyang
Joongang Ilbo
2012-6-5

S. Korean held for selling N. Korean malware
AFP
2012-6-4

Share

DPRK trade bank sued for failure to settle debt

Monday, August 9th, 2010

UPDATE 8/9/2010: According to Yonhap:

A state-run North Korean bank has lost a lawsuit for not paying back a loan it borrowed from a Taiwanese bank nine years ago, the New York district court said Friday.

The District Court of New York confirmed it ordered the Foreign Trade Bank of Korea to pay compensations of just under US$6.77 million to the Mega International Commercial Bank (MICB) in a ruling made earlier in the week.

And as Josh notes: “By which they really mean the U.S. District Court for the Southern District of New York.”

Some additional case information may be found here.

As an aside, North Korea also recently lost another court case in the US.  Read more here.

ORIGINAL POST (5/6/2010): According to KBS:

The Taiwanese bank filed its lawsuit to claim some five million dollars in interest and principal on August 25th, 2001.

It is unclear whether the North Korean bank will repay the Taiwanese plaintiff, but North Korea experts say this will at least add to the crunch on North Korean finances.

Some reference information can be found here.

According to the Korea Times:

A state-run North Korean bank is facing trial in the United States for failing to pay a $5 million loan that it borrowed from a Taiwanese bank in 2001, according to sources Wednesday.

The District Court for the Southern District of New York ordered the Foreign Trade Bank (FTB) of North Korea to make a court appearance on May 17 and submit a proposed case management plan and scheduling order.

The FTB reportedly borrowed $5 million from the Mega International Commercial Bank (MICB) in Taiwan on Aug. 25, 2001 on the promise to amortize the principal and interest in three installments by Sept. 15, 2004.

No repayment was made until December 2008, when the FTB paid the MICB $100,000 to cover some of the interest. The North Korean bank has thus far paid off a total of $462,000 to the MICB, still owing $1.78 million in interest and $4.7 million in principal.

“It has been almost unprecedented for North Korea to be sued in a commercial dispute, though there were occasions that the North was asked to stand in U.S. courts for terrorist activities,” an official of the South Korean Consulate General in New York told Yonhap News.

The official said the litigation will hamper Pyongyang’s recent move to aggressively attract foreign investment in an effort to revive its flagging economy, given that obviously doubt will arise over its debt repayment capacity.

Despite a recent currency reform, the North’s economy remains in a parlous state as the U.N. sanctions have cut off virtually all sources of foreign currency.

Seoul has also suspended tours to the North’s popular tourist destination of Mt. Geumgang, following the shooting death of a South Korean tourist in the mountain resort in July 2008. The tours were a cash cow for the North, generating more than $500 million between 1998 and 2008.

On May 1, the FTB’s official exchange rate was 96.9 won per dollar, but it was traded at 180 won in Pyongyang and higher in other areas, demonstrating the instability of the North’s economy, according to the sources.

Since established in 1959, the bank has served as the reclusive regime’s main foreign exchange bank, they said. It has branch offices in France, Australia, Kuwait, Hong Kong and Beijing.

Read the full story here:
NK trade bank sued for failure to settle debt
Korea Times
5/5/2010

Share

Group sues North Korea for 1972 terror attack (and wins)

Sunday, July 18th, 2010

UPDATE (Oct, 3, 2010): The Los Angeles Times has also picked up this story:

Plaintiffs’ attorney Nitsana Darshan-Leitner was in her Jerusalem office in July when she got news of the Puerto Rican court’s verdict.

A judge there had just issued a $378-million civil judgment for her clients: the families of 17 Puerto Rican missionaries killed by Japanese Red Army militants at an Israeli airport in 1972.

Yet her euphoria was tempered by pragmatic reality: She would have to try to collect the judgment from a defiant North Korea, which the judge ruled had decades ago given training and support to the assailants.

Over the years, Darshan-Leitner has collected more than $72 million in judgments against Iran and the Palestinian Authority. But cash-strapped, isolationist North Korea had already ignored her legal motions and none of its officials showed up for even a day in court.

Legal judgments against Kim Jong Il and his Democratic People’s Republic of Korea in several civil cases have added up to more than $500 million. But not a dime has been collected.

The regime in “Pyongyang is secretive and they’re poor,” said Darshan-Leitner, director of the Israel Law Center, which pursues lawsuits against nations accused of sponsoring terrorism. “Since they don’t export many things, you have to look hard for the money.”

North Korea has for years been an elusive legal target. In 1988, it was added to Washington’s list of nations that sponsor terrorism. But U.S. law at the time precluded suits against foreign countries.

That changed in 1996 when Congress amended the Foreign Sovereign Immunities Act, allowing plaintiffs to pursue in court governments identified as state sponsors of terrorism. In 2008, then-President George W. Bush removed North Korea from the list after it agreed to allow international inspection of its nuclear facilities, closing the door on further lawsuits against Pyongyang.

But in the 12-year window of opportunity, some attorneys were successful in suing North Korea. In 2008, Washington-based attorney Richard Streeter won a $65.8-million judgment in a District of Columbia federal court on behalf of several crewmen of the U.S. Navy intelligence ship Pueblo, who had been held captive for 11 months by Pyongyang in 1968.

Silent for decades, the plaintiffs contacted Streeter in 2006 after his success in helping to collect on a judgment against Iran for a case involving the murder of a U.S. Navy diver by hijackers in 1985.

On Oct. 10, 2008, the day before North Korea was removed from the terrorism list, Darshan-Leitner filed suit against the regime on behalf of the family of Kim Dong Shik. The Chicago minister was kidnapped by North Korean agents in 2000 while on a trip to China and presumably died in a North Korean prison camp. The case is still pending.

Armed with her judgment in the Puerto Rico case, Darshan-Leitner is on the hunt for North Korean money and property worldwide and is looking into reports of $32 million in regime assets frozen by the U.S. government.

For his part, Streeter has filed motions against banks nationwide to disclose the names and balances on frozen accounts and has petitioned the U.S. government in court for more leads. He’s also preparing to take the search outside the country.

Plaintiffs’ attorneys are reluctant to give specifics of their search for fear of alerting target nations. In a case against Iran, Darshan-Leitner found banks in Germany and Italy where assets were being held, but by the time she filed motions, Tehran had withdrawn them, she said.

“We have some leads, but we can’t say in what countries — bank accounts that belong to the North Korean government and the Central Bank of North Korea,” she said. “When we confirm the money is there, we will approach lawyers in those countries to go to court and try to collect.”

In another case against the Iranian government, Darshan-Leitner filed motions in a Texas court to collect on funds from the sale of a seized Lubbock home once owned by the shah of Iran. She is also attempting to seize Persian antiquities kept at the University of Chicago as a way to collect on a judgment against the current government of Iran, she said.

In their collection efforts, lawyers often run up against the U.S. government.

“The U.S. State Department doesn’t like these cases,” said David Strachman, a Rhode Island attorney who has collected on judgments against foreign countries. “They take the position that private litigation by victims interferes with their closely held prerogative of international relations. In many cases, they come in as the 1,000-pound gorilla to try and stop us.”

The State Department declined to comment, but an official familiar with such cases says the agency has no written policy on citizens trying to collect judgments against foreign countries.

Still, one expert called such pursuits “a new and evolving area” that have prompted State Department interference.

“They don’t want to set a precedent,” said Jeffrey Addicott, director of the Center for Terrorism Law at St. Mary’s University’s School of Law in San Antonio. “Their argument is that if we seize assets of another nation to distribute to victims, what’s to stop them from fabricating cases to seize U.S. assets abroad?”

Darshan-Leitner hopes that Kim Jong Il’s regime might one day follow the lead of Libyan leader Moammar Kadafi, who, after years of resistance settled hundreds of millions of dollars worth of judgments over his nation’s involvement in the 1988 bombing of Pan Am Flight 103 over Lockerbie, Scotland.

“Nobody pays attention unless these nations are held accountable,” said Han Kim, the son of the Chicago minister abducted by North Korea.

Meanwhile, plaintiffs’ lawyers continue their hunt for North Korean assets.

“I don’t know whether we’ll ever be successful. That’s the sad part,” said Streeter. He said he charged each of four plaintiffs a $5,000 retainer but will receive no more until a judgment is collected.

“But I want to see some of that money that Kim Jong Il is using to buy his yachts and his Courvoisier as payment to my clients,” he said. “I’ll take it in Courvoisier. I don’t care.”

Read the full story here:
Plaintiffs’ attorneys hunt for North Korea’s money
Los Angeles Times
John M. Glionna
10/3/2010

UPDATE (July 18, 2010): Being a lawyer, Joshua does a great job finding and posting posting legal documents related to the DPRK at One Free Korea.  Most recently he posted a civil ruling which finds the DPRK liable for an airport attack in Israel. According to Joshua:

North Korea was held liable for its role in supporting the Popular Front for the Liberation of Palestine and the Japanese Red Army, which planned the attack together in North Korea. North Korea did not contest the suit. The award consisted of $78 million in compensatory damages awarded to the estates and surviving relatives of the victims, and $300 million in punitive damages.

You can read the ruling here (PDF).

Joshua has posted information from other civil litigation cases here.

The Washington Times did a story.

ORIGINAL POST (Dec 2, 2009): According to the WorldTribune.com:

Families of victims have filed suit against North Korea on charges of supporting a major attack by the Japanese Red Army in Israel.

The group, Shurat HaDin, has filed a suit in a U.S. district court in San Juan, Puerto Rico for the families of the victims of the 1972 attack.

During the assault on Lod Airport, 26 people were killed and 80 others were injured by attackers alleged to have been trained by North Korea. The attack was attributed to the Japanese Red Army and the Popular Front for the Liberation of Palestine.

“This will be the first time North Korea is being held to account in a U.S. court for its support of terrorism over many decades,” Shurat HaDin said on Dec. 1.

According to Shurat HaDin‘s web page:

The case arises from a lawsuit brought by the families of victims of the 1972 terror attack at the Lod Airport in Israel in which 26 people were killed and 80 injured. The complaint alleges that the government of North Korea trained and financed the terrorists who perpetrated the heinous massacre.

The families are represented by Shurat HaDin director Nitsana Darshan-Leitner, the Osen Law group, attorney Robert Tolchin of New York and attorney Manuel San Juan of Puerto Rico.

In May 1972, terrorists from the Japanese Red Army (JRA), working in league with the Popular Front for the Liberation of Palestine (PFLP), placed automatic weapons, ammunition, and grenades in their check-in luggage on a flight from Italy to Israel. When their bags emerged in Tel-Aviv at the arrivals hall, they took out the weapons and opened fire in every direction mowing down passengers, flight crew members and airport workers. They also attempted to blow up airplanes on the ground using hand grenades. Two of the three attackers were killed, and a third, Kozo Akumoto, was captured, tried, and sentenced to prison in Israel.

Most of the victims were Catholic pilgrims from Puerto Rico who had come to visit the Holy Land for the first time.

North Korea was behind the attack. As the trial will show incontrovertibly, in the months leading up to the massacre the leaders of the JRA and PFLP met each other and with North Korean officials, who provided funding, intelligence, training, and other material support for the terrorists. The attack was part of the JRA’s declared strategy of taking their anti-Western violence and plans of communist revoultion to other parts of the world, beginning with Israel—a strategy approved by the North Korean government.

This will be the first time North Korea is being held to account in a U.S. court for its support of terrorism over many decades. It is widely known that one of the world’s most oppressive regimes is also a consistent support of terrorism, including providing weaponry, training bases, and funding for Palestinian terrorist organizations. They were also responsible for building an enormous underground bunker system for Hezbollah that dramatically increased the terrorist group’s fighting capacity in the 2006 Lebanon War.  For this reason, the U.S. State Department put North Korea on its official list of states that sponsor terror in 1988—a fact that makes it possible for American victims to sue the North Korean government and collect against their assets in a U.S. court. Although North Korea was removed from the list late in 2008 for political reasons, the current lawsuit was filed on behalf of the Puerto Rican families before the deadline for filing lawsuits, as were two other lawsuits Shurat HaDin currently has pending against North Korea.

The trial will begin on December 3 in the U.S. Federal Court in San Juan, Puerto Rico.

A copy of the complaint can be found here.

Share

Life tough in Pyongyang

Tuesday, July 6th, 2010

According to the Daily NK:

The gap between the rich and poor in North Korea is growing as the number of people trying to sell their family home to buy food expands in the aftermath of last November’s currency reforms, according to a source from inside the country.

The source from South Pyongan Province told The Daily NK on Thursday, “An increasing number of homes are being sold to buy food, and now it seems like about two out of every ten people around here have lost their home.”

According to the source, the rich buy up the houses, demolish them and build new ones to sell for a profit. Those who have amassed dollars or Chinese Yuan from trading are now turning to the housing market.

Even in Pyongyang, where the public distribution system continues to function, there are homeless people on the street, according to the source, who added, “When I was in Pyongyang, there were homeless people sleeping in the subway in large numbers.”

The source went on, “People’s lives are very difficult. There are even some who rely on digging up 5kg of wormwood, walking three hours to sell it, and only getting 100 won per kg.”

Currently, 1kg of rice sells for 400 to 500 won in Pyongyang, and 500 to 600 won in other areas.

The source also explained, “While public distribution still functions in Pyongyang, there are strict restrictions on movement, and even with our salaries we can’t buy food because there is too little.”

Since the economy is so bad, the crime rate is also going up, he added, “There are now more and more pick pocketing cases, and these days, they not only use small knives to steal purses, but even tweezers to pick stuff from pockets.”

The source’s assertion that there was public distribution until mid-June contradicts the claim of one NGO, which said that on May 26 the authorities ordered each area to look out for its own food supply. The source, when asked about the decree, said he was unaware of its existence.

Read the full story here:
Life Even Tough in Pyongyang
Daily NK
Kim So Yeol
7/2/2010

Share

Chongryon headquarters on block after ruling

Wednesday, June 30th, 2010

According to the Daily NK:

Japan’s Supreme Court has ruled that Chongryon headquarters are a legitimate Chongryon asset which may be seized and auctioned as part of proceedings to recover loans made by a defunct credit union to the organization, Japanese broadcaster NHK reported on Tuesday.

A collection agency recently took over a number of bonds issued by the bankrupt Joeun Credit Union, which loaned around $700 million to Chongryon, the organization of North Koreans in Japan. The agency then announced its intention to pursue collection by putting Chongryon headquarters land and buildings in the Chiyoda district of Tokyo up for auction.

However, since the land and buildings are registered under a separate firm, Chosun Central Hall Management Association, the collection agency was required to file a lawsuit to get the necessary recognition of its right to seizure.

The court initially dismissed the collection agency’s claim on the grounds that the assets are held by a separate entity, but accepted, “It is possible to seize (the assets) if they can be shown to be actual Chongryon assets.”

Therefore, the collection agency filed a separate lawsuit to ask for recognition of the Chongryon headquarters estate and buildings as such an asset, and the Supreme Court has now ruled in its favor.

If the judgment is allowed to stand, the collection agency will be able to legally seize the estate and buildings of the Chongryon headquarters, adding to the organizations mounting woes.

Read the full story here:
Chongryon HQ on Block after Ruling
Daily NK
Yang Jung A
6/30/2010

Share

Pueblo crew awarded $65 million by US court

Tuesday, December 30th, 2008

From the Associated Press (via the New York Times):

A federal judge has awarded more than $65 million to several men of the Navy spy ship Pueblo, who were captured and tortured by North Korea in 1968.

The judge, Henry H. Kennedy Jr. of Federal District Court, issued the judgment against North Korea on Tuesday.

North Korea did not respond to the lawsuit, which accused it of kidnapping, imprisonment and torture. Four former crewmen of the Pueblo filed the suit in 2006.

Citation:
Judgment Is Issued in North Korea Suit
Associated Press
12/30/2008

Share

DPRK stiffens drug laws

Friday, May 16th, 2008

From the Daily NK:

“The North’s adoption of partial open door policy has resulted in the rapid spread of western culture into the society, which could trigger the collapse of socialist ideology and regime. So, as part of efforts to prevent the collapse, the North adopted a series of amendments to its criminal laws,” explained Choi.

“In March 2008, North Korea introduced another amendment according to which individuals charged with drug possession are to be sentenced to death by shooting because drug use has been increasing among people suffering from the lack of basic necessities and medicine despite the state’s strict drug control,” said Choi.

According to the 2004 amendment, North Korea sentences those charged with drug manufacturing to two to five years in the labor reeducation camp (Article 216), those with drug use to up to two years in the labor-training corps (Article 217), and those with drug trafficking and sales to either up to five years in the labor camp (Article 218).

“The amendment of March 2008 further stiffened penalties against drug offenders. Individuals found to be possessing more than 300 grams of drug are to be sentenced to death penalty,” Choi said, “In addition, North Korea which did not have sufficient legal grounds to punish individuals involved with new types of offenses including making international phone calls, possessing copies of foreign pictures and smuggling now appears to have strengthened legal punishment against them.”

The passage of these statutes is probably as close as the DPRK government will get to admitting that markets for recreational drug use are firmly established.  Stiffening drug laws will make no difference to the dissipation of the state’s socialist ideology, but North Korea’s drug cartels will certainly benefit.

The Economics of Cartels

In a competitive market, it is difficult to maintain a cartel.  Cartels work by restricting output to raise prices.  The problem is that once everyone in the cartel has done so, each individual member has an incentive to sell more than his quota to capture those artificially high profits.  After everyone figures out how to do this, the cartel falls apart and prices return to their competitive equilibrium.

So how can cartel members be relied on to maintain their production quotas and not cheat/sabotage each other?  Many times this is done by group acquiescence to government statutes and regulations.  Restrictions on prices, services, quality standards…these can all be used to protect incumbent firms by driving up costs for smaller competitors, and what’s more, the government pays for the enforcement.

And now for the conspiracy theory 

If there is not already a cartel of “companies” or families seeking to corner the DPRK drug market, there soon will be.  Stiffening criminal penalties for drug production simply raises the costs of small-scale producers and distributors, forcing them out of the market because they cannot afford protection/bribes.  This helps the big guys, who can afford these services, to maintain their price premium.

No doubt the groups coming to dominate the drug trade had representatives involved in making sure these statutes were changed (meaning they are now sufficiently politically connected to protect themselves).  What will be the effects on crime?  Well, if the cartel members keep to their agreements, crime could drop, and police would only be used to break up non-cartel operations.

Small-scale producers will respond by shifting into “high quality, low volume” drugs (much like in prohibition when smugglers carried liquor over beer and wine). 

Thoughtful comments appreciated. 

Read the full story here:
North Korea Has Introduced Amendments to Its Criminal Codes to Save the Regime from Falling Apart
Daily NK
Yang Jung A
5/13/2008

Share

North Korea stoic in the face of famine

Sunday, May 4th, 2008

Andrei Lankov is the first in the media to construct a narrative which details the series of decisions that have led to North Korea’s current food crunch.

From his article:

Merely a year ago, North Korean leaders were optimistic. The good harvest of 2005 persuaded them that food shortages were behind them, and that North Korean agriculture had begun to recover. The 2005 harvest was merely 4.6 million tons, well below the 5.2 million tons which are necessary to keep the entire population alive. Still, it was clearly an improvement.

Lankov’s assertion that 5.2 million tons of grain are needed to sustain the DPRK population comes from the UN.  Recent work by Marcus Noland estimates that this number is closer to 4.6, although exact figuress are not possible because the actual size of the DPRK population is unknown.

In addition, for a decade South Korean administrations have maintained their Sunshine policy of unilateral concessions and unconditional food aid. Since 2000, about 450,000 tonnes of food have bee delivered to North Korean granaries from the South every year, free of charge. Its distribution was almost unmonitored. Pyongyang leaders came to believe that such aid would continue for the foreseeable future. Additionally, increasing Chinese involvement with North Korea, while not necessarily welcomed by Pyongyang, was seen as a sign that additional food would be coming – and Chinese shipments were roughly equal to those of South Korea. Finally, the basic agreement with the US on the nuclear issue was perceived in Pyongyang as a sign of Washington’s willingness to pay generously for rather minor concessions.

As noted by many besides Lankov (here), this good fortune prompted the DPRK government to reimpose elements of the planned economy which failed long ago: 

In 2005, authorities claimed that the public distribution system would be completely revived, and banned private trade in grain. This ban was generally ignored and eventually failed, but subsequent moves were more successful. In late 2006, authorities banned male vendors from the country’s marketplaces. In 2007, women under 50 years old were also prohibited from engaging in business in markets. The assumption is that every able-bodied North Korean should go where he or she belongs, specifically to the state-run factories of the Stalinist economy.

The government also staged some campaigns against semi-legal private businesses that had been tacitly tolerated since the late 1990s. After 2005, authorities successfully cracked down on the trafficking, smuggling and illegal labor migration occurring on the border with China. There was also a remarkable increase in the volume of anti-market rhetoric in the official Pyongyang propaganda.

The economic problems they were attempting to achieve at home through these policies, however, were only the first of several shocks to hit the DPRK economy in the last year: 

1. Low harvest numbers

First of all, the 2007 harvest was a failure. It was estimated at only 3.8 million tons, well short of the critical 5.2 million ton benchmark [and Noland’s 4.6 benchmark]. As usual, floods were officially blamed (as if the impoverished North does not share the same small peninsula with the prosperous South, where no signs of food shortage have been seen in decades).

2. Drop in aid from South Korea

The presidential elections of December 2007 led to a change of leadership in Seoul. The new government, led by right-of-the-center pragmatist Lee Myong-bak, said that the era of unconditional concessions to the North was over.

3. International food prices rising

The situation was aggravated by the explosive rise of international food prices. The North Korean press has reported the trend widely obviously in an attempt to,place the blame for the current crisis on factors clearly beyond the government’s control. On April 20, Nodong Sinmun, the major official daily newspaper, ran an article that described food supply difficulties worldwide and mentioned a dramatic increase on food custom duties in “certain countries”.

4. Cold shoulder from China

The worldwide price hike means that the amount of food coming to North Korea via foreign aid channels is likely to decrease. China, preoccupied with the Summer Olympic Games in August, and increasingly annoyed by North Korean antics, is not too willing to help the North out of its trouble which, as some people in Beijing believe, were brought on Pyongyang by its own stubborn resistance to the Chinese reform model.

So what is Lankov’s prediction?

In North Korea, the domestic food situation is deteriorating fast. The sudden hike in food prices seems to be a sign of deepening crisis. There were reports about farmers who refuse to toil the state-owned fields, stating that they are too weak to work (but still willing to work on their private plots). There are rumors of villagers starving to death even though observers believe the food shortage has not yet developed into a famine. If the shortage of fertilizer damages this year’s harvest, a famine may develop by the end of this year.

The political consequences are unclear. Knowledge about the situation inside North Korea remains grossly inadequate. If the past is an indication, however, nothing of great political significance will happen if a few thousand fresh graves appear in the hills of North Hamgyong province. In all probability, Kim Jong-il’s government will use its time-tested tactics: the political elite and the best units of the army will receive full rations; the residents of major cities, police and common soldiers will get barely enough to survive; and the “politically unreliable”, largely villagers from the remote northwest, will be left to their sorry fate.

There is hope the government will momentarily halt its counter-offensive against free market economics, and will ease its border controls to allow more people to China – but even such moderate measures are unlikely. Isolated revolts are possible, but the government seems to be supremely confident. After all, the disorganized, isolated population, deprived of any opportunities to organize or even communicate between themselves, is not capable of challenging the system.

Read the full story here:
North Korea stoic in the face of famine
Asia Times
Andrei Lankov
4/30/2008

Share