North Korean Economy Watch

The UN panel responsible for implementing UNSC resolutions pertaining to the DPRK has written a report (which is not yet publicly available) claiming that the DPRK continues to evade UN sanctions. According to two different Bloomberg stories :

“The Democratic People’s Republic of Korea has established a highly sophisticated international network for the acquisition, marketing and sale of arms and military equipment,” said the report by a Security Council panel established in June to assess the effectiveness of UN sanctions.

The report said arms sales banned by the UN “have increasingly become one of the country’s principal sources for obtaining foreign exchange.” North Korea has used “reputable shipping entities, misdescription of goods and multiple transfers” to hide arms smuggling, according to the report, which has been circulated within the Security Council and not yet publicly released.

…

North Korean companies and banks that have been barred from foreign transactions are circumventing the prohibition through subsidiaries, according to “indications” from some member governments, the report said. The Korea Mining Development Trading Corp., cited in April for violations of UN sanctions, “continues to operate through its subsidiary companies,” according to the report.

The Kwangson Banking Corp. and Amroggang Development Bank substitute for or act on behalf of Tanchon Commercial Bank and the Korea Hyoksin Trading Corp., the UN panel said authorities in unspecified countries have determined. The U.S. earlier this year froze the assets of the Kwangson and Amroggang banks.

The UN panel said North Korea is believed to have exported arms to countries in Africa, Southeast Asia, the Middle East and Latin America. Only a “very small percentage” of North Korea’s illegal arms trade has been reported or discovered, the report said.

An example of attempted trade in contraband was reported in August by the United Arab Emirates, which seized a ship carrying North Korean-manufactured munitions, detonators, explosives and rocket-propelled grenades bound for Iran.

According to Reuters:

The Security Council imposed the sanctions, including arms embargoes, asset freezes and travel bans, in resolutions in 2006 and 2009, in response to North Korean nuclear tests and ballistic missile launches. This year for the first time, it listed eight entities and five people who were being targeted.

A report obtained by Reuters on Wednesday was the first to be written by an expert panel set up by the Security Council in May to vet implementation of the sanctions. It is due to be discussed in closed-door council consultations on Thursday.

The six experts said there were several different techniques employed by the isolated communist state to conceal its involvement.

“These include falsification of manifests, fallacious labeling and description of cargo, the use of multiple layers of intermediaries, ’shell’ companies and financial institutions to hide the true originators and recipients,” the report said.

“In many cases overseas accounts maintained for or on behalf of the DPRK are likely being used for this purpose, making it difficult to trace such transactions, or to relate them to the precise cargo they are intended to cover.”

The experts said North Korea likely also used correspondent accounts in foreign banks, informal transfer mechanisms, cash couriers “and other well known techniques that can be used for money laundering or other surreptitious transactions.”

On illicit arms shipments, the report raised the case of the seizure of a “substantial cargo” of weapons from North Korea. It was apparently referring to arms seized in August by the United Arab Emirates from an Australian-owned ship.

The report also said the North continued to import luxury goods intended for its leadership, despite a U.N. ban. It noted that in July, Italy blocked the sale of two yachts that police said were destined for North Korean leader Kim Jong-il.

The panel, which began work just two months ago, said it would work on recommendations to the Security Council for further firms and individuals to be put on the sanctions list as well as goods whose import by North Korea should be banned.

It also promised more exact definitions of small arms — the only kind of arms Pyongyang can import under existing sanctions — as well as of luxury goods.

Marcus Noland has cleverly named the strategy of tracking down North Korean military financiers and arms dealers “Wac-a-mole“.

Read the full stories below:
North Korean Global Arms Smuggling Evades Ban, UN Panel Says
Bloomberg
Bill Varner
11/18/2009

North Korea Arms Trade Funds Nuclear-Bomb Work, UN Panel Says
Bloomberg
Bill Varner
11/19/2009

North Korea maneuvers to evade U.N. sanctions: experts
Reuters
11/18/2009

The US Treasury Department has targeted  the Amroggang Development Bank for its connections with the Tanchon Commercial Bank.

According to Reuters:

Tanchon was previously hit with sanctions by both the United States and the United Nations Security Council for its involvement in Pyongyang’s proliferation activities.

Treasury said assets of Tanchon under U.S. jurisdiction are frozen and Americans are banned from any dealing with it. It said that Tanchon’s president, Kim Tong Myong, also was being added to the list of weapons proliferators.

Treasury described Amroggang as a Tanchon-related company run by Tanchon officials. It said Tanchon helps finance Korea Mining Development Corp’s sales of ballistic missiles and has been involved in Komid’s ballistic missile transactions with an Iranian industrial group.

The US has sanctioned several companies and banks this year (here, here, here).

The UN Security Council has also sanctioned several companies and individuals (here).

Here is a link to the Treasury Department Statement.  Some text below:

Amroggang, which was established in 2006, is a Tanchon-related company managed by Tanchon officials.  Tanchon, the financial arm of the U.S. and UN-designated North Korean company Korea Mining Development Corporation (KOMID), plays a role in financing KOMID’s sales of ballistic missiles and has also been involved in ballistic missile transactions from KOMID to Iran’s Shahid Hemmat Industrial Group (SHIG), the U.S. and UN-designated Iranian organization responsible for developing liquid-fueled ballistic missiles. KOMID is North Korea’s premiere arms dealer and main exporter of goods and equipment related to ballistic missiles and conventional weapons.

A North Korean individual Kim Tong Myong was also designated today for acting on behalf of Tanchon.  Kim Tong Myong has held various positions within Tanchon since at least 2002 and is currently Tanchon’s President.  He has also played a role in managing Amroggang’s affairs using the alias Kim Chin-so’k.

Read the full Reuters article here:
Treasury puts North Korean bank on blacklist
Reuters
10/23/2009