Archive for the ‘Bureau 39’ Category

Jon Il-chun re-surfaces

Wednesday, December 15th, 2010

According to the Choson Ilbo:

South Korean intelligence officials breathed a sigh of relief on Sunday. They had finally located Jon Il-chun, the head of a special department in North Korea’s Workers Party that manages Kim Jong-il’s slush fund. Jon, who had eluded intelligence officials for the past six months, was finally spotted on a North Korean TV broadcast featuring one of leader Kim Jong-il’s so-called on-the-spot guidance tours in Pyongyang.

The 69-year-old Jon went to high school with Kim (68) and was appointed head of the department, known as Room 39, early this year. It manages 17 overseas branch offices and around 100 trading companies and even owns a gold mine and a bank. The US$200-300 million those companies make each year is funneled into Kim’s secret bank accounts around the world.

Room 39 is targeted each time the U.S. and other foreign governments apply financial sanctions against North Korea. Kim replaced its head early this year because the former director, Kim Tong-un, was put on an EU list of sanctioned individuals late last year, making it impossible for him to manage the leader’s secret overseas bank accounts.

Due to the importance of the department and the clandestine nature of its business, the director of Room 39 rarely appears in public, but he sometimes accompanies Kim Jong-il on guidance tours when they involve organizations linked to Kim’s slush funds, an intelligence official said.

In the TV clip on Sunday, Jon is seen with Kim on an tour to Hyangmanlu, a popular restaurant, and Sonhung food manufacturing plant. A North Korean defector who used to live in Pyongyang, said the restaurant was built in the 1990s by a wealthy ethnic Korean from Japan and is located in a busy part of Pyongyang. “It was always packed with wealthy party officials,” the defector said, adding the party manages the restaurant so the entire proceeds probably go into Kim Jong-il’s coffers. He added there is a strong possibility that the food factory also belongs to the party.

The last time Jon appeared on North Korean TV was on June 20, at the opening of a mine in Yanggang Province. A North Korean source said the Huchang Mine is a famous copper mine that had been closed for some time but must have reopened. “Judging by the fact that Jon took part in the opening ceremony, it appears to be one of many mines run by Room 39.”

Jon was also spotted at Kim’s inspections of two fisheries companies last year and one this year. A Unification Ministry official said, “North Korean exports of fisheries products are handled by the party or the military and they’re sources of revenue for Kim Jong-il’s slush fund.” Fisheries products accounted for the second largest North Korea’s W1.64 trillion exports to South Korea last year, amounting to W173 billion or 16.3 percent. Textiles totaled W477 billion or 44.8 percent.

“This is one of the reasons why we blocked imports of North Korean fisheries products” following the North’s sinking of the Navy corvette Cheonan, the official said.

Additional Information:

1. Michael Madden has written a biography of Jon Il-chun here.

2. Here is a satellite image of the Hyangmanru Restaurant.  Here is a satellite image of the Sohung Foodstuff Factory (right next door).

Read the full story here:
Elusive Manager of Kim Jong-il’s Slush Funds Pops Up Again
Choson Ilbo
12/15/2010

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US sanctions two more DPRK organizations

Thursday, November 18th, 2010

UPDATE 2: Here is the actual Treasury Department Press Release (11/18/2010):

Treasury Designates Key Nodes of the Illicit Financing Network of North Korea’s Office 39

11/18/2010
WASHINGTON – The U.S. Department of the Treasury today designated Korea Daesong Bank and Korea Daesong General Trading Corporation pursuant to Executive Order (E.O.) 13551 for being owned or controlled by Office 39 of the Korean Workers’ Party.  Office 39 is a secretive branch of the government of the Democratic People’s Republic of Korea (North Korea) that provides critical support to North Korean leadership in part through engaging in illicit economic activities and managing slush funds and generating revenues for the leadership. Office 39 was named in the Annex to E.O. 13551, issued by President Obama on August 30, 2010, in response to the U.S. government’s longstanding concerns regarding North Korea’s involvement in a range of illicit activities, many of which are conducted through government agencies and associated front companies. Korea Daesong Bank is involved in facilitating North Korea’s illicit financing projects, and Korea Daesong General Trading Corporation is used to facilitate foreign transactions on behalf of Office 39.

“Korea Daesong Bank and Korea Daesong General Trading Corporation are key components of Office 39’s financial network supporting North Korea’s illicit and dangerous activities,” said Under Secretary for Terrorism and Financial Intelligence Stuart Levey.  “Treasury will continue to use its authorities to target and disrupt the financial networks of entities involved in North Korean proliferation and other illicit activities.”

E.O. 13551 targets for sanctions individuals and entities facilitating North Korean trafficking in arms and related materiel; procurement of luxury goods; and engagement in certain illicit economic activities, such as money laundering, the counterfeiting of goods and currency, bulk cash smuggling and narcotics trafficking. As a result of today’s action, any assets of the designated entities that are within U.S. jurisdiction are frozen and U.S. persons are prohibited from conducting financial or commercial transactions with these entities.

UPDATE 1: Here is the US Treasury Department’s web page on North Korea.

ORIGINAL POST: According to Reuters:

The United States sanctioned on Thursday two North Korean companies linked to a group it accuses of drug smuggling and other “illicit” activities to support the nation’s secretive leadership.

U.S. sanctions against North Korea aim in part to persuade Pyongyang to abandon its nuclear programs, which the United States views as a threat to its allies South Korea and Japan. The North tested nuclear devices in 2006 and 2009.

The Treasury Department’s moves against Korea Daesong Bank and Korea Daesong General Trading Corporation will freeze any assets belonging to them that fall within U.S. jurisdiction as well as bar U.S. companies from dealing with them.

Their main aim is not to block North Korean assets in U.S. banks — analysts say there are unlikely to be any — but to discourage other banks from dealing with North Korea, thereby cutting off its access to foreign currency and luxury imports.

Perks and luxuries such as jewelry, fancy cars and yachts derived from North Korea’s shadowy network of overseas interests are believed to be one of the main tools Pyongyang uses to ensure loyalty among top military and party leaders to North Korean leader Kim Jong-il.

The Treasury described the two entities as “key nodes of the illicit financing network” of Office 39 of the Korean Workers’ Party, which it accuses of producing and smuggling narcotics to earn foreign exchange for the government.

“Korea Daesong Bank and Korea Daesong General Trading Corporation are key components of Office 39’s financial network supporting North Korea’s illicit and dangerous activities,” Treasury Under Secretary Stuart Levey said in a statement.

Heroin Production?
The Treasury designated the two under a recent executive order that targets entities that support North Korea’s arms trafficking, facilitate its luxury goods purchases and engage in illicit economic activities such as money laundering, drug and bulk cash smuggling and counterfeiting goods and currency.

President Barack Obama signed the executive order on August 30 allowing the Treasury to block the U.S. assets of North Korean entities that trade in arms or luxury goods, counterfeit currency or engage in money laundering, drug smuggling or other “illicit” activity to support the government or its leaders.

When that executive order was announced, the Treasury accused Office 39 of producing opium and heroin and of smuggling narcotics such as methamphetamine.

U.S.-North Korean relations have deteriorated since Obama took office, with his aides deeply unhappy about Pyongyang’s decision to conduct nuclear and missile tests last year as well as the March 26 sinking of the South Korean corvette Cheonan.

Forty-six South Korean sailors were killed in the incident, which the United States, South Korea and other nations blame squarely on North Korea. Pyongyang denies responsibility.

In the August 30 executive order, Obama cited the Cheonan’s sinking as well as 2009 nuclear and missile tests by North Korea as evidence it poses “an unusual and extraordinary threat” to U.S. national security, foreign policy and economy.

The Obama administration has been skeptical about returning to so-called six-party negotiations with the two Koreas, China, Japan and Russia under which Pyongyang committed in 2005 to abandon its nuclear programs.

U.S. officials say they do not want to talk for the sake of talking and North Korea must show some commitment to abandoning its nuclear programs.
Read the full story here:
U.S. sanctions two North Korean entities
Reuters
Arshad Mohammed
11/18/2010

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US freezes assets in DPRK proliferation case

Monday, August 30th, 2010

UPDATE 4: The following statement appeared on the Treasury Department web page:

In joint actions, the U.S. Departments of Treasury and State today announced the designations of five North Korean entities and three individuals under Executive Order (E.O.) 13382 for supporting North Korea’s Weapons of Mass Destruction (WMD) program. Executive Order 13382 is an authority aimed at freezing the assets of WMD proliferators and their supporters thereby isolating them from the U.S. financial and commercial systems.

Also today, President Obama signed an Executive Order that directs the Secretary of the Treasury, in consultation with the Secretary of State, to target for sanctions individuals and entities facilitating North Korean trafficking in arms and related materiel; procurement of luxury goods; and engagement in illicit activities, including money laundering, the counterfeiting of goods and currency, bulk cash smuggling and narcotics trafficking. The new Executive Order supplements E.O 13382, under which North Korean entities have been designated to date, and is consistent with measures required in UNSCRs 1718 and 1874.

The following individuals have been added to OFAC’s SDN list:

KIM, Yong Chol (a.k.a. KIM, Yong-Chol; a.k.a. KIM, Young-Cheol; a.k.a. KIM, Young-Chol; a.k.a. KIM, Young-Chul); DOB circa 1947; alt. DOB circa 1946; POB Pyongan-Pukto, North Korea (individual) [DPRK]

RI, Hong-Sop, c/o General Bureau of Atomic Energy , Haeudong, Pyongchen District, Pyongyang, Korea, North; DOB 1940; nationality Korea, North (individual) [NPWMD]

RI, Je-Son (a.k.a. RI, Che-Son), c/o General Bureau of Atomic Energy, Haeudong, Pyongchen District, Pyongyang, Korea, North; DOB 1938; nationality Korea, North (individual) [NPWMD]

YUN, Ho-Jin (a.k.a. YUN, Ho-Chin), c/o Namchongang Trading Corporation, Pyongyang, Korea, North; DOB 13 Oct 1944; nationality Korea, North (individual) [NPWMD]

The following entities have been added to OFAC’s SDN list:

GREEN PINE ASSOCIATED CORPORATION (a.k.a. CHONGSONG YONHAP; a.k.a. CH’O’NGSONG YO’NHAP), Nungrado, Pyongyang, Korea, North; c/o Reconnaissance General Bureau Headquarters, Hyongjesan-Guyok, Pyongyang, Korea, North [DPRK]

KOREA HEUNGJIN TRADING COMPANY (a.k.a. HUNJIN TRADING CO.), Pyongyang, Korea, North [NPWMD]

KOREA TAESONG TRADING COMPANY, Pyongyang, Korea, North [NPWMD]

MUNITIONS INDUSTRY DEPARTMENT (a.k.a. MILITARY SUPPLIES INDUSTRY DEPARTMENT), Pyongyang, Korea,
North [NPWMD]

OFFICE 39 (a.k.a. BUREAU 39; a.k.a. CENTRAL COMMITTEE BUREAU 39; a.k.a. DIVISION 39; a.k.a. OFFICE #39; a.k.a. OFFICE NO. 39; a.k.a. THIRD FLOOR), Second KWP Government Building (Korean – Ch’o’ngsa), Chungso’ng, Urban Town (Korean – Dong), Chung Ward, Pyongyang, Korea, North; Chung-Guyok (Central District), Sosong Street, Kyongrim-Dong, Pyongyang, Korea, North; Changgwang Street, Pyongyang, Korea, North [DPRK]

RECONNAISSANCE GENERAL BUREAU (a.k.a. CHONGCH’AL CH’ONGGUK; a.k.a. KPA UNIT 586; a.k.a. “RGB”), Hyongjesan-Guyok, Pyongyang, Korea, North; Nungrado, Pyongyang, Korea, North [DPRK]

SECOND ACADEMY OF NATURAL SCIENCES (a.k.a. 2ND ACADEMY OF NATURAL SCIENCES; a.k.a. ACADEMY OF NATURAL SCIENCES; a.k.a. CHAYON KWAHAK-WON; a.k.a. CHE 2 CHAYON KWAHAK-WON; a.k.a. KUKPANG KWAHAK-WON; a.k.a. NATIONAL DEFENSE ACADEMY; a.k.a. SANSRI; a.k.a. SECOND ACADEMY OF NATURAL SCIENCES RESEARCH INSTITUTE), Pyongyang, Korea, North [NPWMD]

SECOND ECONOMIC COMMITTEE, Kangdong, Korea, North [NPWMD]

UPDATE 3: According to the Wall Street Journal:

The Obama administration outlined new financial sanctions on North Korea aimed at further choking off Pyongyang’s arms trade and the illicit businesses funding dictator Kim Jong Il’s government.

The U.S. specifically targeted a secretive unit of Pyongyang’s ruling Korean Workers’ Party, known as Office 39, which American officials believe serves as a private slush fund for Mr. Kim.

Washington also blacklisted nearly a dozen North Korean individuals and entities alleged to be overseeing Pyongyang’s development of conventional arms and weapons of mass destruction, as well as their sales to third countries.

Among those designated are the Second Economic Committee of the Workers’ Party and Yun Ho-jin, Pyongyang’s onetime ambassador to the United Nations’ nuclear watchdog, the International Atomic Energy Agency. The U.S. also named to its sanctions list two top officials from Pyongyang’s General Bureau of Atomic Energy, Ri Je-son and Ri Hong-sop.

“When it comes to focusing on illicit activity, we have seen that the world reacts to this kind of thing very, very positively,” said Stuart Levey, the Treasury Department’s undersecretary for terrorism and financial intelligence. “We believe that this sort of program can have a very powerful impact.”

The new U.S. measures freeze any assets of the designated persons or entities inside the U.S. and bars American companies from conducting business with the listed North Koreans. Mr. Levey also said that any foreign entities conducting business with the sanctioned North Koreans could also face U.S. penalties.

Secretary of State Hillary Clinton announced in June that the U.S. would enact new financial penalties on Pyongyang, in part, in response to the North’s alleged torpedoing of a South Korean naval vessel. The March sinking of the Cheonan killed 46 South Korean servicemen and has led to heightened tensions on the Korean peninsula.

U.S. officials fear the attack could be linked to a political succession process inside Pyongyang and could presage other provocative acts by the North. U.S. and Asian officials believe Kim Jong Il is seeking to pass power to his third son, Kim Jong Eun.

…U.S. officials said the targeting of Office 39 is among the most direct assaults on Kim Jong Il’s finances to date and illustrates Washington’s support for the North Korean people. Office 39 has been directly involved in procuring luxury goods for Mr. Kim and Pyongyang’s political elite, even as many North Koreans face starvation.

Office 39 was blacklisted under a new executive order signed by President Barack Obama on Monday that specifically seeks to end North Korea’s ability to raise hard currency through illicit activities like drug smuggling and counterfeit $100 bills. The Treasury said Office 39 was directly involved in a 2009 scheme to illegally export into North Korea two luxury yachts valued at $15 million for Kim Jong Il.

UPDATE 2: According to the Wall Street Journal:

A North Korean arms chief and Pyongyang’s former ambassador to the United Nation’s nuclear agency have emerged as key figures in an intensifying international effort to curb North Korea’s weapons-trading activities.

The global dealings of the two men, Chun Byung-ho and Yun Ho-jin, whom North Korea analysts believe to be related through marriage, date back to the 1980s. They have played leading roles in North Korea’s development and testing of atomic weapons, according to current and former U.S. officials, Asian intelligence analysts and U.N. nonproliferation staffers.

More troubling to officials, Messrs. Chun and Yun also oversee Pyongyang’s vast arms-trading network, which appears to be spreading. They have shipped components for long-range missiles, nuclear reactors and conventional arms to countries including Iran, Syria and Myanmar.

On Monday, the Obama administration announced economic sanctions against various individuals and entities involved in Pyongyang’s nuclear work and in alleged illicit trading activities. The Treasury Department named Mr. Yun and the North Korean body headed by Mr. Chun—the Second Economic Committee of Pyongyang’s ruling Korean Workers’ Party. The sanctions freeze any U.S. assets of those named and bar Americans from conducting business with them. Treasury also warned that foreign firms doing business with them risked sanctions.

The Second Economic Committee oversees a little-known foreign trade office with the Orwellian name of Office 99. The proceeds from the Office’s arms sales go directly to North Korean dictator Kim Jong Il and Pyongyang’s senior leadership, according to these officials and recent North Korean defectors.

“It is broadly believed that the Second Economic Committee…plays the largest and most prominent role in nuclear, other WMD and missile-related development programs, as well as arranging and conducting arms-related exports” for North Korea, says a report issued in May by the U.N. committee tasked with enforcing international sanctions on Pyongyang.

The U.S. and U.N. recently have intensified efforts to combat the Second Economic Committee and Office 99, alarmed by Pyongyang’s two nuclear-weapons tests and its alleged role in sinking a South Korean naval vessel in March. Last year, the U.N. formally sanctioned Mr. Yun and his arms company, Namchongang Trading Co.

North Korean arms shipments moving through Thailand, the United Arab Emirates, South Africa and the South China Sea have been seized or turned back by the U.S. and its allies over the past few years. A Japanese court convicted a Tokyo-based trading company in November of procuring military technologies for Pyongyang with the intent of shipping them to Myanmar.

Still, Messrs. Chun and Yun’s decades of experience in the weapons trade pose a challenge to an international community keen to disrupt Pyongyang’s proliferation activities, say U.S. and Asian officials. “There is no reason to assume that Chun and Yun won’t sell nuclear weapons,” says David Asher, a former Bush administration official who has tracked Pyongyang’s arms trade for a decade. “There needs to be an active effort to disrupt their WMD networks and drive them out of business now, before it’s too late.”

The two men have established a network of front companies in Asia, Europe and the Middle East and have partnered with Southeast Asian, Japanese and Taiwanese criminal syndicates to move cash and contraband, say U.S. officials. And Mr. Yun has used the political cover provided by Pyongyang’s closest ally, China, to openly conduct business in cities such as Beijing and Shenyang, drawing official rebukes from Washington.

North Korean diplomats at Pyongyang’s U.N. mission in New York did not respond to requests for comment. Messrs. Chun and Yun couldn’t be reached.

Current and former U.S. officials say North Korea’s operations resemble in both scale and tactics those of Pakistan’s Abdul Qadeer Khan—one of the most notorious arms dealers in recent years. U.S. officials fear that isolated North Korea, desperate for hard currency, could accelerate its arms exports in a bid to prop up Kim Jong Il’s finances.

Mr. Chun, now 84 years old, and his Second Economic Committee emerged as major global arms exporters in the 1980s, as North Korea shipped as much as $3 billion worth of rockets, pistols and submarines to Tehran during the eight-year Iran-Iraq war, say recent defectors and North Korea analysts.

Pyongyang assisted some communist and socialist countries militarily during the 1960s and 1970s, and provided fighter pilots to aid Egypt and Syria in their wars against Israel. But North Korea found a largely captive market in Iran, which faced a U.S.-led weapons embargo as the West threw its support behind Iraqi strongman Saddam Hussein.

One senior North Korean defector who worked in Pyongyang’s munitions industries says he was dispatched to Iran by the Second Economic Committee in 1987 with the task of constructing missile batteries on the Iranian island of Kish to help Tehran better control the movement of ships through the Straits of Hormuz.

His main interlocutor was Iran’s elite military unit, the Islamic Revolutionary Guard Corps. The former hydro-mechanic says camaraderie developed between his 100-man team and the Guard, despite their different backgrounds.

Mr. Chun’s control over the Second Economic Committee was tied to his close relationship with Pyongyang’s ruling Kim family, say defectors and North Korea experts. The Russian-trained bureaucrat served as a member of North Korean founder Kim Il Sung’s bodyguard unit. He rose up the ranks of the Korean Workers’ Party with the political support of Kim Jong Il, eventually securing a position on Pyongyang’s most powerful political body, the National Defense Commission.

North Korea’s high-level defector, Hwang Jang-yop, has identified Mr. Chun as the broker of a key barter trade in the 1990s with Pakistan that significantly advanced Pyongyang’s nuclear infrastructure. The agreement resulted in North Korea shipping parts for long-range missiles to Islamabad in exchange for A.Q. Khan sending centrifuge equipment used in producing nuclear fuel.

As Mr. Chun pushed forward North Korea’s nuclear program from Pyongyang, Mr. Yun, believed to be the husband of Mr. Chun’s second daughter, emerged as a key player in procuring technologies for the Second Economic Committee from Europe, according to U.S., U.N. and European officials.

Mr. Yun, 66, arrived in Vienna in 1985 as Pyongyang’s ambassador to the International Atomic Energy Agency. The English and German speaker led negotiations with the U.N. agency aimed at forging a nuclear-inspection agreement with North Korea, and he helped oversee a 1992 tour of his nation’s Yongbyon nuclear facility for Hans Blix, the IAEA’s then-managing director.

“Yun was dedicated to turning things around. I truly believe that,” says Willi Theis, who worked closely with Mr. Yun as the head of the IAEA’s safeguards unit overseeing North Korea. Mr. Theis is now retired.

Still, concerns grew inside the IAEA about Mr. Yun’s activities, as relations between Pyongyang and the international community deteriorated, according to IAEA officials.

In 1993, North Korea broke off talks with the IAEA over the agency’s demands for an inspection of the country’s nuclear operations, and the U.S. charged Pyongyang with secretly stockpiling plutonium for atomic weapons. The next year, the Clinton administration threatened to bomb the Yongbyon facility if North Korea didn’t explain where the plutonium had gone. Mr. Yun grew embittered with the diplomatic process and mistrustful of the U.S. and its allies, according to IAEA staff and journalists who met with him.

Mr. Theis says he spent hours discussing the process with Mr. Yun and pressed the Agency to remain engaged with Pyongyang. The West German-born nuclear inspector says he grew suspicious of Mr. Yun’s many trips to other European cities and his contacts with local companies. Mr. Yun even hinted to Mr. Theis that he might have no choice but to directly support North Korea’s nuclear-weapons programs if relations with the IAEA collapsed.

“He came to the conclusion that dealing with the international community was totally disappointing,” said Mr. Theis in a phone interview from Austria. “Mr. Yun had definitely learned how to establish contacts with all types of people [while in Vienna]—not just from the IAEA, but managers of companies.”

Mr. Theis’s concerns about Mr. Yun would be borne out in 2003, when a German businessman, Hans Werner Truppel, was arrested and eventually convicted by a Stuttgart court of selling 22 metric tons of aluminum tubes to Mr. Yun.

The North Korean and his company, Namchongang Trading, used offices in Beijing and Shenyang, China, to place orders for the equipment, which is critical to building centrifuges needed to enrich uranium, according to a German Customs Bureau report. U.S. officials briefed on the case were alarmed that Mr. Yun conducted some of his business through the offices of Shenyang Aircraft Industry Co., a Chinese state-owned firm.

In the ensuing months, the State Department aired its concerns about Mr. Yun’s activities to China’s government, according to former U.S. officials. But Beijing took no action.

China’s ministries of foreign affairs and commerce didn’t respond to requests for comment. Shenyang Aircraft says it had no recollection of any dealings with Mr. Yun.

Messrs. Chun and Yun have sought to accelerate North Korea’s weapons sales and procurement in recent years and allegedly have played important roles in strengthening Pyongyang’s military ties to countries such as Syria and Myanmar, say current and former U.S. officials.

North Korea analysts believe most of these transactions have been conducted through Office 99, which they describe as an international sales office and slush fund for Kim Jong Il.

“Anything that has to do with the imports and exports of weapons flows through Office 99,” says Oh Kongdan, a North Korea expert at Virginia’s Institute of Defense Analyses, a Pentagon-funded think tank. “It’s a royal patronage system.”

U.S. officials say that since the late 1990s they detected through intelligence channels intensifying military cooperation between North Korea and Syria, focused on everything from the development of chemical weapons to missiles.

In September 2007, Israeli jets bombed a facility in eastern Syria that U.S. officials say was a nearly operational replica of North Korea’s Yongbyon nuclear reactor. As many as 10 North Koreans died in the Israeli attack, according to U.S. officials. Mr. Yun and Namchongang Trading are believed to have played a central role in brokering development of the facility.

“That particular company was all over the nuclear trade. There’s no question about it,” says John Bolton, who served as the Bush administration’s top non-proliferation official. Both Syria and North Korea have denied cooperating on developing nuclear technologies.

Over the past two years, U.S. and U.N. officials have also voiced concerns about North Korea’s deepening military ties with Myanmar, the Southeast Asian country formerly known as Burma.

North Korea engineers have helped Myanmar build a maze of fortified bunkers to house senior government officials and military installations, according to Burmese defectors and commercial satellite photos. Current and former U.S. officials say Washington has intervened to block the transfer of Scud missiles to Myanmar from Pyongyang.

In June, Japan’s Ministry of Economy and Trade banned Tokyo-based Toko Boeki Trading Co. and device maker Riken Denshi from conducting international trade after three of their affiliated executives, one of them an ethnic Korean, were arrested trying to send machine tools on an export-control list to Myanmar using a dummy company in Malaysia. The equipment could be used to develop either ballistic missiles or centrifuges for a uranium-enrichment program, according to weapons experts. And the U.N. in its May report said it was examining “suspicious” ties between Mr. Yun’s Namchongang Trading and Myanmar, possibly linked to these activities in Japan.

The Obama administration, in response, has announced a stepped-up campaign to block North Korea’s ability to raise funds through the arms trade. In addition to the new sanctions, the Pentagon has said it will intensify the interdiction of ships and planes believed to be carrying North Korean arms.

Still, Mr. Theis and other North Korea experts believe that it is only through dialogue that the West will be able to curb the North’s proliferation threat. Mr. Theis says he is recently lobbied the IAEA to allow him to return to Pyongyang to hold meetings with Mr. Yun. So far, he says, the IAEA hasn’t agreed.

UPDATE 1: According to Reuters:

President Barack Obama on Monday broadened U.S. financial sanctions on North Korea, freezing the U.S. assets of eight North Korean companies or agencies and four individual citizens.

The U.S. Treasury released a fact sheet detailing U.S. allegations against the North Korean entities and individuals targeted under the new U.S. executive order and a previous one. The following is a summary:

Companies and Agencies

The Reconnainance General Bureau
The Reconnaissance General Bureau (RGB) is North Korea’s premiere intelligence organization, created in early 2009 by the merger of existing intelligence agencies. The RGB trades in conventional arms and controls the North Korean conventional arms firm Green Pine Associated Corporation, which was also identified for sanctions under Obama’s order for exporting arms or related materiel from North Korea, the Treasury said.

Green Pine Associated Corp.
Green Pine was brought under the control of the RGB in 2009. The Treasury said it specializes in the production of maritime military craft and armaments, such as submarines, military boats and missiles systems, and has exported torpedoes and technical assistance to Iranian defense-related firms.

Green Pine is responsible for approximately half of the arms and related materiel exported by North Korea and has taken over many of the activities of the Korea Mining Development Trading Corporation, according to the Treasury.

Office 39
Office 39 of the Korean Workers’ Party engages in illicit economic activity to support the North Korean government, the U.S. Treasury fact sheet said. Office 39 has branches throughout the nation that raise and manage funds and is responsible for earning foreign currency for senior party leaders through illicit activities such as narcotics trafficking.

Office 39 controls a number of entities inside North Korea and abroad through which the Treasury said it is involved in the production, smuggling, and distribution of narcotics, and it has also been involved in the attempted procurement and transfer to North Korea of luxury goods.

Office 39 produced methamphetamine and was also involved in its supply to small-scale North Korean smugglers for distribution through China and South Korea. It also operates poppy farms and produces opium and heroin, the Treasury said.

In 2009, Office 39 was involved in the failed attempt to purchase and export to North Korea — through China — two Italian-made luxury yachts worth more than $15 million and destined for North Korean leader Kim Jong-il, the Treasury said.

Korea Mining Development Trading Corp. (KOMID)
KOMID is Pyongyang’s main arms dealer and main exporter of goods and equipment related to ballistic missiles and conventional weapons, with offices located in multiple countries around the world with the primary goal of facilitating weapons sales and seeking new customers for its weapons, according to the Treasury.

KOMID uses Korea Taesong Trading Company and Korea Heungjin Trading Company for trading purposes. Korea Taesong has acted on behalf of KOMID in dealings with Syria, and Korea Heungjin acts as the procurement arm of KOMID, the Treasury fact sheet said. Korea Heungjin is also suspected to have been involved in supplying missile-related goods to Iran’s Shahid Hemmat Industrial Group, it said.

Korea Taesong was previously sanctioned by the U.S. Department of State in 2008 under the Iran, North Korea, and Syria Nonproliferation Act.

Munitions Industry Department
The Treasury said the Munitions Industry Department is responsible for overseeing the development of North Korea’s ballistic missiles, including the Taepodong-2 which was first test-launched in 2006 and has a possible range of 4,100 miles.

The Second Economic Committee
The Second Economic Committee is responsible for overseeing production of North Korea’s ballistic missiles. It also directs the activities of KOMID, according to the U.S. Treasury.

The Second Academy of Natural Sciences
The Second Academy of Natural Sciences is a national-level organization responsible for research and development of North Korea’s advanced weapons systems, including missiles and probably nuclear weapons. It uses a number of subordinate organizations, including Tangun Trading Corporation, to obtain technology, equipment, and information from overseas for use in North Korea’s missile and probably nuclear weapons programs, the U.S. Treasury said.

Individuals

Kim Yong-chol
General Kim Yong-chol commands the Reconnaissance General Bureau.

Ri Je-son and Ri Hong-sap
The U.S. Treasury fact sheet said Ri Je-son and Ri Hong-sop act for or on behalf of the General Bureau of Atomic Energy (GBAE), which is responsible for North Korea’s nuclear program and manages operations at the Yongbyon Nuclear Research Center. GBAE was designated by the United Nations in July 2009 for its involvement in North Korea’s nuclear program and subsequently sanctioned by the State Department.

Ri Je-son is the director of GBAE and is responsible for facilitating several nuclear endeavors including GBAE’s management of Yongbyon Nuclear Research Center and Namchongang Trading Corporation, according to the Treasury.

Ri Hong-sop is a councilor for GBAE. He is also the former Director of Yongbyon Nuclear Research Center. In that capacity he oversaw the three core facilities that North Korea used to produce weapons-grade plutonium, the Treasury said.

Both Ri Je-son and Ri Hong-sop are also subject to the asset freeze and travel ban provisions under an earlier United Nations Security Council resolution.

Yun Ho-jin
Yun Ho-jin acts for or on behalf of Namchongang Trading Corporation (NCG), a North Korean trading company subordinate to GBAE. NCG has been involved in the procurement of Japanese- origin vacuum pumps that were identified at a North Korean nuclear facility, as well as nuclear-related procurement associated with a German individual.

Yun Ho-jin has acted on behalf of NCG in various capacities since the 1980s. As a senior official at NCG, he oversaw the import of items needed for North Korea’s uranium enrichment program.

Through an NCG office in China, Yun Ho-jin was also involved in purchases of sensitive material linked to the construction of a nuclear reactor in Syria, the Treasury fact sheet said.

He is also under U.N. Security Council asset freeze and travel ban sanctions.

ORIGINAL POST: Here is the full statement by the US Treasury Department:

August 30, 2010
TG-840

United States Designates North Korean Entities and Individuals for Activities Related to North Korea’s Weapons of Mass Destruction Program

WASHINGTON – In joint actions, the U.S. Departments of Treasury and State today announced the designations of five North Korean entities and three individuals under Executive Order (E.O.) 13382 for supporting North Korea’s Weapons of Mass Destruction (WMD) program. Executive Order 13382 is an authority aimed at freezing the assets of WMD proliferators and their supporters thereby isolating them from the U.S. financial and commercial systems.

Also today, President Obama signed an Executive Order that directs the Secretary of the Treasury, in consultation with the Secretary of State, to target for sanctions individuals and entities facilitating North Korean trafficking in arms and related materiel; procurement of luxury goods; and engagement in illicit activities, including money laundering, the counterfeiting of goods and currency, bulk cash smuggling and narcotics trafficking. The new Executive Order supplements E.O 13382, under which North Korean entities have been designated to date, and is consistent with measures required in UNSCRs 1718 and 1874.

Korea Taesong Trading Company and Korea Heungjin Trading Company
Pyongyang-based entities the Korea Taesong Trading Company and Korea Heungjin Trading Company, are used by the Korea Mining Development Trading Corporation (KOMID) for trading purposes. Korea Taesong Trading Company has acted on behalf of KOMID in dealings with Syria, and Korea Heungjin Trading Company acts as the procurement arm of KOMID. Korea Heungjin Trading Company is also suspected to have been involved in supplying missile-related goods to Iran’s Shahid Hemmat Industrial Group.

KOMID is Pyongyang’s premier arms dealer and main exporter of goods and equipment related to ballistic missiles and conventional weapons, with offices located in multiple countries around the world with the primary goal of facilitating weapons sales and seeking new customers for its weapons. It was listed in the Annex to E.O. 13382 of June 2005 and has been sanctioned by the United States repeatedly over the last 10 years for trading in missile technology. KOMID was also designated by the UNSCR 1718 Committee to be subject to the asset freeze provisions of UNSCR 1718.

Korea Taesong Trading Company was previously sanctioned by the U.S. Department of State in 2008 under the Iran, North Korea, and Syria Nonproliferation Act (INKSNA). INKSNA provides for the imposition of measures on entities or individuals for the transfer to or acquisition from Iran, Syria, or North Korea of equipment or technology controlled under multilateral export control lists or otherwise having the potential to make a material contribution to the proliferation of WMD or cruise or ballistic missile systems.

Second Economic Committee, Munitions Industry Department and Second Academy of Natural Sciences
The Munitions Industry Department and Second Economic Committee are involved in key aspects of North Korea’s missile program. The Munitions Industry Department is responsible for overseeing the development of North Korea’s ballistic missiles, including the Taepo Dong-2.

The Second Economic Committee is responsible for overseeing the production of North Korea’s ballistic missiles. The Second Economic Committee also directs the activities of KOMID.

The Second Academy of Natural Sciences is a national-level organization responsible for research and development of North Korea’s advanced weapons systems, including missiles and probably nuclear weapons. The Second Academy of Natural Sciences uses a number of subordinate organizations to obtain technology, equipment, and information from overseas, including Tangun Trading Corporation, for use in North Korea’s missile and probably nuclear weapons programs.

Tangun Trading Corporation is subordinate to the Second Academy of Natural Sciences and is primarily responsible for the procurement of commodities and technologies to support North Korea’s defense research and development programs and procurement, including materials that are controlled under the Missile Technology Control Regime (MTCR) or the Australia Group. Tangun Trading Corporation was designated by the Department of State pursuant to E.O. 13382 in September 2009. Tangun Trading Corporation was also designated by the UNSCR 1718 Committee to be subject to the asset freeze provisions of UNSCR 1718.

Ri Je-son and Ri Hong-sop
Ri Je-son and Ri Hong-sop act for or on behalf of the General Bureau of Atomic Energy (GBAE), which is responsible for North Korea’s nuclear program and manages operations at the Yongbyon Nuclear Research Center. GBAE was designated by the United Nations in July 2009 for its involvement in North Korea’s nuclear program and subsequently sanctioned by the Department of State under E.O. 13382 in September 2009.

Ri Je-son is the Director of GBAE and is responsible for facilitating several nuclear endeavors including GBAE’s management of Yongbyon Nuclear Research Center and Namchongang Trading Corporation.

Ri Hong-sop is a councilor for GBAE. He is also the former Director of Yongbyon Nuclear Research Center. In that capacity he oversaw the three core facilities that the DPRK used to produce of weapons-grade plutonium: the Fuel Fabrication Facility, the 5MWe Experimental Reactor, and the Radiological Laboratory (Reprocessing Plant).

Ri Je-son and Ri Hong-sop were also designated by the UNSCR 1718 Committee to be subject to the asset freeze and travel ban provisions of UNSCR 1718.

Yun Ho-lin
Yun Ho-jin acts for or on behalf of Namchongang Trading Corporation (NCG), a North Korean trading company subordinate to GBAE. NCG has been involved in the procurement of Japanese- origin vacuum pumps that were identified at a North Korean nuclear facility, as well as nuclear-related procurement associated with a German individual. NCG was designated by the State Department pursuant to E.O. 13382 in June 2009.

Yun Ho-jin has acted on behalf of NCG in various capacities since the 1980s. As a senior official at NCG, he oversaw the import of items needed for North Korea’s uranium enrichment program.

Through an NCG office in China, Yun Ho-jin was also involved in purchases of sensitive material linked to the construction of a nuclear reactor in Syria.

Yun Ho-jin was also designated by the UNSCR 1718 Committee to be subject to the asset freeze and travel ban provisions of UNSCR 1718.

Identifying Information:
Entity: Korea Taesong Trading Company
Location: Pyongyang, North Korea

Entity: Korea Heungjin Trading Company
AKA: Hunjin Trading Co.
Location: Pyongyang, North Korea

Entity: Second Economic Committee
Location: Kangdong, North Korea

Entity: Munitions Industry Department
AKA: Military Supplies Industry Department
Location: Pyongyang, North Korea

Entity: Second Academy of Natural Sciences
AKA: 2nd Academy of Natural Sciences
AKA: Che 2 Chayon Kwahak-Won
AKA: Academy of Natural Sciences
AKA: Chayon Kwahak-Won
AKA: National Defense Academy
AKA: Kukpang Kwahak-Won
AKA: Second Academy of Natural Sciences Research Institute SANSRI
Location: Pyongyang, North Korea

Individual: Ri Je-Son
AKA: Ri Che-Son
DOB: 1938

Individual: Ri Hong-Sop
DOB: 1940

Individual: Yun Ho-jin
AKA: Yun Ho-chin

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Daily NK on Office 39

Monday, August 30th, 2010

Pictured above is the location of the First Caribbean International Bank

According to the Daily NK:

The existence of a secret bank account operated by the No.39 Department of the Chosun Workers’ Party has been publicly confirmed for the first time, bringing yet more attention to bear on the activities of banks in one of the western world’s renowned tax havens.

The No.39 Department, which is responsible for the management of Kim Jong Il’s private funds, holds the bank account with the British Virgin Islands branch of First Caribbean International Bank (FCIB), a prominent bank in the Caribbean region.

According to an expert source familiar with China and North Korea, the No. 39 Department’s secret overseas account exists under the name “Hana Holdings”. It is apparently held with the Road Town branch of the bank, which is based in Barbados and has branches in 17 countries.

Explaining the importance to North Korea of the No.39 Department account, the source told Daily NK, “Due to recent UN Security Council sanctions, the No. 39 Department is experiencing considerable difficulties with its overseas financial trade. Currently, excluding Chinese banks, their only active overseas account is that held with FirstCaribbean International Bank.”

Also, he added, “The only bank through which the No. 39 Department can make overseas transfers is FirstCaribbean International Bank in the British Virgin Islands, since their other secret bank accounts are all blocked.”

He said, “In cases of normal trade relationships with other companies, it used to be possible to transfer the money overseas from China. However, those routes are blocked as well. Since United Nation’s financial sanctions against North Korea make it difficult for North Korea to transfer money to accounts in third countries from Chinese banks, all foreign currency earning units including the No. 39 Department are experiencing the same difficulties.”

Generally, the No. 39 Department works by transferring money from secret overseas bank accounts to accounts with Chinese banks for money laundering.

The source explained, “No. 39 Department moves the management funds from third countries to FirstCaribbean International Bank, then sends the money to the Bank of China until it can be transferred to a North Korean bank or withdrawn.”

According to the source, the person in charge of transfers between FirstCaribbean International Bank and Bank of China is dispatched by the No. 39 Department under a false name. Also, the official allegedly travels to China frequently to deal with problems involving trade with the Chinese bank.

News of the FCIB account will not be too surprising to North Korea economy watchers. Entities in the British Virgin Islands were already suspected of doing business with the North Korean regime before this latest revelation because of the islands’ connection to the activities of Taepung International Investment Group.

The annual returns of the Taepung Group, as it is more commonly known, show that it was originally set up in September, 2006. However, it became better known early in 2010 when it was placed at the center of efforts to revive the North Korean economy through the creation of a state development bank.

Registered in Hong Kong, its only shareholder as of its 2010 Annual Return was Taepung International Investment Holdings Ltd, whose registered address is in Road Town, British Virgin Islands.

According to the same return, obtained by a keen observer of North Korea’s illegal activities, Ken Kato, the Taepung Group’s corporate secretary is Sai Ying Company Ltd, whose only shareholder, and corporate director, is JYBD Holdings Ltd. JYBD Holdings Ltd’s registered address is the same one in Road Town, British Virgin Islands.

This is not the first time that FirstCaribbean International Bank has run into trouble, either. In 2008, it was indicted on 113 charges of “failure to report suspicious transactions” between 2001 and 2005 by the Belize Financial Intelligence Unit (FIU).

However, the charges were dropped because, according to a Belize newspaper, they were threatening to destabilize the country’s financial sector. Instead, First International was ordered to pay for both an electronic reporting system for the country and the refurbishment of two parks.

There are known to be a substantial number of other North Korean accounts held in countries around the world. At the time of the report completed by the 1718 Committee (North Korea sanctions committee) under the UN Security Council last July, North Korean banks were said to hold a total of 39 accounts with 18 banks located in 14 countries. Allegedly, these accounts include a considerable number managed by the No. 39 Department.

17 of the 39 accounts were located with big Chinese banks like Bank of China, China Construction Bank and HSBC, according to the report. Bank of China in Macao had the largest number of North Korean accounts, while some other accounts were held with Beijing and Dandong branches.

In addition, at the time, North Korea had 18 accounts with 11 banks in 8 countries in Europe; Russia, Switzerland, Denmark, Hungary, Poland, Italy, Germany, and Belarus; also, it had one account each in Malaysia and Kazakhstan.

As the 1718 Committee report explained, “The DPRK… employs a broad range of techniques to mask its financial transactions, including the use of overseas entities, shell companies, informal transfer mechanisms, cash couriers and barter arrangements. However, it must still, in most cases, rely on access to the international financial system to complete its financial operations. In structuring these transactions, attempts are made to mix illicit transactions with otherwise legitimate business activities in such a way as to hide the illicit activity.”

And also according to the Daily NK:

The newly revealed secret overseas bank account held by the No. 39 Department is just one of several accounts set up in various locations around the world to manage Kim Jong Il’s funds.

However, due to the financial sanctions brought about by two nuclear tests and multiple missile launches, the No. 39 Department’s secret overseas accounts are continuously shrinking. As one North Korean source in China put it, “Due to United Nation’s financial sanction against North Korea, the No. 39 Department’s management of its overseas secret accounts has become difficult.”

Now, due to the Cheonan incident, the U.S. is planning to put in place “customized” financial sanctions which incorporate existing UN Security Council and EU financial sanctions, so the No. 39 Department’s overseas accounts will only get more difficult to manage in the future.

The No. 39 Department’s overseas accounts, which allegedly contribute much to Kim Jong Il’s governing funds, are prime targets for financial sanction since they are key to transferring those funds generated by illegal activity.

According to intelligence authorities, the No.39 Department has a bank account with Daesung Bank in Pyongyang, and manages capital in some of the world’s most influential banks in Macao, Hong Kong, Germany, Japan, and England through a subsidiary of Daesung Bank, Gold Star Bank (Geumbyeol Bank) in Vienna, Austria.

The $25 million which was frozen in Banco Delta Asia in 2005 was allegedly known to be some of Kim Jong Il’s governing funds managed by the No. 39 Department.

Radio Free Asia reports that even the Luxembourg government seems likely to implement any new sanctions, quoting them as saying, “We are keeping a close eye on the illegal activities which can take place through North Korea’s overseas accounts.”

The No. 39 Department has 17 overseas branches, 100 trading companies and banks under its auspices. They generate foreign currency through loyalty funds collected from each agency and management of hotels and foreign currency stores. Also, they trade the country’s natural resources including pine mushrooms, gold and silver.

The department is also in charge of the production of “supernotes,” high quality counterfeit $100 bills, and has a role in weapons and the illegal drugs trade.

The funds are mostly spent on the living costs of the Kim family and the patronage network required to maintain his coterie of high officials. In 2008, the sum of luxury goods purchased by North Korea was estimated to be more than $100 million. For example, immediately prior to the anniversary of Kim Il Sung’s birth on April 15th, North Korea imported approximately 200 high grade vehicles from China.

Since foreign currency generation started to become difficult due to the sanctions, Kim Jong Il has allegedly revived the No. 38 Department, which used to be in charge of overseas currency earning and was only merged with the No. 39 Department in September of 2009, and replaced the head of No. 39 Department with Jeon Il Choon, an old high school friend.

As Kim Kwang Jin, a North Korean defector who worked for the Northeast Asia Bank of North Korea, pointed out in a recent press interview, “The UN Security’s North Korea sanctions and the United States’ Banco Delta Asia sanctions must have caused the shrinking of North Korea’s overseas accounts. It is possible that North Korea could try to open accounts under phantom company names to continue with its financial trades.”

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Daily NK proposes “pet sanctions”

Thursday, August 12th, 2010

According to the Daily NK:

It has been suggested that pets should added to the list of “luxury goods” sanctioned and supposedly out of reach of the Kim Jong Il regime.

While “thoroughbred horses” are already a luxury good on the EU’s list of banned products published in the final version of the “Report to the Security Council from the Panel of Experts Established Pursuant to Resolution 1874”, there is nothing about pets.

However, according to one anonymous source well-versed in North Korea matters, Kim Jong Il has been known to spend hundreds of thousands of dollars on pets from France and Switzerland.

The money for his purchases apparently comes from the No. 39 Department of the Central Committee of the Party, according to a Daily NK source, and since the funds generated by the No. 39 Department come from illicit activities such as selling weapons, drugs, counterfeit cigarettes and super notes, he believes this pet-related trading must also be put on the list of sanctioned “luxury goods.”

Among dogs, for example, Kim apparently has a preference for the Shitzu and has spent many thousands of dollars purchasing and raising them. Kim Chun Hyung, a Seoul-based veterinarian, confirmed the price of such fine breeds, saying, “The price of pets is very diverse, but when you import a purebred you may need to pay tens of thousands of dollars.”

Jang Jin Sung, a poet who was said to be Kim Jong Il’s favorite poet in North Korea until he defected in 2004, described how much Kim Jong Il loves his pet dogs in an interview on Wednesday, explaining, “I was invited to a no.1 event, in which Kim Jong Il is set to appear, at Kim’s Kalmacheon Villa in Wonsan, Kangwon Province. Security was so fussy that they forced us to disinfect our hands, and then I waited for him nervously.”

“All of sudden a small white puppy appeared, which made me wonder, but then Kim Jong Il entered the hall behind it,” Jang said. “While Kim was having dinner, the puppy walked around without restriction. When it approached Kim, he petted it many times.”

The anonymous source said that Kim is always accompanied by dogs to his onsite inspections, adding that their food and shampoo is all imported, from France in the case of shampoo.

When the animals fall sick, top quality vets from foreign countries are invited to Pyongyang or the animals are taken overseas for treatment, the source said, adding, “The reason why they go by plane is for ease of customs clearance.”

The responsibility for importing pets is the job of overseas-based officials, but due to Kim Jong Il’s picky taste, especially in cats, they find it hard to match the color of fur or eyes that Kim likes, according to the source. 

Read the full story here:
Pets Are Luxury Goods, Too
Daily NK
Shin Joo Hyun
8/12/2010

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UN report explains sanctions decisions

Friday, August 6th, 2010

According to the Daily NK:

The 1718 Committee of the UN Security Council has published the final version of its “Report to the Security Council from the Panel of Experts established Pursuant to Resolution 1874,”

In the report, of which the Daily NK has obtained a copy, the 1718 Committee revealed North Korean overseas accounts which had likely been used for North Korea’s illicit activities such as conventional weapons transactions and luxury goods, and the names of entities and individuals involved in those activities. The lists were submitted by UN member states.

The report singles out 17 North Korean officials thought likely to violate UN Resolutions 1718 and 1874, and outlines the reasons why they were designated by the UN member states.

They are Jang Sung Taek, Vice-chairman of the National Defense Commission and the closest associate of Kim Jong Il, Vice-chairman of the National Defense Commission Oh Keuk Ryul, Kim Young Chun, the Minister for the People’s Armed Forces, Director of No. 39 Department Kim Dong Woon, Military Supplies Secretary in the Central Committee of the Party Jeon Byung Ho, former Yongbyon technical director Jeon Chi Bu, First Vice-director of the Ministry of the Munitions Industry Chu Kyu Chang, Standing Vice-director of the People’s Army’s General Political Department Hyun Cheul Hae, President of the Tanchon Commercial Bank Kim Dong Myung, Member of the National Defence Commission Baek Se Bong, Deputy Director of the General Political Department of the People’s Armed Forces Park Jae Kyung, President of the Academy of Science Byeon Youong Rip, Director of the General Bureau of Atomic Energy Ryeom Young, Head of the Department of Nuclear Physics of Kim Il Sung University Seo Sang Il, President of Kohas AG Jacop Steiger and Alex H.T. Tsai, who is known to have provided financial, technological and other support for KOMID, and his wife, Su Lu-chi.

It also released a list of autonomous designations provided by member states, covering 19 North Korean entities. That list was made based on information collected as of April 30th this year.

They are Amroggang Development Banking Corporation, Global Interface Company Inc., Hesong Trading Corporation, Korea Complex Equipment Import Corporation, Kohas AG, Korea International Chemical Joint Venture Company, Korea Kwangson Banking Corp, Korea Kwangsong Trading Corporation, Korea Pugang Trading Corporation, Korea Pugang Mining and Machinery Corporation ltd., Korea Ryongwang Trading Corporation, Korea Ryonha Machinery Joint Venture Corporation, Korea Tonghae Shipping Company, Ponghwa Hospital, Pyongyang Informatics Centre, Sobaeku United Corp., Tosong Technology Trading Corporation, Trans Merits Co. Ltd., and Yongbyon Nuclear Research Centre.

13 out of the 19 have direct or indirect links to Tanchon Commercial Bank and Korea Mining Development Trading Corporation (KOMID).

Amroggang Development Banking Corporation is the financial arm of KOMID and related to Tanchon Commercial Bank, which has also been designated by the 1718 Committee. Additionally, Global Interface Company Inc. is owned by Alex Tsai, who is thought to have provided, or attempted to provide, support to KOMID.

Sobaeku United Corp. is involved in activities related to natural graphite, producing graphite blocks that can be used in missiles.

The report points out, “North Korea has established a highly sophisticated international network for the acquisition, marketing and sale of arms and military equipment, and arms exports have become one of the country’s principal sources for obtaining foreign exchange,” and goes on to say, “Agencies under the National Defense Commission (NDC), the Workers’ Party of Korea (WPK) and the Korean People’s Army (KPA) are most active in this regard.”

The report explains, “The Second Economic Committee of the National Defense Commission plays the largest and most prominent role in nuclear, other WMD and missile-related development programs as well as in arranging and conducting arms-related exports.”

It adds, “The General Bureau of Surveillance of the Korean People’s Army is involved in the production and sale of conventional armaments.”

The report points out that North Korea has opened 39 accounts with 18 overseas banks in 14 countries. 17 of which are held with Chinese banks.

Besides China, 11 banks in eight European and former Soviet countries (Russia, Switzerland, Denmark, Hungary, Poland, Italy, German, Belarus and Kazakhstan) hold 18 North Korean accounts. There is one account in Malaysia.

“The DPRK also employs a broad range of techniques to mask its financial transactions, including the use of overseas entities, shell companies, informal transfer mechanisms, cash couriers and barter arrangements,” the report notes.

According to experts on North Korea, since North Korean overseas illegal activities are all led by the loyal group surrounding Kim Jong Il, U.S. financial sanctions in accordance with UN Security Council resolutions 1817 and 1874 and also U.S. Executive Order (E.O.) 13382 have the potential to be a great pressure on the Kim Jong Il regime.

The Panel of Experts, which was appointed by the UN Secretary-General on 12 August 2009 to author the report, are David J. Birch (United Kingdom of Great Britain and Northern Ireland, coordinator), Masahiko Asada (Japan), Victor D. Comras (United States of America), Erik Marzolf (France), Young Wan Song (Republic of Korea), Alexander Vilnin (Russian Federation), and Xiaodong Xue (People’s Republic of China).

Read the full story here:
Report Explains Sanctions Decisions
Daily NK
Kim Yong Hun
8/6/2010

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Mansudae Overseas Development Group Projects

Wednesday, June 23rd, 2010

According to the Daily NK:

North Korea has earned more than $160 million in the last ten years thanks to the construction of sculptures and other edifices in countries across Africa.

A Daily NK source in China revealed on the 18th, “Since 2000, North Korea has been earning colossal quantities of dollars through contracts for the Mansudae Overseas Project Group of Companies under the Mansudae Art Institute to construct sculptures.”

Mansudae Art Institute is an organization primarily dedicated to the idolization of Kim Il Sung and Kim Jong Il through public works, one whose construction of edifices such as the Juche Tower and Arch of Triumph in Pyongyang has added to the status of the country.

It has also been building revolutionary monuments in African countries such as Ethiopia since the 1970s in order to maintain cordial relations with socialist states, but in the early 2000s started doing work in African countries to earn foreign currency as well.

According to the source, North Korea has earned $66.03 million from Namibia alone thanks to the construction of the Presidential Palace ($49 million); the Cemetery of National Heroes ($5.23 million); a military museum ($1.8 million); and Independence Hall ($10 million).

It has also earned almost $55 million from Angola via the António Agostinho Neto culture center ($40 million); Cabinda Park ($13 million); and the Peace Monument ($1.5 million).

Additionally, the North has constructed a basketball stadium ($14.4 million) and an athlete academic center ($4.8 million) in the Congo, earning almost $20 million dollars in total.

Thanks to the Monument to the African Renaissance in Senegal, the North has made another $12 million dollars.

There are around 19.8㎢ set aside for a vacation spot for the president of Equatorial Guinea, which is supposed to earn Mansudae around $800,000, not to mention a government office building ($1.5 million), Luba Stadium ($6.74 million) and conference halls ($3.5 million).

The source also reported, “The money earned from these construction projects is managed by the No. 39 Department. Some of these dollars are used for domestic governance, while the rest go to secret accounts in Switzerland or Macau to become Kim Jong Il’s secret funds.”

Here are the images from the story including a table of financial data (which I would take with a grain of salt):

dnk-mansudae-1.jpg dnk-mansudae-2.jpg dnk-mansudae-3.jpg dnk-mansudae-4.jpg dnk-mansudae-5.jpg dnk-mansudae-6.jpg dnk-mansudae-7.jpg

Additional Information:

1. I blogged here about the Derg Monument in Ethiopia.

2. I have located some of the Mansudae Overseas projects mentioned in this story (as well as numerous other places not menioned in this story: Egypt and Syria, Zimbabwe, DR Congo). However, here are GeoEye satellite images of some of the Namibia and Angola projects mentioned above courtesy of Google Earth:  

Namibia National Heroes Acre (22°39’46.02″S,  17° 4’41.06″E):

national-heroes-acre-namibia-thumb.jpg

Namibia State House (22°35’28.83″S,  17° 6’2.76″E)

namibia-state-house-thumb.jpg

Cultural Center of António Agostinho Neto (Mausoleum) (8°49’24.73″S,  13°13’8.52″E)

angola-nehro-thumb.jpg

 

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Room (Bureau) 38 allegedly restored

Wednesday, June 23rd, 2010

According ot the Choson Ilbo:

North Korea in March restored a special department in the Workers Party codenamed Room 38 which manages leader Kim Jong-il’s coffers and personal slush funds, it emerged Monday. The North last fall merged Room 38 with Room 39, which manages party slush funds.

“Rooms 38 and 39 were merged to simplify Kim Jong-il’s slush funds,” said a North Korean source. “But when it became difficult to secure hard currency due to international sanctions, Room 38 seems to have been restored because there was a feeling that Room 39 alone can’t meet the need.”

Room 38 is reportedly led by Kim Tong-il, who heads three regional departments in charge of earning hard currency.

Room 39 tries to maximize earnings from gold and zinc mining and farming and fisheries. It also manages stores and hotels exclusively for foreigners in Pyongyang. Room 39 seems to have suffered badly due to the recent suspension of inter-Korean trade. “Taesong Bank and Zokwang Trading, which received remittances from Mt. Kumgang tourism, are both controlled by Room 39, and is also in charge of the exports of agricultural and fisheries products,” said a government source.

Kim Jong-il needs dollars to maintain the party elite’s loyalty to him and his heir presumptive. He is said to have told party bigwigs in February, “From now on I will judge your loyalty based on the amount you contribute to the fund.” His son Jong-un is also said to be amassing separate slush funds for his own use.

But international sanctions on exports of weapons, counterfeit dollars, fake cigarettes and drugs remain in place, and the United States is pushing ahead with additional financial sanctions over the North’s sinking of the South Korean Navy corvette Cheonan in March. Pyongyang was dealt a heavy blow in 2005 when the U.S. froze US$25 million in the Banco Delta Asia in Macao which was apparently for Kim’s personal use.

Kim earlier this year appointed his high school friend Jon Il-chun head of Room 39. Jon was also named chairman of the National Development Bank, established early this year with a view to conducting normal international financial transactions to induce foreign investment. “North Korea seems to be planning to divert part of foreign investment to Kim’s slush fund,” said a government official.

NK Leadership Watch has more

Read the full story here:
Kim Jong-il Restores Special Department to Swell Coffers
Choson Ilbo
6/24/2010

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DPRK looking for Chinese investors in Taebong gold mine

Tuesday, May 4th, 2010

According to the Daily NK:

The chairman of North Korea’s State Development Bank, Jeon Il Chun visited China on April 8, reportedly to try and bring Chinese investment to Daebong Mine, located near Hyesan, Yangkang Province.

Daebong Mine is one of North Korea’s major gold mines, managed under the auspices of the No. 39 Department of the Central Committee, a special department charged with raising funds for Kim Jong Il’s personal use. Jeon Il Chun is the person in charge of the No. 39 Department.

Attempts to sell shares in a gold mine directly controlled by the 39 Department, Kim Jong Il’s own private safe, to China seem to indirectly imply that Kim is suffering from a debilitating foreign currency supply crisis.

One Daily NK source in China who is well-acquainted with North Korean affairs reported that while Jeon was in China, he met with the management of three or four Chinese enterprises which already have investments in North Korea, and suggested investment conditions under which the North could transfer some of its mineral rights to them and receive capital investments in return.

The source said, “For now, as far as I know, executive managers of the No. 39 Department have been in contact with Chinese enterprises. Since the Workers’ Party is trying to sell shares in a gold mine, it seems the funding of the Party might be serious.”

“It is not clear whether or not this attempt was done on Kim Jong Il’s instructions, but attracting foreign investment in a gold mine is not a commonplace affair,” the source pointed out, adding that an investor has not yet been put in place.

What is the Daebong Mine for?

The Daebong Mine is a relatively large gold mine on the border of Woonheung and Gapsan in Yangkang Province. Until 2001, a Yangkang provincial foreign currency earning enterprise and the foreign currency earning department of the People’s Safety Agency jointly managed it. However, in May, 2002, it became a No. 39 Department affiliated enterprise.

The No. 39 Department has been raising private funds for the leader and Party operations under the Finance and Accounting Department of the Central Committee since the mid-1970s. According to defectors, it has the highest authority and the largest funds of all North Korea’s foreign currency earning enterprises. Especially, it has the ability to mobilize tremendous financial resources since it manages and controls supplies of gold and silver and rare non-ferrous metals.

A source from Yangkang Province explained, “According to Chongjin University of Mining and Metals and Kim Chaek University of Technology, the purity of the gold from the Daebong Mine is more than 76 percent, while production from Hoichang and Eunsan in South Pyongang Province is 63 percent and 61 percent respectively. More than 150kg of solid gold is produced annually, so this mine is known as the ‘loyalty mine’.”

“People say that the government earns four or five million dollars a year through this mine. Neither Yangkang Provincial Committee nor Hyesan Municipal Committee is involved with the business of the mine.”

The source added, “Since the No. 39 Department deals with the mine, only those discharged soldiers with good family backgrounds are dispatched there by the Central Committee. In October of last year, around 200 discharged soldiers with good family backgrounds came to the mine.”

Almost all the gold produced in the Daebong Mine is stored in Swiss and Austrian banks in gold bars.

A Chinese company had a contract with the DPRK’s Musan Mine which has been canceled for an unknown reason.

Click here to see what I believe is the mine’s location.

Read the full article here:
No. 39 Department Hawking Shares in Key Gold Mine
Daily NK
5/3/010
Lee Sung Jin

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More on Kim Jong-il’s court economy

Wednesday, April 28th, 2010

According to the Choson Ilbo:

North Korean leader Kim Jong-il’s youngest son and the heir apparent Kim Jong-un is already said to be busy amassing his own slush fund. Despite North Korea’s dire economic difficulties, Kim Jong-il himself is said to have stashed away between US$200-300 million every year to finance his lavish lifestyle and maintain the party elite’s loyalty to him.

With the money, North Korea would be able to import between 400,000 to 600,000 tons of rice, which would be enough to cover half the country’s food shortage of 1 million tons of rice per year.

Key departments within the Workers Party are pressuring agencies under their control to offer “loyalty funds” for the successor, a source familiar with North Korean affairs said. “A separate company has been established under the leadership of Kim Jong-un to secretly amass foreign currency.”

The source said Kim senior uses his slush fund to finance his expensive tastes, build monuments in his own honor and buy gifts for his loyal aides. Faced with increasing difficulties bolstering his slush funds under international sanctions, the Kim is said to have issued an ultimatum to his top officials in February, saying from now on he would judge their loyalty based on the amount they contribute to the fund.

The North is estimated to have imported more than $100 million worth of high-quality liquor, cars and other luxury goods in 2008. And also on the list are pet dogs, which the Kim family are said to adore. Kim buys dozens of German shepherds, Shih Tzus and other breeds from France and Switzerland every year. He also buys dog food, shampoo and other pet products as well as medical equipment for the dogs and has foreign veterinarians check their health.

Before nation founder Kim Il-sung’s birthday on April 15 this year, Kim imported around 200 high-end cars from China at a cost of some $5 million. A North Korean source said secret funds are also used to finance nuclear missile development and other state projects Kim Jong-il orders personally.

It is difficult to estimate the total amount of Kim’s slush fund. Experts can only guess that Kim has stashed huge sums of money in Swiss or Luxembourg bank accounts, as did other dictators like former president of the Philippines Ferdinand Marcos and ex-Iraqi leader Saddam Hussein. The international press estimates Kim’s slush fund to be worth around $4 billion.

Kim started amassing his slush fund as soon as he was picked as the next leader of North Korea in 1974 to be able to buy the loyalty of top officials. A special department within North Korea’s Workers’ Party called Room 39 which manages Kim’s slush fund by collecting the loyalty funds, exporting local staples including pine mushrooms and operating stores in hotels. A large portion of the $100 million to $200 million North Korea makes each year from exporting weapons, producing counterfeit dollars, smuggling fake cigarettes and selling drugs are also put into Kim’s slush fund.

A North Korean source said a lot of the cash profits generated by the joint tourism business with South Korea end up inside Kim’s personal slush fund too, judging by the fact that Daesong Bank and Zokwang Trading, which do business with the South, are both controlled by Room 39.

Early this year, Kim appointed his high school friend Jon Il-chun to head Room 39. Jon was made the chief of a state development bank North Korea opened recently to lure foreign investment. A South Korean government official said there are suspicions that Kim is diverting some of the profits of the state development bank into his own slush fund as well.

Read the full story here:
How N.Korea’s Ruling Family Swells Its Private Coffers
Choson Ilbo
4/28/2010

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