N Korea uses cash couriers, false names to outwit US, UN

Kim Kwang-jin says that when he worked for North Korea’s state insurance company in Singapore in 2003, he stuffed $20 million into two suitcases one day and sent it to Pyongyang as a special gift for then leader Kim Jong-il.

He received a medal for that, Kim Kwang-jin said. North Korea, sanctioned by the United States since the 1950s and later by the United Nations after its nuclear tests, has been shuffling money for decades from illicit drugs, arms and financial scams and is now more expert at hiding it to fund its weapons programs and its leaders’ opulent lifestyles. “There is tremendous difficulty identifying bank accounts,” said a South Korean government source who is directly involved in yet another sanctions push in the UN Security Council after the North conducted a third nuclear test this week.

With limited trade and natural resources, Pyongyang’s revenues are heavily reliant on money-making scams ranging from fake $100 bills to arms sales and drugs money, according to reports by the US government. In 2005, $25 million of the regime’s cash was frozen at Macau-based Banco Delta Asia, which was designated a “primary money laundering concern” by the US Treasury.

That case stands as practically the only public success in seizing funds from the isolated country that is now led by 30-year-old Kim Jong-un, the third of the Kim dynasty to rule.
The $25 million was released after protracted negotiations led by Kim Kye-gwan, the North’s long-standing negotiator with the United States, and US envoy Christopher Hill, officials present at the talks said.

Pyongyang has learned from that episode and buried its funds even deeper, said the South Korean official, who spoke on condition of anonymity. “The bank accounts are split up a lot,” the official said, meaning the money is divided into small amounts so that a freeze on one account would not greatly affect the total.

The official has tried to identify North Korean funds for years and was involved in previous sanctions pushes, although he said that identifying accounts and transactions was near impossible because of the use of fake names.

Kim Kwang-jin, now living as a defector in South Korea, said the $20 million sent to Kim Jong-il in 2003 came from insurance scams by Pyongyang’s Korea National Insurance Corp, which exaggerated claims from re-insurers and underwriters for events such as weather damage, ship and aircraft losses.

Kim Kwang-jin said the money from the scams he participated in was funneled into what he termed North Korea’s “royal court fund” - money for Kim Jong-il and his inner circle.
“Kim Jong-il sent a letter of thanks to the people in my company (KNIC). And some of us received presents like DVD players and blankets. I later got a medal too,” said the 46-year-old.

North Korea also often uses its diplomats and other officials to ferry cash, according to Kim and other defectors and diplomats. This method, called “bulk cash”, is largely untraceable.