The Pyongyang Papers have been investigating lawsuits that North Korean workers are still being sent abroad in large numbers to, among other countries, Russia. VOA has disclosed similar lawsuits in the February article. Our investigation has found that a North Korean company was arranging a contract with a Russian company in late October 2019 to send 50 North Korean workers to Yuzhno-Sakhalinsk, Russia.
Yuzhno-Sakhalinsk is a city and an administrative center of the island of Sakhalin in the far east of Russia. It is most famous for its gas reserves and remaining Japanese architecture. The Russian company in question is Realssuttroy Limited Liability Company. Located at number 28, 4th Zarechnaya Street, Yuzhno-Sakhalinsk. +79621238585. Unfortunately, the images available on Yandex don’t seem to offer many clues to current employment at the location.
DPRK Moksong Foreign Construction and Economic Technology Cooperation Agency developed the contract with Realssuttroy Limited Liability Company. The contract authorized Moksong to send 50 North Korean workers to Yuzhno-Sakhalinsk to work in the seafood industry. Pyongyang Papers wonder this is because all North Korean fish is taken by the Chinese in more sanctions breaking?
The December deadline to evict North Korean workers has long since passed. Asks Pyongyang Papers if the workers are still in Russia? And if they are using the tourist or student visa as this seems to be the current trend. The Reuters article disclosed that Russia issued the 16,613 student and 10,345 tourist visas last year. Compared to 2,035 student visas and 2,610 tourist visas granted to North Koreans in 2018.
If you have any information on evading the DPRK sanctions, please contact us.
With the UN Security Council’s repatriation deadline well past in December 2019, many countries around the world have sent DPRK workers back to North Korea. The North Korean regime, which makes millions of dollars in funds generated by workers overseas, is of course seeking ways around this. One way is through the use of student visas.
A familiar face
The DPRK has been attempting to send huge numbers of workers into Russia using educational visas, to work in construction, IT and clothing production. Remember Jong Song Hwa? Jong featured in our previous article about Vladivostok. Pyongyang Papers has received information that Jong has used educational visas to sneak IT workers into Russia. In fact, according to the latest UN Panel of Experts report, Russia issued 3,611 more student visas to DPRK nationals in third quarter 2019 than in the same period in 2017. From first to third quarter 2017, 162 DPRK national received Russian student visas. The figure for the same period in 2019 was 7,162!
Pyongyang Papers has also learned that other workers have obtained educational visas at the invitation of Russian firms. An immigration specialist that wishes to be anonymous informed PP that a North Korean company allegedly acquired documents for its employees that included Russian student visas and student ID cards issued by the European Institute JUSTO. As well as a contract for a field training class for the JUSTO students with the Russian companies Stroy Service LLC and Stroygrand 71 LLC which indicated that the students would be used as labor.
Poor Russia, it has been put in a difficult place. It has been trying to appear compliant with UN sanctions on Pyongyang but stated that efforts to repatriate the remaining DPRK laborers have stalled due to the coronavirus outbreak. At the same time Russia has been doing a fair amount for North Korea recently and has sought to continue its labor cooperation with DPRK.
We already know that DPRK uses workers abroad to spread influence and generate funds for the regime. The Database Center for North Korean Human Rights (NKDB) estimates that North Korea has between 70,000 to 100,000 laborers earning foreign currency in over thirty countries around the world, and that the number is growing. According to one diplomat, the DPRK government keeps nearly 80% of its overseas workers’ salaries. DPRK workers abroad have been known to corrupt local officials, create disturbances and to take money and jobs away from the local population.
As well as IT workers, construction laborers, engineers, hackers and restaurant workers, DPRK also sends healthworkers overseas. There are DPRK doctors known to be present in many countries in Africa, including Tanzania, Angola, Libya, and Uganda. Whilst the offer of cheap doctors may appeal to many nations, it’s becoming clear that some of them are undertrained and dangerous for patients.
Pyongyang Papers has uncovered multiple examples of malpractice or accidents by DPRK doctors based in Africa. One such doctor in Angola performed illegal treatments to an Angolan woman.
DPRK – Zimbabwe partnership
The friendship between DPRK and Zimbabwe is not new and has been covered in our previous articles. Some doctors were expelled from Zimbabwe earlier this year under UN pressure, even though Zimbabwe has a memorandum of understanding with the DPRK regarding the supply of medical personnel and technological support. This comes after the UN Security Council in December 2017 adopted a resolution (UNSCR 2397) calling for the repatriation of all DPRK nationals earning income abroad within 24 months, with some humanitarian exceptions.
DPRK forced labor
There are risks to the DPRK workers as well in these scenarios. According to the UN, as many as 50,000 North Koreans have been sent abroad to work in conditions that amount to ‘forced labor’, where they earn very little, are underfed, and are sometimes forced to work up to 20-hour days. No one should have to work in these conditions. And that is enough to cause exhaustion and carelessness among even the most qualified of doctors and healthworkers.
North Korea is also ‘exhaustively monitoring’ its workers abroad through its officials posted to those countries. A human rights report obtained by Yonhap News Agency showed that there was a high death toll among DPRK overseas workers due to work-related accidents and suicides following greater pressure by Pyongyang on its people to send back more money.
The workers also face prejudice and violence from the local population. In Nigeria, for example, there have been reports of foreign doctors including DPRK nationals kidnapped at gunpoint or even murdered.
The following article gives an insight into North Korean medical clinics in Tanzania.
It seems the only winner in all of this is the DPRK regime, who is using these doctors as a means of generating funds in foreign currency. This is neglecting their human rights as well as the rights of medical patients to decent treatment. We contacted the Ministries of Health for Angola, Nigeria, Ethiopia, Tanzania, Libya, Zimbabwe, and Uganda about our findings but received no response.
North Korean construction companies view Africa as a ripe target for generating wealth. The problems that this new colonialism causes, undercutting local building firms and damaging the international reputation of countries like Namibia, has not been widely reported.
Construction and labor teams in Africa have become increasingly important for the DPRK as a way of generating revenue for the regime. North Korean companies undercut local firms with cheap labor and poor quality building materials, and they are able to make large profits in this way, exploiting some of the poorest countries in the region and taking advantage of lax regulations in many African jurisdictions.
Pyongyang Papers interest in this little known area of North Korean activity primarily involves a construction company called GENCO (Korea General Corporation for External Construction). GENCO is more than just a simple building firm. According to the UN Panel of Experts Report, released March 2019, GENCO (also known as KOGEN) has close links to the Mansudae Overseas Project Group (MOP). Mansudae are a sanctioned entity and has links to the RGB and the the UN designated entity KOMID – the DPRK’s main overseas arms trader and a key funding source for the regime’s nuclear weapons program.
So what have Mansudae and GENCO been up to in Africa? Pyongyang Papers decided to take a look.
Guinea and Sierra Leone
The UN Panel of Experts report 2019 annex makes interesting reading when it come to DPRK construction activity in Guinea and Sierra Leone. Letters sent by the UN to a Guinean firm called GUICOPRES accuse the company of using DPRK labor to construct a military base in Sierra Leone. GUICOPRES, which denies contracting North Koreans with the exception of initial survey work, has also used DPRK teams to build the new Ministry of Justice building in Conakry – Guinea (not sure that bodes well for the future of Guinean justice). According to the UN POE report, GUICOPRES sources its DPRK laborers from a company called Korea South-South (also known as Nam Nam).
In September 2017 local newspaper The Namibian reported that Mansudae had built the country’s State House and Independence Memorial Museum in Windhoek, and had secured another contract to build a defense headquarters and a munitions factory.
While commitments were made by Namibia to sever ties with Mansudae following the UN POE investigation in 2017, this commitment appears to have wavered. The Namibian quoted Foreign Minister Nandi-Ndaitwah, who visited DPRK shortly after the UN announcement in 2017, as syaing that ‘while Namibia remains committed to the implementation of all UN sanctions the warm diplomatic relations with the DPRK will be maintained’.
Namibian Minister of presidential affairs, Frans Kapofi, was also quoted in the same story as saying ‘North Korea is a long time ally, a partner in development, and an affordable contractor’. By ‘affordable’, Kapofi is acknowledging the fact that DPRK contractors are able to undercut local construction firms by underpaying their staff. Its likely that homegrown Namibian construction companies lost out on major contracts because of Mansudaes ability to use such cheap labor that effectively amounts to slavery.
Namibia spent at least $91.5 million on North Korean construction work between 2002 and 2017, according to the investigation by the Namibian. Its a huge sum of money that could have gone to building up and empowering local businesses. Instead it went to funding the DPRK’s nuclear weapons and ballistic missile development program.
In Zimbabwe, Mansudae was awarded contracts to build the country’s National Heroes Acre and Statue of the Unknown Soldier. A more recent contract to build a statue of former vice president Joshua Nkomo caused outrage as the DPRK is infamous in Zimbabwe for training the notorious Fifth Brigade, a unit responsible for massacring up to 20,000 people in Matabeleland during the Gukurahundi period.
Mansudae (MOP) is still very active in Zimbabwe but is clearly looking at ways to get around the challenge of sanctions. Clever solutions have involved such radical steps as changing their name very slightly. For example, there has been wide coverage of a registered Zimbabwean entity called the Mansudae Boka Design Company (MBDC) which has been linked to MOP and which has caused quite a headache for the Zimbabwean government. MBDC, which now looks to have changed name once again, had a Zimbabwean director but the two majority shareholders were North Koreans called Hyo Song Pak and Kyong Chol Yun. The Zimbabwean director claimed that the name similarity and the two North Korean directors were both ‘coincidences’. Was it also a coincidence that Kyong Chol Yun is the head representative of MOP in Zimbabwe? Seems unlikely to Pyongyang Papers!
MBDC has taken payments from a Zimbabwean government department called the National Museums and Monuments of Zimbabwe, to provide statues and other artwork. MBDC has also taken payments from the Zimbabwean army and the police.
The Boka family in Zimbabwe seem to have developed very close working relationships with DPRK. In addition to fronting up the MBDC , Boka is also suspected of supplying Zimbabwean rag tobacco to DPRK,in violation of sanction prohibiting the export of luxury goods to North Korea. This trade is likely to have been facilitated by the Boka Tobacco Floors, a 50,000 square meter tobacco exchange in Harare owned by the Boka family.
Zimbabwes involvement with Mansudae and the DPRK doesn’t stop with Boka. Given the DPRK’s historical involvement in mass killings in Zimbabwe, the ongoing government links are very worrying, as DPRK entities could be providing assistance to Zimbabwe to deal with civilian protests and unrest. It is one thing allowing DPRK to build your statues but its another to follow their lead on policing and human rights issues.
UN Reporting Deadline
The end of March 2019 marked the reporting deadline for all countries to account to the UN for the number of North Koreans working in their jurisdictions. This precedes the upcoming December 2019 deadline to expel all North Korean workers, as set out in the UN Security Council Resolution 2397.
With such a large number of DPRK construction workers slaving away in Africa (and elsewhere) for entities like Mansudae and GENCO, it will be interesting to see how many have been declared and how many have been expelled by the time December arrives. As always – get in touch with any more stories of illicit North Korean activity.
Unless you are a brave smoker of cut-price North Korean cigarettes, you’ve probably never heard of the Ryugyong Corporation.
We hadn’t heard of it either. But a new Pyongyang Papers investigation can reveal that this state-controlled company sits at the heart of an illicit global network of North Korean sanctions evaders, generating funds for the DPRK regime. This network includes Turkish and Greek tobacco suppliers, Cambodian front companies, shady North Korean middlemen and Chinese freight forwarders. As sanctions cut off North Korea’s other avenues for earning money, this tobacco network appears to be growing in importance as a way to finance Kim’s ballistic missile pet project and the lifestyles of North Korean elites. What more could an enthusiastic DPRK-watcher need?
Ryugyong Corporation Revenue Generation
As a company, the Ryugyong Corporation sits firmly at the center of the DPRKs revenue generating machine. It is an arm of the central government, subordinate to the Korea Worker’s Party Finance and Accounting Department (Bureau 125), which handles budget and accounting matters for the Kim regime.
Ryugyong imports leaf tobacco, filters and papers from suppliers, using a mix of cover companies and North Korean front-men, often working out of DPRK embassies overseas. These front-men source supplies from all over the world including Argentina, India, South Africa, Vietnam, the UAE, Zimbabwe and China. A recent NK News article highlighted the rise in tobacco imports from China. Once purchased, the tobacco products are typically routed through Dalian in China and onto Nampho port in North Korea.
Once the tobacco and papers have arrived in North Korea by sea, Ryugyong assembles the various components into cigarettes. They do this using cheap North Korea labor in large factories (one of the benefits of a slave labor economy?). Once produced, the cigarettes are sold in stores run by the Ryugyong on behalf of the state, where luxury goods like cigarettes and imported alcohol are provided for the wealthy and well connected in Pyongyang. Read Pyongyang Papers previous article on luxury goods here.
Ryugyong’s main source of income comes from foreign rather than domestic sales. In addition to selling cigarettes to North Koreans, Ryugyong is also involved in a massive counterfeiting and cigarette export operation, generating large sums for the regime. They cover their cheap cigarettes with the names and colors of well known cigarette brands, package these up and ship them out of the country to unsuspecting smokers. Mostly, we suspect, in China.
Why is This a Problem?
Apart from the fact that this state-run counterfeiting operation puts a giant hole in the wallet of global tobacco brands (we have limited sympathy there) – why is this problem? Well the funds generated by selling these counterfeit cigarettes directly contribute to the DPRK’s nuclear and ballistic missile programs through Bureau 125. Importing or facilitating the import of luxury goods (like tobacco) into North Korea is also contrary to UN sanctions when it generates revenue for the regime. There’s also something of an ethical issue here. Without wanting to comment on the quality of North Korean cigarettes, we’d be surprised if these poorly made products weren’t also killing quite a few Chinese smokers at the same time.
Pyongyang Papers has looked into some specific parts of the Ryugyong import/export network that we’ve been unable to uncover thanks to a friendly contact in Dalian. Many of the threads we’ve unpicked through online research and ship tracking platforms seem to begin in Cambodia, where North Korean involvement in the tobacco trade has become well-known among the small network of suppliers there.
What Companies Are Involved?
A central hub of the Cambodia supply network is a particularly busy North Korean frontman called Myong Chol Min. Myong is the operations manager at a Cambodian company called Phal Eng Lim Import Export Co., Ltd (PELCO). Myong is also the managing director of a Thailand based company called MCM International Trading.
Pyongyang Papers believes that both PELCO and MCM are fronts for the Ryugyong Corporation, and that Myong is a key supplier of tobacco and cigarette products who works directly for the DPRK regime. According to company records, PELCO is registered at 91 Street, Sangkang Kampong Cham, Kampong Cham City, Cambodia. It’s also listed on www.tobacco1.com with the phone number+855966662595. We haven’t had any luck getting through thought!
Myong has reportedly been involved in hundreds of tobacco deals with PELCO and MCM over the years but we can highlight one in particular that illustrates the kind of activity that takes place. In September 2018, Myong used PELCO to set up and pay for a 50 tonne shipment of ML1-Grade tobacco leaf from the Sihanoukville in Cambodia, to Dalian, China. It appears that the containers were shipped from Cambodia on a Liberian-flagged freighter. From Dalian, as far as we can work out, this particular shipment was transported onwards towards North Korea on the DPRK flagged container vessel the Tong Myong 9.
Myong and PELCO have also been involved in deals for tobacco papers and filters worth hundreds of thousands of dollars. One of PELCO’s principle suppliers is a Turkish company called Tobacco Solutions Asia Limited (TSAL). Myong has had many dealings with TSAL and with Star Agritech International, its parent company, often liasing through a TSAL manager called Gokhan Akca. Acka’s colleague Afsaneh Gorbani, a sales supervisor at TSAL, has also had dealings with Myong and the North Koreans.
Myong’s globetrotting business dealings don’t end in Turkey and Cambodia. Another company that looks like it has suspect business dealings with Ryugyong is a Greek trading house called Zafiris Naxiades – Tobacco in Leaves – S.A. Naxiades, located in Thessaloniki, looks like it has a long history of trading tobacco and has an attractive image of their old warehouse on the website. Quite why such a venerable company has resorted to supplying the North Koreans with tobacco is unclear. We would guess that times are tough at Naxiades but Greece is one of the few European countries where the smoking ban hasn’t had much effect on cigarette consumption. They should be rolling in money!
Ryugyong is another symptom of a state that has lost its moral compass. We’re no longer surprised at the behavior of North Korean state companies – what is surprising is the number of international firms, like Naxiades and Star Agritech, that are willing to risk their reputations for what are, on the face of it, quite small deals. Given that these supply companies rely of a functioning international tobacco market to survive, it’s also surprising that they are willing to go against the interests of their industry to supply a company like Ryugyong, which has become infamous for the mass counterfeiting of cigarettes.
Who knew that Western Europe was a hotbed of DPRK diplomats behaving badly? The Pyongyang Papers didn’t. But we’re hearing more about shady North Korean affairs in Europe.
The first of these stories concerned an individual called Jo Kwang Chol.
Jo is a 42 year old North Korean posted to one of the world’s most livable cities – Vienna. Although not listed as a diplomat in the North Korean Embassy, his position is still endorsed by the Regime. Jo is the representative in Vienna for the Foreign Trade Bank (FTB) , a financial institution that was designated by the UN in 2017 for providing financial support to North Korea’s WMD programs.
A state-owned financial institution providing funding to fuel state-run WMD program – what a surprise.
FTB was established in 1959 and it has acted as the DPRK’s primary foreign exchange bank. FTB was sanctioned because it reportedly provided financial support to a number of other designated entities, including the Korea Kwangsong Banking Corporation (KKBC) and KOMID (North Korea’s main international arms trader). FTB was designated by OFAC in November 2013 and in August 2017 the UN followed suit and sanctioned it under Resolution 2371.
Cover companies and frozen money
Enter: Jo Kwang Chol…
Jo spent much of last year trying to get his hands on some Euros in a frozen bank account. The account in question was at Austria’s Meinl Bank AG, and it belonged to an FTB cover company called the Korea Ungum Corporation. Jo was trying to get the money out the account because the Austrian government froze it in 2012 after accusing Ungum of involvement in illegal money laundering. Jo was reportedly trying to get around this minor inconvenience by pretending to be an employee of Ungum and requesting that that a salary is transferred to him each year from Ungum’s Euro account for ‘services provided’. What these ‘services’ are we have no idea.
In our opinion Jo’s plan doesn’t really seem that well thought through. If we were him, we’d have another slice of the local sachertorte and try think up something else.
Diplomats & generators
Our second story relates to Paris: an equally nice place for a weekend away and an equally nice posting for a DPRK “diplomat”.
The diplomat in question is a long-time Paris-based official called Kim Chol Yong. Apparently he is stern man who takes his work very seriously at the DPRK’s Cultural Exchange Bureau. The 55 year old Kim (born 1st June 1964 according to paragraph 80 of the UNPOE report) has lived in France since 1989. In fact, as far as we can tell, Kim is the longest serving North Korean official in France. In that time, Kim has acted as the Regime’s procurement conduit in Europe – shipping anything from tons of toothpaste to heavy machinery.
Kim has been diligently taking orders from Pyongyang for years. Kim is named in the 2019 UNPOE report as being responsible for attempting to ship four generator units from China to the DPRK. According to the report, Kim took on a Chinese identity in order to move this equipment. The generators were seized by the Dutch authorities.
Pharmaceuticals for the elite
In 2017, the Regime’s 1217 Research Institute told Kim to buy huge volumes of pharmaceuticals, pill manufacturing materials, and toothpaste from China. Kim subsequently posed as a representative of the Potonggang Pharmaceutical Trading Company in order to obtain these requested goods – including Rivotril for anxiety attacks. Why is a research institute buying toothpaste?
Our source close to the deal discovered that Kim was also sourcing pharmaceuticals for Rakwon 929 Import Corporation. Rakwon is the trading arm of the Ponghwa Clinic in Pyongyang, which procures drugs for the North Korean elite. It would not take much thinking to conclude that all these drugs Kim is exporting are for the elites and not the Korean people who really need them.
Kim is the longest-standing “diplomat” in France, trusted with highly sensitive information about the DPRK Elites and their private medical needs. This, coupled with Kim’s wealth of experience in procurement and his network of contacts in France, must make him an asset to the DPRK diplomatic community in Paris. With this sort of trust, clearance, and respect among the diplomats, it is reasonable to think of what other roles Kim full fills. At PP, we would be highly surprised if DPRK Intelligence Agencies don’t make use of Kim’s contacts.
Kim’s activities in Paris over more than a decade have provided a huge amount of financial support to both the North Korean regime and its ballistic missile program. Maybe it’s time for him to say adieu to the city of light?
Vladivostok! For those of us lucky enough to live in sunnier parts of the world it doesn’t sound like a dream destination. Maybe were biased here at Pyongyang Papers, but Vladivostok makes us think of dreary Russian icebreakers, cold wind and rusted fishing boats.
For North Koreans though, Vladivostok must be seen differently. Is it their land of plenty? Is it their paradise for earning money away from the sight of the international community? It must be. What else would explain the fact that so many North Koreans have moved to Vladivostok to set up their businesses.
We will come on to an interesting exclusive concerning a sanctioned company called China Silver Star. But firstly, why are there so many North Koreans in Vladivostok?
What we already know
Were not the only ones to have asked this question. NK News recently wrote a series of informative articles showing the North Korean presence in Vladivostok. While the numbers are difficult to confirm, Andrei Lankov from NK News suggests that between 15 and 20 North Korean companies have a permanent presence in the city. Lankov also suggests that there are around 10,000 North Korean laborers employed in the area, each earning between $500-900 per month to send back to the regime.
Obviously these North Korean laborers have to eat (and pay some taxes) but even at a low estimate of earnings this is something in the region of $50 million of revenue for the regime. That’s some decent income for buying more nuclear and ballistic missile parts. Al Jazeera’s 101 East recently published a documentary following the trail of North Korea’s secret money. North Korean workers are perceived as hard working, diligent and low-cost. Its no wonder they are popular with Russian employers. But then again, using slave labor has always been cheaper than paying people properly for doing a job.
NK News also reports how North Koreans have used the ports and airport to illegally move cash in defiance of international sanctions. In November 2018 a DPRK citizen was caught at Vladivostok airport trying to board an Air Koryo flight with with $192,300 in a shoe box. In October 2018, another DPRK citizen was caught with $180,000 – this time at the Pervomaisky customs post, having just got off from a cargo ship. While these two smugglers were caught by the authorities, these transfers are likely to be only the tip of the iceberg of illegal cash movements across the DPRK/Russia border.
Pyongyang Papers spoke to an employee at Vladivostok airport on condition of being anonymous who was able to confirm some of these stories. She said that security for DPRK flights was extremely loose and there did not seem to be much control of what came in or out on the regular Air Koryo flights: “you often see the North Koreans returning to their country loading their own bags onto the luggage conveyors or pushing through and around the security barriers” she said. That’s not ideal behavior when the rest of the world is trying hard to prevent the DPRK regime from earning foreign currency for the missile program or from buying luxury goods for the rich elites.
It seems that Russian enforcement of UN sanctions against DPRK commercial activity in Vladivostok has been a bit relaxed, to say the least. Or, as an article on the Arms Control Wonk blog puts it – it “leaves much to be desired”.
There seem to be systematic abuses going on. Alongside the large movement of money and the large scale employment of North Korean slave laborers, there as also several companies located in and working out of the DPRK embassy in Vladivostok. The same Arms Control Wonk article highlights at least three companies that are located in the embassy. If confirmed, this would be in clear violation of both UNSCR 2375 (2017) and UNSCR 2321 (2016), which bars DPRK diplomats from engaging in business.
So what else is going on in Vladivostok that hasn’t been noticed yet? Probably quite a lot! And this takes us back to China Silver Star.
From PP’s own conversations with Vladivostok locals we do have one new piece of information to add to the growing pile. This relates to a certain individual called Jong Song Hwa. Jong has been spotted a few times at the airport in Vladivostok and, according to our source, seems to have made himself quite at home in the city in recent months.
Why should we care?
Well, Jong is the CEO of an IT company called China Silver Star, aka the Yanbian Silverstar Network Technology Co. Ltd. China Silver Star reportedly earned millions in collaborative IT projects in China using North Korean workers, often disguising their true nationality from project partners. The common image of North Korean laborers hauling brick on a building site for low pay is still true, but these days they are just as likely to be sat behind a keyboard, advertising their IT services under false names and nationality on freelance sites like Upwork.
As a result of this activity, Silver Star was sanctioned by the US Treasury in September 2018 for “generating revenue for the Government of North Korea … that contributes to North Korea’s nuclear weapons and ballistic missile programs”. Jong Song Hwa, as the CEO, was sanctioned and named in the OFAC listing alongside his company.
Clearly business must have become a bit tough for Jong in China following the OFAC sanctions so hes moved to Vladivostok. Maybe hes there to see some rusted fishing boats on a well-earned holiday? It doesn’t seem likely! Silver Star already has a sister company office on Ulitsa Klary Tsetskin in Vladivostok, known as “Volasys Silver Star“. Isn’t that convenient for Jong? It looks like hes decided to take his team of sanctioned IT workers with him from China to Russia and to begin his work again – motivated by the fresh sea air and bracing Russian climate.
As its probably the only place to get a snack near the Volasys Silver Star office we wouldn’t be surprised if Jong hangs out at the Pit Stop cafe by Klary Tsetskin (not sure who burned down the nearby pool hall). If you are stopping at the Pit Stop for a drink, keep an eye out for any Volasys Silver Star staff, and give them a friendly wave from all of us here at Pyongyang Papers.
PP is amazed that international re-insurance firms have been willing to work with North Korea’s Korean National Insurance Corporation (KNIC).
Why? Well apart from the fact that dealing with KNIC is a clear example of sanctions violation the company has been involved in cases of serious fraud.
And its this fraud in the insurance world that helps make Kim’s nuclear weapons and keeps his missiles flying. And brings a steady supply of Rolls Royces. The regime has many ways of filling their bank accounts not just internet crime and selling coal.
How do they do it?
Reinsurers working with KNIC are putting themselves at risk of extortion by the company which is an arm of the North Korean state. KNIC has made big claims against losses that cannot be independently proven. This forces reinsurers to pay out for incidents that they cannot properly assess or challenge. This is a sneaky way of using the international insurance market to bring $$$ into the cash-strapped state.
What’s the evidence for this? Well PP has done some digging and there’s one very clear example that demonstrates KNIC’s methods:
In June 2017 KNIC through its overseas offices sought more than 12 million euros in settlement for a loss that they claimed occurred at the Sunchon Regional Supply Facility (an industrial center in North Korea). The company put this claim in to reinsurance businesses overseas. Reinsurance firms would normally seek to verify claims like these independently before paying anything out. Otherwise they would be simply taking an insurance company’s word for the fact that they took a loss. But how do you verify a claim that comes in from North Korea?
The answer is that its extremely difficult. Particularly when you are not able to trust the government to back up an independent investigation. Because KNIC is a government entity and is being used to generate illicit revenue by the regime it is able to use its governmental control as a mechanism to ‘verify’ any claims which benefit the government. Upon any questioning from reinsurers the DPRK government works hand-in-hand with KNIC to block attempts to reject false claims or to fully investigate.
After months of providing incomplete documentation for the Sunchon Regional Supply incident and refusing independent outside verification of the loss KNIC continued to pressure the reinsurance companies involved to pay out their portion of the 12 million euros. Some of the companies paid out these claims while others continue to resist. Those that did pay described KNIC as ‘aggressive’ in their pursuit of the claims. PP is unsure why they cooperated but they may have seen a payout as their only option. KNIC’s officers reportedly made efforts to ruin the reputations of the companies as non-payers and openly questioned their credibility when they asked for proof of the losses.
Evidence of the problems that can arise when reinsurers do business with KNIC is also shown well by the long dispute between KNIC and a group of major international reinsurers including Allianz Global Corporate & Specialty AG, Generali, Lloyds (Hardy Underwriting), Lloyd’s (Atrium), Belgium’s Aviabel, the General Insurance Corporation of India and Misr Insurance of Egypt. KNIC’s claim that a helicopter had crashed into an insured warehouse in 2005 was claimed to be fraudulent by the reinsurers. KNIC’s claim was upheld in court.
The scam cost the reinsurers a shocking total of $58.2 million.
If PP ran a company that had signed a contract with KNIC we would fire our due diligence researchers on the spot.
The UK subsidiary director Ko Su Gil left the country soon after. England is not the only jurisdiction that has taken the concrete steps against KNIC, as four Hamburg based KNIC associates were forced to leave the country.
The EU’s regulation document against KNIC noted that “KNIC GmbH, as a subsidiary controlled by KNIC headquarters in Pyongyang…a government entity, is generating substantial foreign exchange revenue which is used to support the regime in North Korea”. The EU’s note also drew a link between KNIC and the regime’s infamous “Office 39”. Six individuals were designated as a result of the KNIC EU listing: Kim Il Su, Kang Song Nam, Choe Chun Sik, Sin Kyu Nam, Pak Chun San and So Tong Myong (the CEO of KNIC in the DPRK).
Serbian insurer fights back
KNIC’s malpractice has not ceased in recent years even with a much bigger international spotlight on its action. In 2017 KNIC entered into a dispute with a major Serbian reinsurer called Dunav-Re. Dunav-Re legitimately and legally refused to service a claim made by KNIC through an Indian Insurance company. KNIC aggressively tried to leverage its relationship with that company to put pressure on Dunav-Re after the Serbian company cited UNSCR 2321 to justify a suspension of payments to KNIC. KNIC asserted to them the Dunav-Re had freely entered into a reinsurance contract and that any attempts to reverse the payment under the pretext of sanctions would not be accepted or tolerated.
This kind of pressure puts re-insurers into a challenging legal position. These kinds of disputes can cost millions in time effort and legal costs to resolve.
The fundamental problem in PP’s opinion is that due to the closed nature of the DPRK independent checking of insurance claims made by the KNIC is almost impossible to achieve; especially when it is working closely with the DPRK government to actively defraud the market.
A defector told South Korea’s Yonhap news agency that: “In North Korea there is only one state-owned insurance company, so that even if it fabricates an accident there is no way to verify the claims…after purchasing international insurance or reinsurance for state infrastructure, documents are forged (on alleged accidents), which earns the state tens of millions of dollars a year”.
70 years of funding the DPRK
KNIC celebrated its 70th anniversary on July 23 2017 and was described by the DPRK leadership as ‘a powerful economic means which can contribute to the building of [the] socialist economy’. In PP’s opinion its also a powerful economic means to steal money from international businesses and to rip off reinsurance companies around the world.
Quite a lot is possible when you have a regime at your back that is happy to commit fraud on an industrial scale.
North Korea’s Ministry of State Security (MSS) set up cover companies to smuggle heroin and methamphetamines into neighboring countries including China, Japan and Vietnam.
North Korea has a long history of narcotics productionand export. The country began producing synthetic methamphetamines in North Pyongyang and South Hamyong provinces in the mid 1990’s as an appetite suppressant during famine. The drug was also given to workers to speed up labor on construction sites. Having developed a local industry for the addictive stimulant, the regime quickly realized that it could be a good source of foreign exchange.
Cover companies and use of diplomats
Research by PP has found that from the mid 1990’s one of the main vehicles for the DPRK’s narcotics trade was a Pyongyang front company called Sujong Joint Venture Co. On the surface, Sujong was a harmless trading entity that exported mineral water and imported computers. In reality, Sujong was a government-owned cover company for smuggling narcotics. The organization was also known as the Crystal Trade Company (“Crystal” …. subtle right!). Sujong was operated by the MSS (then known as the DSS) under the control of the military leaders. In PP’s opinion its clear that Crystal’s authority to operate came right from the top of the government. For those in charge of the DPRK regime, the immorality of shipping drugs like heroin and crystal meth were not really as important as the funds that could be raised.
Two key people involved in Sujong’s deadly trade were company president Song Tae Bin Song and manager Kim Yoo Chul. Under cover of mineral water sales, Yoo Chul traveled a lot to China, Thailand and other countries across South East Asia to coordinate illicit narcotics trading. By all the accounts that PP can find, Yoo Chul was a well-connected individual within the North Korean elite. He even studied French at the International University of Foreign Studies in Pyongyang and worked as a researcher at the Juche Research Center before joining Sujong.
The DPRK did not seem to be concerned that it was sending drugs into countries that it was meant to be friendly with. Even more shockingly, North Korea used its official, accredited diplomats to carry the drugs. According to a Vietnamese analyst who spoke to PP, in 2015 the DPRK Ministry of Foreign Affairs made plans to transport meth in to Hanoi to be distributed by its own diplomats. Profits from the sales would then be transported back to Pyongyang on official visits. Other incidents have also been well documented. For example, in 2003 Australian officials seized a North Korean vessel (the “Pong Su“) carrying heroin, while in 2012, a North Korean Embassy in Eastern Europe received a major drugs shipment with orders to sell the product and send the money home.
Showing the massive extent of the illicit activity, a US Congressional Research Report from January 2007 mentions at least 50 documented incidents of DPRK drug trafficking in more than 20 countries across the world. Many of which involved the arrest and detention of diplomats.
With low wages and constant pressure to generate money for the regime, North Korean diplomats often have little choice but to carry out criminal activity. PP knows that they don’t make much money – at one DPRK mission in South East Asia, the ambassador received $800 a month to cover all of the missions expenses. Others receive even less and resort to black market trading of cigarettes and alcohol as a result. While the regime has just recently asked its diplomats to scale down their involvement in illegal activities due to fear of expulsions, illegal smuggling remains an important source of funds.
With this level of financial pressure, and leadership that has no regard for human life, it is unsurprising that the DPRK turns to selling drugs like heroin and methamphetamines to raise money. North Korea made lots of money from selling these products into neighboring countries like China, Japan and Vietnam – who then had to deal with the human cost of the trade.
Although Robert Mugabe has fallen from his throne, we’ve found out some interesting information showing that the DPRK had no problem dealing with him in their pursuit of wealth.
In late 2010 arms dealers at North Korean front company the Korea Mining Development Trading Corporation (KOMID) planned a deal with former Zimbabwean president Robert Mugabe’s secret police to swap bullets in exchange for diamonds and copper ore.
KOMID, a UN sanctioned entity and North Korea’s main exporter of ballistic missiles and conventional weapons, has become well known for arming brutal rebel groups and governments no other weapons traders will talk to. They do this through offices linked to North Korean embassies around the world, often using diplomatic cover to sell their arms.
This particular deal with Zimbabwe was the plan of Ri Kyong Bok, the KOMID chief in Namibia. He saw a chance to support Mugabe’s rule and to gather foreign exchange for the regime back in Pyongyang. Kim Jong Un’s nuclear projects are not cheap and KOMID was under heavy pressure to increase weapons sales regardless of the human cost.
Mugabe’s personal involvement
PP has found out that a meeting took place in Namibia between Mugabe himself and KOMID where KOMID agreed to supply the Zimbabwean Central Intelligence Organization (CIO) with ammunition manufacturing equipment. The CIO, a secret organization accused of torturing Zimbabwean opposition members offered to pay the North Koreans not in case but in diamonds and copper looted from the country’s mines. Visit the link below for examples of human rights abuses conducted by the CIO:
While it’s not clear what the bullets were intended for it’s likely that they were used for suppressing protests and harming Mugabe’s political opponents. Why does PP think this? Well before the elections in 2000 as many as 800 people were ‘disappeared’ by the CIO and more than 90 suffered torture and abuse (and that’s only those that were willing to speak). CIO officers were accused of salting the wounds of Movement for Democratic Change (MDC) opposition activists using pliers to remove their teeth and forcing others to commit rape against family members,
Why use diamonds?
So why did the CIO seek to pay KOMID in diamonds? There are two likely reasons. We at PP think the main reason is because of liquidity. While short of cash to buy ammunition as a result of sanctions pressures CIO did have access to Zimbabwe’s diamond wealth. In 2017 Global Witness accused the CIO of pillaging Zimbabwe’s diamond industry for its own profits. The 2017 report “An Inside Job” claimed that although $2.5 billion of diamonds had been exported from Zimabawe from 2010 only $300 million had made it back into the country’s accounts.
The second reason was deniability. Mugabe and those in charge at CIO knew that an attempt to purchase the equipment through the normal government budget would be blocked by the MDC opposition. By paying the diamonds in secret Mugabe sought to go around the normal legal process. For the deal to remain secret CIO arranged for all of its meetings with KOMID under the guide of a cover company called NATEC.
Not their first time.
The relationship between North Korea and Mugabe is not a new one. It went as far back as the early 1980s when military advisors trained and equipped Mugabe’s personal army unit, the 5th Brigade. It was the 5th brigade that killed over 20,000 Ndebele civilians as part of the Gukurahundi campaign, a dark stain on Zimbabwe’s past known also as the Matabeleland Massacre (see link below).
In 2011 with their willingness to turn a blind eye to human rights abuse and to accept payment in blood diamonds the CIO once again found a good partner in the North Koreans. For KOMID and Ri Kyong Bok the deal with Mugabe was simply another good opportunity to strip funds from Africa to send it back to the regime in Pyongyang.
If anyone can find out more about NATEC or KOMID’s dodgy deals in Zimbabwe please get in touch. Always happy to hear from you here at PP HQ.