North Korea: A Criminal Syndicate Posing as a Government
By Nate Thayer
(Copyright Nate Thayer. No republication in part or in whole without prior written permission of the author)
After a decade of failed Clinton era diplomacy, the United Nations and both the Bush and Obama administrations shifted to a more confrontational policy regarding the PDRK, from negotiations on stopping the North Korean program for nuclear and missile development, to increased confrontation over their state sponsored criminal activity and financial sanctions directed to punish the North Koreans for weapons development. This evolved to a collapse of all diplomatic negotiations whatsoever in 2009.
The US and its allies have essentially been left bewildered and have little strategic policy towards the PDRK at all. International policy towards North Korea currently is labelled one of “Strategic Patience”, a euphamism, after exhausting all obvious paths, since 1985, of engaging the worlds most stark threat to regional and international peace, which has left the world community at a loss of what to do next. And currently having no strategic policy at all.
Since President Clinton left office in January 2001 until the present, there has been a marked escalation of hostility between the two sides that has reached a complete breakdown in diplomatic negotiations over the development of the PDRK nuclear and other military program. The U.S. and the United Nations, South Korea, Japan, the European Union and a number of other countries have created laws, resolutions, and Presidential Executive Orders to mitigate the effectiveness of some of the North Korean international criminal network and its military programs of acquiring nuclear weapons and exporting sophisticated weapons.
In September 2005, the Bush administration used provisions of the Patriot Act, which was made law in the wake of the 2001 terrorist attack in the United States, and provisions of the Bank Secrecy Act, an amendment to the Patriot Act, to sanction and seize assets of financial institutions linked with North Korean illegal activities in Macau.
The North Koreans responded by exploding a nuclear bomb in a test demonstration of its nuclear capablity.
In October 2006 UN security Council passed unanimously resolution 1718 imposing a series of harsh economic and commercial sanctions on North Korea after the DPRK conducted tests of a nuclear bomb earlier that month. The UN resolution demanded the DPRK halt its nuclear program and ballistic missile program, authorized the boarding and inspection of all DPRK cargo ships for weapons of mass destruction, banned imports and exports of a wide range of military equipment, deemed that all North Korean companies and individuals engaged in banned DPRK weapons programmers could have their assets frozen, and called for the “return immediately to the six-party talks without precondition”
North Korea released an official statement contending it’s “nuclear test was entirely attributable to the US nuclear threat, sanctions and pressure,” and “was compelled to substantially prove its possession of nukes to protect its sovereignty.” North Korea’s UN Ambassador, Pak Gil Yon, said in reaction “If the United States increases pressure on the Democratic People Republic of Korea, the DPRK will continue to take physical counter measures considering it as an act of war.”
In June of 2008, Bush declared “a national emergency” saying North Korea threatened U.S. security and interests and issued an executive order based on provisions of the Trading with the Enemy Act and the Patriot Act. He cited “the proliferation of weapons usable fissionable material on the Korean peninsula constitute an unusual and extraordinary threat to the national security and foreign policy of the United States.”
In September of 2005 the Financial Crimes Enforcement Network, an interagency task force under the Department of the Treasury was created to combat DPRK illicit international activities.
In June of 2009, after North Korea’s long range missile tests and another underground nuclear tests earlier that year, the United Nations Security Council issued more sanctions on the DPRK which “bans all arms transfers from North Korea. The resolution “ targeted not only North Korean financial institutions, but key individuals associated with nuclear, ballistic missile, and other WMD related programs.”
President Obama’s 2010 executive order was specific and direct saying it “targets the government of North Korea’s continued involvement in a wide range of proliferation and other illicit activities…for sanction individuals and entities facilitating North Korean Trafficking in arms…and engagement in illicit economic activities, such as money laundering, the counterfeiting of goods and currency, bulk cash smuggling and narcotics trafficking. This new executive order supplements existing sanctions targeting proliferation of weapons of mass destruction (WMD) and those who support them, under which North Korean entities have been designated to date.”
The Congressional Research Service has said US policy can help reverse the DPRK dependence on its illicit economy by “balancing US interest where foreign policy goals may conflict with anti crime activities. Congress may also be asked to provide funding for energy and food assistance as part of the resolution to the DPRKs weapons program, because some contend that additional supplies of energy and food could reduce the need to rely on illicit activities in some North Korean quarters.”
Here is a glimpse of what the PDRK has been doing concommitently to the international diplomatic effort;
Profit estimates vary widely for the North Korean drug trade. Estimates range from 100 million dollars to nearly a billion dollars from the combined production, manufacture, and sale of opium, heroin, and methamphetamines. In 2004, more sober estimates were 200 million dollars from the combined heroin and methamphetamine trade, in addition to 500 million dollars from other criminal organized crime. Lower figures can reach 71 million dollars—-59 million for heroin and opium and 12 million from amphetamine. Counterfeit brand name cigarettes are estimated to have a retail value of between 560 and 720 million dollars annually from their manufacture and export And some U.S. government figures estimate they make more than 500 million dollars a year in the export of weapons systems and components, including the transfer of nuclear technology and expertise.
However, it appears that the extraordinary high profile of DPRK official involvement in narcotics trafficking, particularly with the arrest, detention, and expulsion of diplomatic, military, and intelligence officers and officials connected to the government, has led the North Koreans to seek out middlemen in private organized crime syndicates to help distribute the illicit products. These include Japanese, Chinese, other Asian, Russian, and European crime syndicates that distribute their illicit narcotics, cigarettes, counterfeit currency and pharmaceuticals, and even weapons.
For at least the last 35 years, officials of the DPRK and other North Korean government operatives have been apprehended for trafficking in narcotics. Since 1976 there have been at least 50 arrests and drug seizures involving North Korean officials in more than 20 countries around the world, said William Bach, a U.S State Department official, in May 2003, “And more recently there have been very clear indications especially in the form of methamphetamine seizures in Japan that North Koreans traffic and probably manufacture methamphetamine drugs.”
The State Department’s annual International Narcotics Country Report released March, 2003 concludes that ”for years during the 1970s 1980s and 1990s, citizens of the DPRK, many of them diplomatic employees of the government were apprehended abroad while trafficking in narcotics……more recently, police investigation of suspects apprehended making large illicit shipments of heroin and methamphetamine to Taiwan and Japan have revealed a North Korean connection to the drugs.”
Suspects arrested in several countries revealed to authorities direct links with North Korean officials, military vessels and personnel in drug and other illicit trafficking. Defector accounts also confirm government control over opium production, and the manufacture of heroin and methamphetamine by PDRK state entities. “ The most profitable means of state sponsored illegal business remains drug trafficking, gold smuggling, illegal sale and distribution of endangered species, trafficking in counterfeit us currency, and rare metals,” said Raphael Pearl of the independent Congressional Research Service in 2006, “North Korean officials appear to be increasing their involvement in financing (these activities)”
Methamphetamine production in North Korea was said to have started in the mid 1990’s. In the late 1990’s North Korea tried to purchase between 20 and 50 tons of ephedrine—the precursor drug for methamphetamines—from several countries, including an Indian pharmaceutical company. That is enough to treat 135 million colds for a country with a population of 23.9 million people.
North Korean officials have been directly linked to possessing or selling heroin, methamphetamines, opium, cocaine, hashish, and Ryhopnol (the ‘date rape drug’) in countries as far afield as Venezeula, Japan, China, Russia, Taiwan, Egypt, the Czech Republic, Bulgaria, India, and Turkey.
Japan has been a particular target for North Korean drugs. In 1999, two separate seizure of 100 kilograms and 564 kilograms of methamphetamine was seized. In 2000, 250 kilograms of methamphetamine seized, in 2001 a North Korean military ship was sunk by a Japanese patrol boat suspected of attempting to smuggle in drugs, and in 2002 separate seizures of 150 kilograms and two packages containing 500 pounds of methamphetamine said to be from North Korea discovered floating onshore. And in 2003 the Australian authorities seized a North Korean ship near the coast off Melbourne with 125 kilograms of heroin and arrested it’s North Korean crew. The ship tried to flee Australian navel vessels for four days and was holding no other cargo. Included onboard was a Korean Worker’s Party “political officer” with no maritime function.
In Egypt North Korean diplomats have been expelled repeatedly for smuggling large quantaties of drugs over three decades. In 1976 diplomats were expelled for having 400 kilograms of hashish in their luggage, in 1998 diplomats were expelled with a half million tablets of Rohypnol—the so-called ‘date rape’ drug, and in2004, two diplomats in Egypt were expelled with 150,000 tablets of Clonazipam, an anti anxiety drug. These are just a random list of the broad range of official involvement in narcotics smuggling worldwide.
The contraband is often smuggled by land from North Korea through China and Russia or by ship to markets in Europe, Asia and the Middle East through private trading companies controlled by Bureau 39, diplomatic pouch, and hidden in cargo labeled legitimate material.
But North Korea’s state sponsored criminal syndicates have shifted priorities of the type of smuggled goods and the tactics used to transport and deliver them over the last 35 years, seeking to maximize profits and mask the source of origin as they have faced increasing international scrutiny. They have shifted from counterfeit dollars and opium and heroin in the 1970’s and 80’s to a sharp rise in methamphetamine in the 90’s to counterfeit cigarettes and pharmaceuticals and illegal weapons transfers in the last decade. They also have been involved in smuggling illicit elephant ivory, rhinocerous horns, conflict gemstones, fake postage stamps, untaxed liquor, CD’s, cigarettes, gold, vehicles, often through diplomatic pouched declared as innocuous goods. They have smuggled internationally controlled precursor chemicals for drug manufacture, and nuclear and weapons components, through front companies and organized crime groups. And they have increasingly shifted from direct retail delivery, through use of diplomats and state front companies, to wholesalers selling to organized crime syndicates who distribute the illicit goods worldwide. They have created a maze of changing front companies and bank accounts located worldwide, to stifle international scrutiny and disguise violations of national laws and international sanctions that can be directly linked to the North Korean regime. So as seizures of particular commodities ebb and flow, and distribution networks change, their commitment to controlling a worldwide criminal syndicate remains a central feature of state policy and aggregate revenues from illegal goods has remained consistent or increased. One marked shift is partnering with established criminal syndicates to transport and distribute illegal goods. “ DPRK linked illicit trading networks exist on every continent today – increasingly in partnership with organized crime groups,” said David Asher, a former senior U.S. government official in charge of counter North Korean criminal operations until 2005, citing a 2005 indictment of 87 people throughout the United States, “…an expansive network in the US linked to North Korea and Chinese criminal partners was documented. This network, as the unsealed indictments show, was engaged in selling tens of millions of dollars per year of contraband – everything from counterfeit US currency, counterfeit US postage stamps, counterfeit US branded cigarettes and state tax stamps, counterfeit Viagra, ecstasy, methamphetamine, heroin, AK-47s, and even attempting to sell shoulder fired missiles (manpads) and rocket propelled grenades (RPGs) into the US.”
William Newcomb, a former senior U.S. State Department official and North Korea specialist remarked in March 2011 that,” On the other hand, the continuing large-scale traffic in counterfeit cigarettes from DPRK territory suggests that enforcement against notorious organized criminality is lax. It is also possible that a lucrative counterfeit cigarette trade has replaced a riskier drug trafficking business as a generator of revenue for the DPRK state”
The lower profile, if indeed diminishing involvement, in narcotics trafficking by the North Koreans could be a reflection of the negative consequences of the very high profile criminal seizures, arrests, detentions, and expulsions incontrovertibly linking the regime to state sponsored illegal narcotics smuggling over 30 years since 1976. They have long had dealings with private organized crime from China, Russia, and Japan and appear to have expanded these networks worldwide—along with an estimated 120 shell front corporations—the PDRK increasingly acting as a wholesaler, using them as middlemen for distribution outside the country.
Dozens of ships linked to North Korea have been seized with counterfeit US dollars and narcotics, as well as weapons, and cigarette paper, among other things. This exposed the highly unusual arrangement North Korea had entered into with the Cambodian Government to operate a “Flag of Convenience” office in Singapore, controlled and staffed by North Koreans, for a reportable bribe of millions of dollars and the promise that 30 North Korean ships could be registered under the Cambodian flag.
The company, the Cambodian Shipping Company, was established in 1994 by a long time North Korean diplomat who had served in Cambodia, and finally shut down under international pressure in 2002 after having numerous ships seized for illegal activity, including those originating from North Korea.
“Of most concern to the US and indeed to South Korea was the clear evidence that North Korean freighters flying the Cambodian flag or on the Cambodian register were moving ballistic missiles to clients in the Middle East and Africa,” , said Michael Richardson, author of the book “A Time Bomb for Global Trade: Maritime Related Terrorism in the Age of Weapons of Mass Destruction”.
In 2001 Irish customs found 20 million smuggled cigarettes on a Cambodian-registered ship that arrived from Estonia, its manifest claiming it had timber. The cigarettes concealed in the centre of bales of timber, were liable to tax amounting to about three million Irish pounds. It was the largest seizure of tobacco in Irish history. Irish officials said they were destined for a terrorist faction called the Real IRA, whose leader Shawn Garland was later indicted by the United States for laundering millions of dollars of counterfeit U.S. dollars he received at the North Korean embassies in Moscow and Minsk, Belarus and distributed throughout Europe. The 2001 cigarette bust was also said to originate in North Korea.
Spain seized a ship, tracked by U.S. intelligence departing from North Korea in November 2002 allegedly carrying cement to Yemen. In December 2002 it was seized in the Indian Ocean by Spanish and American military vessels. The So San was a Cambodian registered vessel said to be loaded with cement “but an examination revealed 15 Scud missiles with 15 conventional warheads, 23 tanks of nitric acid rocket propellant and 85 drums of unidentified chemicals all hidden beneath the bags of cement.” It was allowed to continue at the time. It’s cargo was later determined to have ended up in Libya. An embarrassed State Department spokesman responded: “At first we couldn’t verify the nationality of the ship because the ship’s name and the indications on the hull and the funnel were obscured. It was flying no flag.”
Lloyd’s List, a shipping industry newspaper, said dozens of North Korean ships flew the Cambodian flag.
Also in 2002, the French seized the Cambodian registered ship the Winter after a firefight. They seized one ton of cocaine worth over 100 million dollars. The cargo was registered as scrap destined for Spain. Greek, French, and Spanish authorities had tracked the vessel.
David Cockroft, head of the International Transport Workers’ Federation said: “As long as governments and the UN turn a blind eye to the way FOCs allow criminals to operate anonymously, ships will be used to transport everything from drugs and illegal immigrants to the supplies used by the al-Qaida men who blew up the US embassies in Kenya and Tanzania,” Adding “The world should join us in demanding that Cambodia shut down this sleazy and pestilent offshore registration.”
Lim In-Yong, a senior North Korean diplomat who had been stationed in Cambodia, owned the CSC , which was awarded the contract as the exclusive Cambodian government representative to register flags of convenience vessels in 1994. He was, on paper in partnership with the son in law of Cambodian King Norodom Sihanouk, Kek Vandy, married to the King’s eldest daughter. The CSC quickly gained a reputation as a rogue operation.
The Company, operating under the legal representative of the Cambodian government but operated by North Koreans, rapidly became notorious for illegal activities of the ships it registered. Aside from the above mentioned cases, they were implicated in smuggling oil out of Iraq during the embargo, smuggling cigarettes to Albania and Crete, human trafficking and prostitution to Japan and Crete, as well as other hauling contraband from weapons to drugs. Intelligence officials suspected North Korea was using CSC vessels to ship ballistic missile technology to Iran, Iraq, and Pakistan. Under Flags of Convenience vessels, it is difficult to identify who is the real owner of a ship.
By 2002 the company had registered ships of which 25 had shipwrecked, 41 crashed, nine fires and 45 arrests. Nine CRC registered ships were banned from entering European ports as unfit to sail.
A Cambodian government official, Ahamed Yahya , responded to the public inquiries. “We don’t know or care who owns the ships or whether they’re doing ‘white’ or ‘black’ business … it is not our concern.”
Under growing international complaints, the Cambodian government withdrew its license to the North Korean controlled CSC. But there are 40 nations that offer flags of convenience services, making it easy to disguise the origin and cargo for the transport of illegal goods. And making sanctions against interdicting North Korean illicit cargo much harder. “Arms smuggling, the ability to conceal large sums of money, trafficking in goods and people, and other illegal activities can also thrive in the unregulated havens which the flag of convenience system provides,” said Nick Winchester, an analyst in the Seafarers’ International Research Centre at Cardiff University in Wales.
Since at least the mid-1990s, the DPRK has engaged in the manufacture of counterfeit cigarettes along with packaging and tobacco revenue stamps of various countries. Taiwan law enforcement seized 20 shipping containers of fake cigarette wrappers destined for North Korea. According to a report from a private investigation launched by a consortium of Tobacco companies targeted by North Korean counterfeiters, “the seized materials could have been used to package cigarettes with a retail value of $1 billion.”
It reportedly hosts similar foreign-operated counterfeit cigarette ventures. Tobacco industry investigations concluded in 2005 that North Korea operated 10-to-12 active plants and determined that the DPRK military and the “internal security service” operated at least one plant each.
Tobacco industry investigators estimated North Korea could gross between $520 million and $720 million annually.
Made in North Korea ” counterfeit cigarettes are marketed throughout Asia, especially Taiwan and Indonesia, and in the United States. More recently, North Korea began making counterfeit pharmaceuticals, in particular Viagra, for foreign distribution, mostly Japan and South Korea.
North Korean factories are reckoned to produce 41 billion fake cigarettes a year, for sale in China, Japan and the US,” according to testimony in front of the U.S. Congress.