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North Korean Crime-for-Profit Activities

2018-06-07 11:16
Order Code RL33885

North Korean Crime-for-Profit Activities

February 16, 2007
Raphael Perl
Specialist in International Affairs
Foreign Affairs, Defense, and Trade Division

Dick K. Nanto
Specialist in Industry and Trade
Foreign Affairs, Defense, and Trade Division
North Korean Crime-for-Profit Activities


Strong indications exist that the North Korean (Democratic People’s Republic
of Korea or DPRK) regime is involved in illicit drug production and trafficking, as
well as production and trafficking in counterfeit currency, cigarettes, and
pharmaceuticals, with drug trafficking likely decreasing and counterfeiting of
cigarettes expanding. Overall, the reported scale of this activity is significant and
arguably provides important foreign currency resources to the military-oriented North
Korean state. Media reports also indicate that North Korea may engage in insurance
fraud as a matter of state policy. DPRK crime-for-profit activities are reportedly
orchestrated by a special office charged with bringing in foreign currency under the
direction of the ruling Korean Worker’s Party.

With the caveat that dollar value estimates of clandestine activities are highly
speculative, conservative/mainstream estimates suggest North Korean criminal
activity generates as much as $500 million in profit per year, with some estimates
reaching the $1 billion level. A core issue is whether the income from the DPRK’s
reportedly widespread criminal activity is used to finance the acquisition of weapons
of mass destruction, thereby strengthening the DPRK’s ability to maintain what many
view as its — to date — truculent, no-compromise position on curbing its aggregate
level of criminal activity. Moreover, the DPRK has on numerous occasions linked
its ongoing participation in the Six-Party Talks to the lifting of U.S. restrictive
measures against Banco Delta Asia which are designed to sanction the Macau-based
bank for its reported longstanding role in facilitating the money laundering of
proceeds linked to DPRK criminal activity.

Policy analysts in the past have suggested that North Korean crime-for-profit
activity has been carefully controlled and limited to fill specific foreign exchange
shortfalls. However, increasing concern exists that North Korean crime-for-profit
activity is becoming a “runaway train,” gaining momentum, and possibly out of
control. As the DPRK’s crime-for- profit activity becomes increasingly entrenched,
and arguably in some cases decentralized, analysts question whether the Pyongyang
regime (or any subsequent government) would have the ability to effectively restrain
such activity, should it so desire. Moreover, some suggest that simply replacing
DPRK crime-related income with legitimate-source income would ignore the need
of the current regime to divert funding to slush funds designed to sustain the loyalty
of a core of party elite numbering in the tens of thousands and to underwrite weapons
development programs. They argue, therefore, that prospects for a decrease in crimefor-
profit activity do not bode well for the current regime as it appears to be neither
willing nor able to change its dependence on income that is unaccountable.

A challenge facing policymakers is how to balance pursuing anti-drug,
counterfeiting, and crime policies vis-a-vis North Korea against effectively pursuing
other high priority U.S. foreign policy objectives including (1) limiting possession
and production of weapons of mass destruction; (2) limiting ballistic missile
production and export; (3) curbing terrorism, and (4) addressing humanitarian needs.

This report may be periodically updated.

Here is the report. Click here.

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