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Office 39 / Bureau 39 - Korean Workers' Party

Office 39 (a.k.a. Office #39; a.k.a. Office No. 39; a.k.a. Bureau 39; a.k.a. Central Committee Bureau 39; a.k.a. "Third Floor"; a.k.a. Division 39), of the Korean Workers' Party provides critical support to North Korean leadership in part through engaging in illicit economic activities and managing the leadership's slush funds. Luxury goods are used by North Korean leaders to consolidate power and appease members of the political elite by increasing their personal wealth. Office 39 of the Korean Workers' Party engages in illicit economic activity to support the North Korean government. It has branches throughout the nation that raise and manage funds and is responsible for earning foreign currency for North Korea's Korean Workers' Party senior leadership through illicit activities such as narcotics trafficking.

As an organization that oversees the nation’s foreign currency earnings, it has raised and managed Kim Jong-un’s secret funds. As a means of earning foreign money these days, it has guided various illegal activities, such as drug trafficking, financial fraud, counterfeiting, manufacturing of fake tobacco products and hacking. Office 38, which takes charge of procuring the leader’s governing money from within the nation, has reportedly been integrated into Office 39. In 1992 and 1993, Office 38 was separated from Office 39.

Paul Rexton Kan, Bruce E. Bechtol, Jr., and Robert M. Collins noted in 2010 that North Korea had " a “court economy,” akin to that practiced by an absolute monarch. Started in 1972, this court economy predates the emergence of Office #39 but is one of the many drivers of criminal sovereignty. The court economy is responsible for approximately 30 to 40 percent of North Korea’s entire economy and is also referred to in a number of other ways, such as the Supreme Leader’s economy, the 3rd economy, the elites’ economy, the cadre economy, or the party (KWP) economy. The functional heart of this court economy is now, in fact, Office #39."

Kim Jong-il was internally boosted as the successor in February 1974, but to ensure a successful succession, an enormous amount of political fund was required. To procure such a colossal political fund, Kim Jong-il created a new economic organ under the party called Office 39 in 1974. Starting with the Daesung Trading Company, formerly subordinate to the Ministry of Foreign Trade, being integrated into Office 39, major trade businesses became subsidiary parts of the party-economy. The party-economy took control of companies and businesses that were the source of foreign currency income by monopolizing most of the gold and zinc mines and refineries and exporting high quality marine product and pine mushrooms.

Office 39 began to professionally earn foreign currency, having organizations such as the Daesung Trading Company under its control. Office 39 had ‘No. 5 Management Division’ (ohogwanlibu) as its direct subordinate, which was the procurement agency to obtain ‘loyalty party fund’ through various export goods by mobilizing party organization of provincial and municipal offices, state-run enterprises, and collective farms of each city and district. ‘No. 5 Management Division’ set up regional headquarters and aimed to produce local products enabling to draw in one million dollars annually. Initially, these headquarters, called the ‘No. 5 Management Office’ (ohogwanliso), were supervised by the Organization Department of the local Party Committee of province, city, and district, but was renamed as the ‘No. 5 Management Division’ after 1989 when foreign currency earnings became active and diversified. The ‘No. 5 Management Division’ utilized two methods of profit making. One was, through Office 39, allocating various foreign currency earning assignments to the Primary Party Committee of factories, companies, and collective farms and supervising and controlling the process.

The other was a semi-coercive mobilization of the population to fulfill individual obligatory foreign currency earning targets to collect and gather local products such as gold, pine mushrooms, and fatsia and to sell them to the monopsony agencies of the local No. 5 Management Division. Regional administrative organizations also participated in earning foreign currency by engaging in businesses to expand local finances. However, because these regional businesses did not have the authority to dispose of the resources, they had to be delivered to Office 39 for export. Additionally, after 1977, foreign currency only stores for imported goods were opened in the cities and districts to soak up foreign currency among population.

Then how did they earn foreign currency? In the 1970s the Party Center’s foreign currency earning agencies had monopoly over the collection and export of resources. Thus, the Party Center could prevent cost increases caused by competition with other shops. This meant that there was a huge margin between the domestic price and international price of exported goods and the Party Center’s foreign currency earning agencies took hold of such margin.

The provincial chief secretaries and people around him would often develop a symbiotic relationship with wealthy citizens in the region by offering privileges and protection in exchange for personal economic gains. For example, the organization secretary, chief of Office 39 at the central Secretariat, chief secretary and chief accountant of the Kangwon Provincial Branch were all arrested in 1998. They were accused of having given an unlimited power for foreign currency transaction to a wealthy local businessman who had connections with Japanese businessmen. The fact that provincial party organizations were engaged in cronyism and maintained closely knit symbiotic relations with business or personal profiteering networks is evidence that the central party control had been weakening.

Office 39 controls a number of entities inside North Korea and abroad through which it conducts numerous illicit activities including the production, smuggling, and distribution of narcotics. Office 39 has also been involved in the attempted procurement and transfer to North Korea of luxury goods. The U.S. government has longstanding concerns regarding North Korea's involvement in a range of illicit activities conducted through government agencies and associated front companies. North Korea's nuclear and missile proliferation activity and other illicit conduct violate UN Security Council Resolutions 1718 and 1874, and these activities and their other illicit conduct violate international norms and destabilize the Korean Peninsula and the entire region.

During the past three decades, North Korean citizens, diplomats and government officials have engaged in narcotics trafficking. Officials in Turkey, Egypt, Taiwan and Japan have linked North Korean officials to narcotics possession, distribution and smuggling.

The United States continues to investigate North Korea's manufacture and distribution of the highly deceptive counterfeit of the U.S. $100 and $50 bills, also known as the "supernote." The United States Secret Service has made definitive connections between the supernote and the government of North Korea. Since its first detection in 1989, the Secret Service has seized approximately $63 million of supernotes globally.

UNSCR 1718 requires Member States to prohibit the direct or indirect supply, sale of transfer to North Korea of luxury goods, which North Korean leadership uses to secure the loyalty of elites and the military. In July 2009, Italian authorities prevented the sale of luxury yachts worth more than $15 million to an Austrian company because they were ultimately destined for North Korea.

North Korea continues to engage in deceptive financial practices to disguise the true nature of its transactions, using government agencies and front companies to engage in WMD and missile proliferation-related and other illicit activities and to evade detection by financial institutions around the world. All of the conduct above is facilitated by the deceptive financial practices North Korea engages in to disguise the true nature of its transactions.

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. Halted by Italian authorities, the attempted export of the yachts destined for Kim Jong-il was in violation of United Nations sanctions against North Korea under UNSCR 1718, which specifically require Member States to prevent the supply, sale, or transfer of luxury goods to North Korea.

Office 39 previously used Banco Delta Asia to launder illicit proceeds. Banco Delta Asia was identified by the Treasury Department in September 2005 as a "primary money laundering concern" under Section 311 of the USA PATRIOT Act because it represented an unacceptable risk of money laundering and other financial crimes.

In 2015 HSBC froze accounts of a Hong Kong businessman believed to have been involved in businesses with dictatorial regimes in Africa and North Korea. The Financial Times reported on 15 March 2016 that accounts controlled by Sam Pa and his business associate Veronica Fung were blocked by HSBC in March of last year and that an internal investigation was still under way. The report claimed the frozen accounts contain at least 87 million U.S. dollars, and a judge in Hong Kong declined a request made by Pa and Fung last week that HSBC release the funds.

Pa, who is believed to be head of the Hong Kong-based Queensway Group, is suspected of having dealings with dictatorial regimes around the world. In 2006, Pa reportedly pursued a project to build high-rise buildings in Pyongyang. The project dubbed “KKG Avenue” is connected to Office 39 of the North’s ruling Workers’ Party, the branch of Kim Jong-un's regime that handles the country’s illicit financial activities.

The North is believed to reap an annual 100 million dollars in foreign currency from its overseas laborers. Eighty to ninety percent of their monthly wages are believed to be transferred to Office 39 of the Workers' Party, the agency that manages funds for state governance.

On 11 January 2018, the Unification Ministry in South Korea announced major changes in North Korea’s power structure for 2018. The ministry publishes a list of North Korea’s power elite every year. According to the new report, some of those in charge of key agencies in North Korea seem to have been replaced. Shin Ryong-man became the head of Office 39. As the party’s special unit in charge of managing Kim Jong-un’s secret funds, Office 39 has been led by one of the most reliable experts trusted by the leader.