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DPRK Corruption

Cyberattacks have earned North Korea about $2 billion in just over three years, money that has gone towards its nuclear and ballistic missile programmes, according to a UN report. The report, which was presented August 2019 to the UN Security Council’s Sanctions Committee on North Korea, has totted up the loot brought in by 39 attacks since 2016, carried out by suspected cyber criminals in Pyongyang’s pay. They targeted financial institutions in 17 countries and stole bitcoins from cyptocurrency trading sites in raids that “used cyberspace to launch increasingly sophisticated attacks to steal funds from financial institutions and cryptocurrency exchanges to generate income”, the report said.

IT attacks that make money for North Korea have been known about and documented for years. One of the most active cybercriminal groups, nicknamed Lazarus, is suspected of being the driving force behind the well-publicised robbery of $80 million from the Bangladeshi central bank in 2016. Overall, between 2017 and 2018, at least $571 million was stolen in the hacking of five cryptocurrency trading platforms, according to an October 2018 report by the Russian cyber security firm IB Group.

Lazarus is not the only group of hackers that works to feed Pyongyang’s coffers. North Korean cybercrime activities are co-ordinated by the Reconnaissance General Bureau, the main intelligence organ of Kim Jong-un’s Workers’ Party of Korea. US authorities have given these cybercrime operations the collective code name Hidden Cobra, and have identified about twenty hacking weapons (viruses, Trojan horses etc) that have been used for North Korea’s benefit.

However, until the release of the UN report, the amount of money these cyberattacks have raked in was unknown. If its estimate of $2 billion is proven to be accurate, that would mean that cybercrime has become “one of the most important, if not the most important, source of income for the North Korean state”, noted Antoine Bondaz, director of the Korea programme at the Foundation for Strategic Research in Paris, in an interview with FRANCE 24.

Though weakened and corrupt, the DPRK security apparatus is still capable of inflicting fearsome punishment on those caught doing something viewed as anti-regime. Moreover, the authorities still punished not only the wrongdoer, but his or her extended family (and sometimes friends) as well. While medieval, this collective punishment kept a tight and effective lid on regime opposition. The average non-elite North Korean does not have the luxury of thinking about politics. Instead, he/she has to worry about putting food on the table for the next meal.

People in the Democratic People’s Republic of Korea (DPRK) are trapped in a vicious cycle, in which the failure of the State to provide for life’s basic necessities forces them to turn to rudimentary markets where they face a host of human rights violations in an uncertain legal environment. The public distribution system in the DPRK has been broken for over two decades and how, as people seek to eke out a living in a legally precarious parallel economy, they are exposed to arbitrary arrest, detention, and extortion. The whole system is based on the informal but pervasive practice of bribing State officials who are in a position to enable people to side-step State requirements and regulations in order to work in the private sector and avoid arrest. The constant threat of arrest and prosecution provides State officials with a powerful means to extort money and other favours from people desperate to avoid detention in inhumane conditions. In addition, the living conditions and treatment of detainees can also depend on the payment of bribes.

The children of high-ranking North Korean and Chinese officials hijack the most favorable investment and aid deals for their own enrichment. When the child of a high-ranking official hears of a Chinese aid proposal to North Korea, he will travel to North Korea to convince the relevant official to follow his instructions for implementing the aid project. He will then use his connections to request proposals from Chinese companies to develop the project, returning to North Korea to convince the relevant official to select the favored company. At each step, money changes hands, and the well-connected Chinese go-between pockets a tidy sum.

For the offspring of officials in the DPRK, there are also ample opportunities to work in China. In a typical situation, a DPRK official will alert another official to an opportunity for the second official's child to work in China for a DPRK-Chinese joint venture. After signing a contract, it is a cheap, easy process to obtain the necessary permit from the Chinese provincial Bureau of Labor and Social Security. The system is similar to the "ting xin, liu zhi" system in China in the 1980s, in which officials retained their government position with a suspended salary while going to work for a private company.

Over-reporting of actual value is a common phenomenon on the part of North Koreans charged with securing foreign investment. For instance, a commitment of RMB 10 million is reported to Pyongyang as a commitment of USD 10 million or more and the actual sum (the RMB 10 million) is reported as a first tranche. After the initial investment is realized, the central government is told that the foreign investor demands further preferences in order to inject more money. The reporting officials count on the central government either taking additional steps to attract the extra investment or doing something to upset the Chinese investor. In the latter case, the official can blame the lack of realizing the investment on political factors out of his control.

Northeast China is home to 10,000-20,000 North Koreans. PRC policy toward North Korean border-crossers shifted in 2002 in part because of growing evidence of the involvement of some crossers in criminal activity. Until 2002, Beijing and local northeastern Chinese government officials benignly neglected North Koreans "living peacefully" in northeast China. But in 2002, PRC policy toward North Korean border- crossers officially shifted, requiring the arrest and repatriation of "illegal migrants" to the DPRK.

In a number of areas along the southern end of the PRC-DPRK border, illicit cross-border smuggling persists, complicating the extent to which official trade figures fully capture the complex reality of PRC-DPRK exchanges -- official or otherwise. Scrap metal and antiques are among the staples of smaller-scale smuggling around Dandong. Profitability is difficult to discern. One Hekou smuggler reported that copper fetched RMB 49 (USD 6.30) per kilo on the black market in 2007. According to one Kuandian smuggler, the most successful smuggler in Hushan-- a full-time operator, unlike some others who smuggle only to supplement their normal incomes--can afford to pay his "employees" RMB 60,000 (USD 7700) per year, a large sum in an otherwise depressed area.

The complicity of corrupt local officials complicates PRC efforts to crack down on smuggling. Local police were well aware of the smuggling and turned a blind eye. Maintaining a good relationship with security officials is absolutely essential to smuggling operations. The ability of North Koreans to make multiple forays into China after repatriation underscores, in part, the corruption of North Korean soldiers and other security personnel on the DPRK side of the border. It also suggests, in select cases, ties of some border-crossers to resilient criminal networks in North Korea.

By the end of 2009 DPRK's poor harvest and severe food shortages were nothing new. The major difference from the famine of the late 1990s is that non-elite North Koreans had taken charge of getting their own food via unofficial markets; in the 1990s, many ordinary North Koreans sat around waiting for the government to save them and died of starvation. The increase in black market activity throughout the DPRK could be read as a sign of particularly tough, but not unprecedented, times in the North.

Just about everyone in North Korea now buys and/or sells things in black markets, including government officials and urban workers. People go to their work units for the morning roll call and then head off to the nearest market to "earn real income." The system is sustainable because even work unit supervisors and security force officers earn income at the markets -- though often in the form of bribes. At a typical market, approximately 85 percent of the goods come from China; the balance, were generally goods stolen from factories, government offices and/or people's homes.

From the early 1970s, the North Korean government initiated a clandestine opiate production program. The drugs produced were exported in order to earn foreign currency. It was North Korean diplomats and other officials who were tasked with transporting and peddling the drugs overseas. Predictably, the scheme led to recurrent diplomatic scandals in places as different as Norway and Egypt. The resultant publicity was not good for the country’s image, to put it mildly.

Around 2005, the North Korean government finally decided to stop, or at least significantly curtail, the state-sponsored drug smuggling program. This was probably a wise if long overdue move, since the economic gain probably did not compensate for the damage the program did to the country’s name.

Roughly around the same time, however, a completely new kind of drug problem came to be associated with North Korea. The new wave of the drug production was not run by the intelligence operatives and sponsored by the state. Instead, this was a small scale, privately run, lab-based production of methamphetamine. The North Korean government did not endorse these activities, even though it was a widespread official corruption that allowed methamphetamine to proliferate.

Actually, the North Korean government had produced the methamphetamine before, using it as a stimulant. This is not unprecedented, since during the Second World War not only the Japanese and Germans, but also Americans and British armed forces used methamphetamine and amphetamine-type stimulants widely.

Initially, meth was produced for private export to China, but before too long, drug deals found customers inside North Korea. A meth epidemic began and continues to this day.

The major problem is that the majority of North Koreans are not fully aware of the dangers associated with the use of crystal meth. Many believe that this kind of drug is only mildly addictive and hence drugs are frequently taken for recreation purposes or stimulants by those engaged in demanding work. Alarmingly, drugs are frequently given as presents, even as birthday presents, to friends, and in some cases are used for in-kind payment (a la cigarettes).

The North Korean government cannot bring itself to openly admit that it has a serious drug problem because for decades, such problems have been presented in their propaganda as something that might happen only in the immoral and depraved capitalist societies.

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Page last modified: 10-08-2019 19:03:12 ZULU