Sanctions on North Korea Inc. Hit Kim's Secretive 'Office 39'




The United Nations' latest sanctions on North Korea for its nuclear program extend beyond the conventional exports cited in the Security Council resolution -- coal, iron ore, lead ore and seafood.

The restrictions described by diplomats on Aug. 5 as the "most stringent" against the nation also freeze the assets of some of North Korea's biggest companies, including a maker of massive monuments and a Pyongyang-based insurance company that's been linked to a slush fund for leader Kim Jong Un and his family.

Here are more details on the sanctioned entities:

Korea National Insurance Corp.

According to a 2016 report by theU.S. Treasury Department, the company is a "substantial" generator of foreign-exchange revenue for the Kim regime and is linked to a secretive part of the government known as Office 39.

"Most people think of Office 39 as Kim's slush fund, a private budget for Kim family purposes," said Sokeel Park, director of research and strategy at Liberty in North Korea, a Seoul-based group working to help refugees from across the border.

KNIC gained prominence when Lloyds of London,Allianz SE and other reinsurersdisputed the country's $57 million claim after a 2005 helicopter crash destroyed a Pyongyang warehouse filled with food and other humanitarian aid.

At the time, the insurers alleged in a London court that the crash was staged and the claim was intended to bring foreign currency into the country to benefit then-leaderKim Jong Il.

Most of those reinsurers agreed tosettle in 2008 for about $53 million and to retract all allegations of fraud against the company.

A telephone message seeking comment from a company official wasn't returned, and an email sent seeking comment wasn't answered.

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Mansudae Overseas Project Group of Companies

Founded in 1959, Mansudae is the nation's most-prominent art studio, with business ties reaching from Algeria and Togo to Cambodia and Malaysia. Primarily engaged in creating tributes to the Kim family, its best-known overseas projects include Senegal's African Renaissance Monument -- taller than the Statue of Liberty -- and Frankfurt's Fairy Tale Fountain.

At the other end of the size scale, it designed the tiny "Kim pins" that North Koreans wear on their lapels.

According to the U.S. Treasury Department, the company has been involved in exporting workers to generate revenue for the Kim regime.

Mansudae's contracts were already in decline as North Korea's diplomatic relations with the outside world deteriorated, said Lim Soo-ho, a research fellow at the Korea Institute for International Economic Policy in Sejong, South Korea.

"The sanctions could have the impact of cutting what contracts they have, but it's also possible that North Korea just changes the name of Mansudae or transfers the contracts to a different state organization," Lim said.

A phone number for the company couldn't be found, and a message sent through its website seeking comment wasn't immediately answered.

Foreign Trade Bank

FTB has served as North Korea's main foreign-exchange bank since being established in 1959, doing deals for large state-owned companies. In 2013, the U.S. Treasury Department said the bank facilitated millions of dollars in transactions that benefited the Korea Mining Development Corp., which the U.S. described as "North Korea's premier arms dealer."

Yet there is a suspicion the FTB may be able to evade Security Council Resolution 2371 easily.

"North Korea can easily change entities' names," said Kim Byung-yeon, an economics professor at Seoul National University and author of "Unveiling the North Korean Economy." "For organizations run by the state, North Korea can just shift the sanctioned entities' work to a different organization."

Efforts to find contact information for the company were unsuccessful.

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Koryo Credit Development Bank

The bank's English-language marketing materials list services that include foreign-currency loans and advances, remittance in foreign currencies, import loans and investment banking, according to materials posted on the website North Korean Economy Watch.

The brochure adds that KCDB's "mission is to become your most user-friendly banker."

The UN resolution said the bank is also known as Daesong Credit Development Bank, Koryo Global Credit Bank and Koryo Global Trust Bank.

In March, the entity was banned from using the Society for Worldwide Interbank Financial Telecommunication (SWIFT).

In June, the U.S. Treasury Department said Ri Song Hyok, a Beijing-based official for the bank, had established front companies to procure items and conduct financial transactions on behalf of North Korea, and he received cooperation from a Chinese citizen.

A person answering a phone number listed in the company's marketing materials who declined to identify himself said it was difficult to speak about the organization. When asked about the sanctions, the person said he didn't have an opinion on it and hung up.

That person hung up again when called back.

Read Sanctions on North Korea Inc. Hit Kim's Secretive 'Office 39' on bloombergpolitics.com

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