Gold Smuggling North Korean Diplomat Provides Glimpse at Criminal Empire

Shut off from the global financial system and under heavy sanctions, North Korea operates a vast system of illicit enterprise, ferrying precious metals, drugs, and weapons around the world. One might be forgiven for confusing this state with a mafia organization.

In operating its criminal empire, North Korea has a distinct leg up over its competitors: diplomatic immunity. By using the legal privileges afforded to a state, North Korea has made its government the principal instrument of a mafia organization whose essential purpose is to enrich and protect the ruling Kim family. On Friday, the latest evidence of this enterprise surfaced from below the murky waters of the North Korean state when one of its diplomats was arrested at the airport in Dhaka, Bangladesh, trying to smuggle $1.4 million worth of a gold into the country. Given his diplomatic status, he was released.

As he was carrying a combination of gold bars and jewelry, it doesn’t take an investigative genius to figure out this diplomat’s plot. Son Young Nam, the first secretary of the North Korean Embassy in Dhaka, arrived in Dhaka from Singapore carrying a briefcase filled with the precious metal in question. He was arrested after customs officials asked to search his hand luggage, and he refused. Singapore, of course, is a major port city, one easily serviced by North Korea’s considerable merchant marine. Dhaka is home to a major gold market, where the mineral would likely have been sold and entered the global market.

(Once it enters the market, the gold is so hard to track that some American companies have admitted that North Korean precious metals have turned up in their products, in violation of U.S. sanctions.)

The plot is a testament to the Kim family’s strategy both for staying in power and enriching itself at the expense of the country’s citizenry. Endowed with a considerable wealth in natural resources, gold smuggling serves as a major source of revenue for the country. North Korea reportedly has about 2,000 tons of gold reserves and produces 12 tons of the stuff annually. Most of that gold is reportedly smuggled across North Korea’s northern border and combined with higher purity Chinese gold. Such sales provide the Kim family with key sources of hard currency to finance their activities and those of their government, as the country’s currency, the won, is all but worthless.

As with all stories about North Korea, it is important to note that the total lack of transparency and access to the country makes writing about it something like an educated guessing game. A puzzle but appears here and there — but as they accumulate, one can begin to draw a fuller picture of the regime’s activities.

Key to understanding North Korea’s criminal activities abroad is shadowy group known as Bureau 39, whose principal responsibility is providing hard currency to the ruling family. Set up by Kim Jong Il during the 1970s to finance his rise to power, Office 39 deals in counterfeiting currency, drug smuggling, arms sales, and, yes, sales of gold, according to defector accounts. Bureau 39 is said to generate somewhere between $500 and $1 billion in revenue annually.

The sale of knock-off cigarettes are something of a specialty, as is counterfeiting U.S. dollars. In the mid-2000s, the Secret Service became obsessed with halting the production of so-called North Korean “supernotes,” counterfeit dollars that were so good that the agency’s own experts had trouble telling real from fake. The U.S. government has said that some $50 million of these supernotes entered circulation, but independent experts have said that Pyongyang could have made as much as $2 billion in counterfeit dollars.

Stepped up financial sanctions and widespread media attention reportedly led the North Korean government to curtail its counterfeiting activities. But given the Kim’s family continued isolation and need for hard currency, it is more likely that Bureau 39 has simply shifted its attention elsewhere.

Friday’s arrest is probably indicative of that effort and shows how the regime can shift and adjust the enterprise as needed. If a diplomat such as Son makes two trips a month to Singapore to pick up a shipment of gold bars, he might reasonably net about $30 million a year, depending on the discount at which he sells the material.

And Son is but one cog in the machinery of the North Korean mafia state. Elsewhere in the world, North Korea has been reported to be selling state-manufactured methamphetamine. North Korea was reported to have helped build a Syrian nuclear reactor destroyed by Israel in 2007. Last year, a North Korean weapons shipment from Cuba was intercepted in the Panama Canal.

All that business adds up.

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