The wiseguy regime

North Korea has embarked on a global crime spree
By DAVID E. KAPLAN: US NEWS & WORLD REPORT: Feb. 15, 1999

Something about the two North Korean diplomats passing through Egypt didn't seem quite right. The pair, based in Syria, had arrived only a day earlier from Ethiopia and already were high tailing it out of Cairo. Suspicious, an Egyptian customs official insisted on checking their six suitcases. He found quite a stash: 506,000 tablets of Rohypnol, a sedative known as the "date rape drug:"
That episode last July the largest seizure of Rohypnol on record is just one in a long string of drug incidents, counterfeiting cases, and other alleged crimes involving North Korean officials. Isolated, beset by famine, and desperate for hard currency, North Korea has in effect turned into a vast criminal enterprise, U.S. experts say. "It's the mafia masquerading as a government," contends James Przystup of the National Defense University in Washington, D.C. Says another international crime analyst: "If North Korea were not a nation, you could indict it as a continuing criminal enterprise."
Cases of North Korean officials engaged in smuggling and drug trafficking began to surface in the 1970s, but law enforcement analysts have noted a disturbing jump in the past five years. Using data from the Drug Enforcement Administration, Japanese and South Korean police, and foreign press reports, U.S. News has compiled a record of criminal complaints against North Korean diplomats in 16 countries since 1994. Interviews with law enforcement officials, intelligence analysts, and North Korean defectors suggest that the regime is now dramatically expanding its narcotics production and that much of the criminal activity is controlled at the highest levels of government.
How much of the profiteering goes to prop up the world's last Stalinist state and how much lines the pockets of corrupt officials is impossible to know. But it is clear that the worldwide network of North Korean embassies, coupled with the use of diplomatic pouches and immunity, offers the ideal cover for a criminal enterprise. 'We've rarely seen a state use organized crime in this way,", says Phil Williams, a University of Pittsburgh professor and editor of the journal Transnational Organized Crime. "This is a criminal state not because it's been captured by criminals but because the state has taken over crime."

Among the evidence:
* Authorities in at least nine countries have nabbed North Korean diplomats with a virtual pharmacy of illegal drugs: opium, heroin, cocaine, hashish. Investigators have traced orders for 50 tons of ephedrine the base for methamphetamine to North Korean front companies; that quantity is 20 times as much as the nation's legitimate needs.

* North Korean officials have been caught distributing counterfeit $100 bills in Cambodia, Russia, Macao, and Mongolia. The regime is believed to produce some of the world's best bogus currency with the same model press used by the U.S. Bureau of Engraving and Printing.

* North Korean officials in countries from Romania to Zambia are accused of using embassies and front companies to smuggle a mind-boggling array of goods, including untaxed cigarettes, bootleg CDs, fake antiques, and endangered species parts. North Koreans also have been tied to kidnappings and terrorism.

Behind much of this criminal activity lies North Korea's desperate need for cash. With the end of Soviet patronage, and with Koreans in Japan sending less money home, North Korea has lost two key sources of hard currency. Drug dealing and smuggling offer a lucrative alternative and are believed to bring into the nation's crippled economy more than $100 million each year. Just one North Korean methamphetamine shipment, seized in August by Japanese officials, had a street value of $170 million. By comparison, North Korea's legitimate exports plunged last year to a mere $520 million, while the nation spends an estimated $200 million annually on its nuclear program.
Some analysts suspect that drug profits may, in fact, be going into that program. Since 1994, Washington has pursued a policy of engagement, offering billions of dollars in Western aid if North Korea gives up its nuclear weapons development and missile exports. But the policy has produced a frustrating stalemate, and U.S. intelligence officials say new satellite photos indicate the North Koreans are rapidly expanding a suspected underground nuclear site. Meanwhile, the North Korean Army -the world's fifth largest- remains a potent threat to South Korea and Japan. "I can hardly overstate my concern about North Korea , " CIA Director George Tenet told Congress last week.
Congressional report. Concern over North Korea's illicit activity is bound to be fueled by a Congressional Research Service report due this week. The study, U.S. News has learned, cites at least 30 incidents that tie North Korea to drug trafficking. The CRS report suggests not only that drug profits could be funding the nuclear program but that U.S. food aid to the regime over $77 million worth this year may be needed in part because farm acreage is used to grow poppies for opium.
North Korea made its entry into the narcotics trade in the 1970s by purchasing drugs for resale, according to a U.S. intelligence report. At the time, the country had defaulted on international loans and, as now, was in dire need of cash. In 1976, four Scandinavian countries kicked out 17 North Korean diplomats after claiming to have found evidence that they were illegally selling narcotics, cigarettes, and alcohol. Among the officials were two ambassadors and the entire staff of the North Korean Embassy in Norway. (Diplomats, when caught, are rarely prosecuted.)
By the mid 1980s, North Korean farmers began cultivating opium poppies, allegedly under orders from leader Kim Il Sung. The processed opium and heroin were then sold overseas. With the cutoff of Soviet aid in the 1990s, Kim's son and successor, Kim Jong Il, ordered a major expansion of the drugs for export program, U.S. officials say. Based on data from defectors and other intelligence sources, U.S. and South Korean narcotics analysts believe that up to 17,000 acres now produce at least 44 tons of opium annually. If true, that would approach the output of Colombia, the largest supplier of heroin to the United States.
Despite repeated requests, North Korean officials declined an interview with U.S. News. In the past, however, North Korean spokesmen have branded accusations of drug dealing and other crimes as "smear campaigns" orchestrated by South Korea. The nation's opium production, they say, is strictly for medicinal purposes and is being stockpiled for use in war. Moreover, some drug control officials remain skeptical that North Korea is a major drug producer, among them Herbert Schaepe, secretary of the United Nations International Narcotics Control Board in Vienna. "If those production figures are correct, we would see seizures everywhere'' he says. "But we just haven't seen the evidence.' U.S. law enforcement officials counter that they are seeing large seizures and that the growing number of smuggling incidents as well as mounting testimony by defectors cannot be explained away as propaganda from Seoul. More conclusive evidence could come from U.S. spy satellites; one satellite was recently tasked to photograph North Korea's opium fields, intelligence sources say, but the day was cloudy and officials have been unable to get the satellite retasked.
Defectors say that drug trafficking is, indeed, a state run industry. One defector interviewed by U.S. News, Bae In Su, says he worked for three years as a driver for the Communist Party's Foreign Currency Earnings Department, ferrying opium and heroin to port for export. At least twice a month, Bae says, he would deliver a van full of opium packed by the kilogram in plastic bags to Japanese ships or to a local pharmaceutical plant that refined it into heroin. The entire process, he adds, was controlled by high-ranking party officials. "They talked about opium being gold;' Bae says. Another defector, pharmacist Ho Chang Gol, has claimed that the government ran more than 10 poppy farms to export opium.
Given the tight control wielded by North Korea's security apparatus, U.S. analysts say that such large scale production of illegal drugs could not exist without sponsorship by authorities in Pyongyang, the capital. Intelligence reports say that the trade is handled by Office 39, a party organ under the direct control of Kim Jong I1, which oversees production and then doles out the drugs to trading companies and diplomatic posts. U.S. officials believe the profits are funneled into a private slush fund controlled by Kim and used to hand out favors, bankroll intelligence operations, and buy military hardware.
The North Koreans have not targeted their drugs at the U.S. market, although at times their shipments have ended up here. One of Hong Kong's most notorious drug lords, Lai King man, started out peddling heroin from North Korea, says Catherine Palmer, a former assistant U.S. attorney who successfully prosecuted Lai in 1990. Palmer believes that 100 to 200 pounds were smuggled into the United States and that most of it ended up on the streets of New York.
Mexico to Moscow. Recent arrests suggest that the North Koreans are now exploring European markets. One year ago, Russian officials arrested two North Korean diplomats for smuggling 77 pounds of cocaine enough to fetch $4 million on the street from Mexico City to Moscow. In their pockets were round trip tickets to Frankfurt. And last October, German police investigated the deputy ambassador at the embassy in Berlin for ties to a heroin and weapons smuggling ring. But hardest hit are North Korea's neighbors. In the early 1990s, Russian officials noticed opium being sold by North Korean loggers in Siberia. The sellers, they found, dissolved opium and morphine into “medicines” with names like Roots of the White Bell and peddled them in local markets. But it took a 1994 sting operation to uncover the full scope of North Korean official involvement. Russian undercover cops agreed to buy nearly 18 pounds of heroin from two dealers who turned out to be North Korean state security agents. The deal was meant as a first installment for over 2 tons of the drug and the Koreans boasted that nearly 8 tons were available.
Still, the drug of the future for North Korea is likely to be methamphetamine. The Koreans are moving quickly into industrial scale production of "meth;" the drug of choice in much of East Asia, say law enforcement officials. U.N. drug control officials are tracking 50 tons of ephedrine base allegedly ordered by North Korea in the past year. The drug is used as a cold remedy, but the nation's legitimate annual needs are 2.5 tons. "They must have a lot of stuffy noses." quips one drug control agent.
The target for this appears to be Japan, where the nation's 500,000 users pay handsomely for high quality crystal meth. Most of Japan's speed in recent years has come from China, but Tokyo cops got a surprise in April 1997, in a small port in southern Japan. There a lone customs inspector wondered about the 12 large cans of honey that crew members hand carried from a North Korean freighter. It seemed strange, the inspector thought, that North Korea was exporting food in the midst of a famine. A check found the cans crammed with 130 pounds of meth. Then, last August, Japanese police traced a 660 pound meth shipment, worth $335 million on the street, to a North Korean boat disguised as a Japanese vessel. Investigators have tied both cases to the yakuza -Japanese crime syndicates- many of whose members are ethnic Korean. Japanese police are alarmed: In two years the North Koreans have come to supply nearly 20 percent of Japan's multibillion-dollar meth market.
North Korean-printed U.S. dollars are also showing up with troubling frequency: Authorities have seized Pyongyang’s bad bills in at least nine countries, from Mongolia to Germany. Last April, for in stance, a North Korean trade attache' in Vladivostok, Russia, was caught passing $30,000 in fake hundreds. In 1994, police in Macao traced $600,000 of the bogus bills to a North Korean trading company. Any doubts of official complicity were erased in 1996, when Yoshimi Tanaka, a former Japanese Red Army member wanted for hijacking, was arrested in Cambodia and tied to $200,000 in counterfeit money. Tanaka held a North Korean diplomatic passport, traveled in a North Korean Embassy car, and was accompanied by North Korean officials.
“Supernotes.” The Korean $100 bills have been dubbed “supernotes”; they air so good they helped push the United States to issue redesigned currency in 1996. The old style bills are cranked out on a $10 million intaglio press similar to those employed by the U.S. Bureau of Engraving and Printing, officials say. North Korean defectors claim the notes come from a high security plant in Pyongyang. Kim Jeong Min, a former top North Korean intelligence official, told U.S. News that he had been ordered to find the paper used to print U.S. currency but couldn't. "Instead, I obtained many $1 notes and bleached the ink out of them,” he says. “The size of the bill was what mattered, not the denomination:”
South Korea's intelligence agency estimates that the North turns out some $15 million in counterfeit U.S. money each year; American officials believe that figure is high. But even that amount would not constitute a threat to the stability of the greenback ($480 billion in US. currency is circulated worldwide).
Defector Kim says his career was not limited to counterfeiting. He boasts that before he left in 1988 he smuggled gems and Western currency out of Africa. Cramming French francs, U.S. dollars, and South African diamonds into his suitcases, he ventured overseas as often as five times a month during the 1980s. Protected by diplomatic immunity, Kim claims he cleared a profit of $80 million during that time, both for the regime and for himself. "I was immune from any laws," he says.
Authorities in numerous countries have stopped North Korean diplomats from smuggling vehicles, alcohol, fake antiques, electronic goods, weapons, and more. Other reports deeply implicate officials in the endangered species trade. Since 1996, at least six North Korean diplomats have been forced to leave Africa after attempts to smuggle elephant tusks and rhinoceros horns. Such efforts seem partly driven by the dismal funding of North Korea's embassies. Lacking cash, North Korea closed at least 14 embassies last year and reportedly told those remaining to become “self sufficient.” Still other diplomatic smuggling incidents involve cigarettes, allegedly sold tax free on the black market, and pirated CDs. Two diplomats crossing into Romania from Bulgaria last year were found to have crammed 12,000 bootleg CDs in the trunk of their car. Truly inventive at times, North Koreans even counterfeit name brand cigarettes, which contain their own cheap tobacco. In 1995, Taiwanese authorities seized 20 ship containers of counterfeit cigarette packaging bound for North Korea. It was enough to make 2 million fake cartons of best-selling Japanese and British brands.
North Korea's criminal reach extends beyond smuggling and counterfeiting, U.S. officials say. Japan has accused North Korea of kidnapping at least 19 of its citizens so that the regimes spies could learn Japanese and assume their victims' identities. The nation also appears on the State Department's short list of countries sponsoring terrorism. Its agents are suspected of the bombing of a 1987 South Korean flight and a 1983 bombing that killed South Korean officials in Burma. Some policy makers argue that the best strategy is to isolate North Korea and wait for it to fall. But the regime has proved surprisingly resilient, and the key levers of power - the security forces and the Communist Party - remain under the firm control of the reclusive Kim Jong I1. South Korean President Kim Dae Jung and other allies argue that lifting U.S. sanctions and further engaging the regime is the best way. Whatever the course ahead, at least the time has passed when North Korea's criminality could be ignored by policy makers. “It wasn't even on the radarscope," says one surprised U.S. analyst. "It's a classic case of hear no evil, see no evil, respond to no evil.”

With Steven Butler in Seoul and Mark Madden
Sources; CIA, World Almanac, U.N. World Food Program