This article is the first of a series produced by the James Martin Center for Nonproliferation Studies (CNS) at the Middlebury Institute of International Studies exclusively for NK News. For this series, we’ve chosen to focus on the legal (mis)adventures of North Korean entities and individuals overseas.
Even as diplomacy between the United States and the DPRK continues, North Korea endeavors to bring in currency to sustain itself and, potentially, contribute to its nuclear and missile programs.
The DPRK faces hurdles to doing so, most notably through the sanctions regime endorsed—and given the weight of international law—by the United Nations.
Yet North Korea continues to conduct activities that the sanctions regime seeks to prevent, and Pyongyang’s illicit activities—whether further investment in its nuclear or missile programs, the import of banned luxury goods, or the export of prohibited commodities—all rely on one thing: money.
The sanctions regime has limited North Korea’s ability to access the international financial system. Yet, through foreign facilitators and its own evasive practices, Pyongyang continues to earn and spend foreign currency.
ENTER BULK CASH TRANSFERS
One of the strategies North Korea employs to circumvent sanctions is the use of bulk cash transfers. The UN Panel of Experts established pursuant to resolution 1874 (2009), which is tasked with assessing the implementation of UN sanctions on North Korea, has documented North Korean bulk cash transfers in its reports.
The UN Security Council has also drawn particular attention to this issue in resolutions 2087 (2013) and 2321 (2016), formally alerting Member States to the use of bulk cash transfers to circumvent sanctions.
It in this context that the activities of North Korean nationals caught or accused of bulk cash smuggling take on additional significance. Russian authorities have caught several such individuals, and the way Russia has handled their prosecutions sheds light on the country’s implementation of the UN sanctions regime.
In Russia, undeclared cash transfers like those the Panel describes in its reports are criminalized under Article 200.1 of the Criminal Code of the Russian Federation, which covers the undeclared import or export of currency valued over $10,000.
A review of cases filed in relation to Article 200.1 and accessed via the online portal found three instances of attempted bulk cash transfers that merit particular attention.
The stories of the three DPRK nationals involved—as told through successive court filings—offer a unique view into how Russia handles cases of potential relevance to sanctions on North Korea.
TO CATCH A COURIER
The first DPRK national, Hong Ui Sop, was charged 25 January 2018 in Artemovski City Court case 1-91/2018. Hong is described as having attempted to export $61,277 from Russia to the DPRK by plane, likely the Air Koryo route between Vladivostok and Pyongyang.
Russian authorities determined Hong to be the owner of $4885, while authorities found the remaining $56,392 to belong to workers of the Korean General Corporation for External Construction.
Hong was fined a year’s salary, 215,982 rubles (then approximately $3786 according to OANDA). That sum was drawn from Hong’s portion of the funds.
Both his remaining funds and those “owned” by other DPRK nationals working in Russia were then returned. Court documents list a representative of the Korean General Corporation for External Construction as designated to receive the workers’ shares, apparently at their request.
The second DPRK national, Son Keong Il, was charged 12 July 2018 in Artemovski City Court case 1-343/2018. Court records for this case could not be located as part of this review, and the following details come from a case, Primorski Regional Court case 22-4518/2018, appealing the initial ruling.
Son is described as having attempted to bring $40,000 into Russia from the DPRK aboard the JS-271 flight from Pyongyang.
The bulk of the money, $30,000, was found to belong to—and been transported on behalf of—a DPRK national still residing in the DPRK. The initial sentence against Son sought the confiscation of that $30,000, the amount above the legal limit, however this was reversed on appeal.
The $30,000 not belonging to Son was ordered returned to its declared owner in the DPRK. The appeal also reduced Son’s punishment (unspecified in the appeal) to a fine of five months’ salary (a whopping $1500).
The third DPRK national, Choe Hyon A, was charged 5 September 2018 in Artemovski City Court case 1-416/2018. Choe is described as having attempted to export $52,402 from Russia to the DPRK. Notably, Choe claimed that all but $10,000—again, the legal limit for cash not subject to declaration—belonged to North Korean colleagues in Russia for transfer to their relatives in the DPRK.
The criminal case against Choe was terminated due to “active repentance,” an assertion that went unchallenged by the prosecutor, and a reference of good character provided by the DPRK consulate in Vladivostok.
The character reference should be considered of dubious worth given questionable compliance of the consulate with UN sanctions.
But the court ordered the $10,000 returned to Choe and the remainder to a representative of its owners, identified in court documents as the head of the representative office for the Korean General Corporation for External Construction.
LAW AND ORDER
These three cases yield a couple interesting observations.
First, the Artemovski City Court, in assessing the circumstances of the illegal transfer of funds, failed to take into account that undeclared bulk cash transfers are explicitly identified in UNSCR 2321 (2016) as a means of evading provisions of the UN sanctions regime.
The funds were returned, in part or in whole, to North Korean entities and individuals, possibly allowing future attempts to smuggle the same funds into or from Russia. Second, the “ownership” of the funds seized appears to have been structured in a way that most likely would result in the funds being returned.
The two transfers where the caught individual “owned” the exact maximum amount of funds they could legally transport is especially suspicious. By keeping the share of the funds”owned” by the individual transporting them at or below the legal limit, the North Koreans were able to secure the return of the majority of funds seized.
More recently, however, prosecutors have challenged the sentences of the cases above. Though not stated in court documents, these challenges may have been motivated by sanctions obligations.
Prosecutors sought, and were awarded, orders canceling the previous rulings in order to claw back the funds the courts initially ruled to be returned to North Korean parties.
Interestingly, the sentences for Hong Ui Sop, Son Keong Il, and Choe Hyon A were all challenged within a two-week period, 28 December 2018-9 January 2019. The cases challenging the sentences of Hong Ui Sop, Son Keong Il, and Choe Hyon A—respectively Primorski Regional Court cases 44У-34/2019, 44У-36/2019, and 44У-35/2019—yield some additional points of note.
First, the evidence of ownership produced in the first round of cases (mainly witnesses or sworn statements of ownership) were rejected. The court found, in the three cases challenging the sentences, that they did not demonstrate ‘indisputable’ ownership though no other theory of ownership was made.
Second, the challenges to the sentences of Hong Ui Sop and Choe Hyon A reveal the DPRK nationals whose funds they were allegedly transporting were not necessarily employed by the Korean General Corporation for External Construction.
Instead, the DPRK nationals were employed by LLC “Enisei” and LLC Foreign Trade Corporation “Keisung”. Nonetheless, a representative from the Korean General Corporation for External Construction had been authorized by the court to receive their funds with the apparent consent of the DPRK nationals in question.
This may provide a typology for how representatives of DPRK entities assert control over foreign workers overseas, even as those employees nominally work for ostensibly private companies.
Third, the amount of time that had passed between the issuing of the sentences and this batch of challenges may pose enforcement challenges. The last of the initial cases, Choe’s, was decided in October 2018. It was not challenged until December 2018.
If the initial ruling had been carried out and the funds returned to their “owners,” it is unclear what action would actually correspond to that sentence being overturned.
Additionally, it is unclear why these three challenges were issued in relatively rapid succession (note the sequential case numbers, above) when the initial cases were months apart.
Taken together, the court cases surrounding Hong Ui Sop, Son Keong Il, and Choe Hyon A demonstrate how Russia’s legal system fails to take sanctions measures into account, whether inadvertently or by design.
The fact that the court documents do not mention the UN sanctions regime on North Korea mentioned once is of obvious concern.
As stated at the outset of this article, North Korea’s use of bulk cash transfers for the purposes of avoiding sanctions is well documented and Russia voted in favor of alerting countries to this practice at the United Nations via UNSCR 2087 (2013).
Still, there’s hope that this may change: clawing back the funds carried by Hong, Son, and Choe is an action in the right direction.
Court documents give no indication sanctions implementation was the cause of this action but it may—and one hopes would—well be the case.
Edited by Oliver Hotham
Featured image: Vladivostok Customs Press Service
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