N.Korean Purge 'All About the Money'

      December 12, 2013 12:51

      A swathe of stories emerging from North Korea attribute the recent purge surrounding eminence grise Jang Song-taek to prosaic financial motives.

      While some have suggested a trail of corruption in the military supply and other money-making business Jang had come to monopolize, others have traced the root cause to control of North Korean leader Kim Jong-un's overseas slush fund.

      ◆ Secret Bank Accounts

      The regime is believed to have maintained a slush fund of an estimated US$4 million abroad since former leader Kim Jong-il. It is replenished to maintain the size whenever it is tapped into.

      The only part of the slush fund that was ever definitely traced was an account in Banco Delta Asia in Macau containing $25 million that was frozen in 2005.

      One diplomatic source in Seoul said, "The North Korean regime itself at the time was apparently glad to discover it, since they were unaware of the account."

      The source added that almost all agencies have separate secret bank accounts overseas, so nobody has clear overview. If an official managing some of them is suddenly purged or dies, those accounts can be forgotten forever.

      The U.S. and South Korea began tracing the secret bank accounts of the Kim dynasty following UN Security Council's sanctions against North Korea in 2006. More than 200 suspicious bank accounts surfaced in banks in Austria, China, Lichtenstein, Luxembourg, Russia, Singapore and Switzerland.

      ◆ Embezzlement Claims

      Jang was responsible for managing North Korea's money-making business overseas as well as for economic reforms. One North Korean source said Jang and his cronies had been "deeply involved" in the North's secretive money-making operations since Kim Jong-il's rule, and it is likely that they continued to manage Kim Jong-un's slush fund as well.

      Jang Su-gil

      Ri Su-yong, another confidant of Jang's, served as the North's chief consul from 1980 to 2010 in Lichtenstein, the Netherlands and Switzerland, where the Kim family is suspected of stashing away their money.

      A government source here said Jang Su-gil, the head of Department 54 of the Workers Party, was publicly executed, probably for embezzling money from Kim's slush fund.

      Department 54 supplies electricity, coal, fuel, clothes and other necessities to the military but also runs a slew of other businesses.

      Jang and his cronies either failed to deposit foreign currency earnings into Kim's overseas accounts or were caught skimming off them.

      ◆ Huge Profits

      Government officials here believe North Korea made between $200 million to $300 million in profits each year from illicit activities until international sanctions intensified. North Korea's economy is broadly divided into three parts: the official economy managed by the cabinet, another involving the procurement of military supplies, and a third revolving around Kim's slush fund.

      Most of the hard cash the North generates from its overseas businesses goes into this slush fund. The businesses range from the sale of gold and pine mushrooms and export of minerals and agricultural products to drug dealing, counterfeiting and arms exports.

      One North Korean source said there are rumors that North Korea has started selling off its gold reserves, which hints at a serious shortage of money. North Korean mines are estimated to contain 2,000 tons of gold worth an estimated $8 billion.

      North Korean leaders traditionally use their slush fund to buy the loyalty of top officials with lavish gifts, as well as luxury goods like yachts, liquor and trinkets for themselves. A ski resort Kim Jong-un is building as well as other prestige projects is thought to have been partly financed from the slush fund.

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