Why the U.S. Is Going After Kim Jong-il's Slush Fund

The latest U.S. financial sanctions against North Korea are mainly aimed at slush funds amassed by leader Kim Jong-il for his third son Jong-un.

So far the U.S. targeted individuals and companies in line with its existing executive orders and UN Security Council resolutions 1718 and 1874 aimed at preventing the proliferation of weapons of mass destruction and nuclear materials.

But this time, it is going after the flow of conventional weapons, drugs and counterfeit bills, which provide revenue for Kim, and of the luxury goods he uses to reward loyal officials.

The regime stashed away huge sums of cash in bank accounts in Switzerland, Luxembourg and other European countries to support the transfer of power to Kim Jong-un. Switzerland and Luxembourg have already said they will cooperate with the U.S. investigation, vowing to take legal action if banks were involved in illicit activities involving North Korea. In March, Kim apparently transferred US$4 billion from a bank account in Switzerland to another in Luxembourg.

"It will be difficult for North Korea to raise money through conventional channels to ensure a smooth transfer of power," said a South Korean official.

Until now, North Korea's drug trafficking and counterfeiting activities had been the focus of several investigations, but experts say the fact that the North persists in these activities shows that they are important sources of money necessary to ensure Jong-un's grip on power once he assumes the throne.