Kim Jong-Un's secret 'billion-dollar cash stash'

March 14, 2013, 10:24 am Business Insider Yahoo!7

The North Korean leader is expected to have as much as $5 billion in overseas accounts.


A huge network of secret slush funds owned by North Korean leader Kim Jong-Un have been discovered during a joint US-South Korea investigation, Seoul-based newspaper Chosun Ilbo reports.

As much as $5 billion linked to Kim was found in foreign bank accounts in other people's names, the paper reported. Intelligence agencies reportedly believe that North Korean accounts exist in Austria, China, Lichtenstein, Luxembourg, Russia, Singapore and Switzerland.

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"Since the launch of the Lee Myung-bak administration in February of 2008, South Korea and the U.S. have been tracking more than 200 North Korean accounts that appear to be linked weapons of mass destruction and export of drugs, counterfeit money and cigarettes," one diplomatic source told the newspaper.

Another source elaborated on the scheme, saying that "the regime uses minor banks that are relatively less stringent in screening their account holders or opening accounts using the names of foreigners or companies."

The Chosun Ilbo had previously reported that dozens of accounts linked to Kim were found in Shanghai and other parts of China.

These accounts are thought to contain hundreds of millions of dollars, but Beijing reportedly refused to allow them to be included in the new UN sanctions adopted last Thursday.

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Following that report, the South China Morning Post reports that the news has led to fresh calls for China to clamp down on its neighbor.

If this happens, the repercussions for North Korea could be big.

Ellen Kim, assistant director and Fellow of the Korea Chair at the Center for Strategic and International Studies, told BI, "This could have a real impact on the North Korean regime if China actually follows through. The key to the [effectiveness] of the sanctions is China."

The Chosun Ilbo reports that most of the money in the foreign accounts comes from North Korean businesses attached to the military or other government entities. The money is reportedly used by Kim to buy luxury goods for himself and his allies.

Knowledge of North Korea's illicit foreign funds has been around for a while, but the exact nature of North Korea's foreign currency businesses is murky and, by most accounts, illegal — the Chosun Ilbo reports that the Russian mafia is being used to launder the money, for example.

Foreign currency is, however, vital for a sanctions-stifled state that stopped paying its debts 20 years ago, and has a worthless local currency (the won).

The most well-known of the foreign currency state enterprises is Room 39 and Room 38, secretive organizations believed to be in charge of controlling North Korean executives' foreign currency funds.

One 2007 report estimated that the these funds netted North Korea $500 million to $1 billion a year, via a variety of methods, including widespread counterfeiting of US dollars (at least $45 million according to a 2006 US congress report), foreign hotels and restaurants, and even reports of gold smuggling and drug trafficking.

A 2009 Washington Post story talks about an enormous international insurance scam being conducted by the group.

Conflict over foreign money between Kim and the military is believed to have been one possible factor in last year's ousting of North Korean military chief Ri Yong-ho.

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