Drugs, counterfeiting: How North Korea survives on proceeds of crime

When North Korea tested what it claimed wasanew intercontinental ballistic missilelast week, the regime certainly wanted to flex its military might forthe world, and in particularthe United States.

But it may havehad another purpose in mind it may have been looking to make a sale.

"This is not just a threat. This is to make money," said Bruce Bechtol, professor of political science at Angelo State University in Texas.

And one way the regime makes moneyis through proliferation the proliferation of weapons, as well as technical assistance and military training for its clients in the Middle East and Africa.

"You can assume with high probabilitythat that [type of] missile is going to Iran for a veryhigh price," saidBechtol, whoservedas a senior Northeast Asia analystin the Pentagon.

Proliferation is just part of the regime's vast criminal enterprises illicit activities that experts say account for a significant portion of the North Korean economy.

"Their money is typically generated through a myriadof illegal activities that the embassies around the world are sanctioned to engage in," said DavidAsher, formerspecialco-ordinatorof the U.S.State Department'sNorth Koreaworking group.

Those activities include illegal drug manufacturing and trafficking of cocaine, heroin and high-grade methamphetamine. He said the regime isalso heavily involved inthe production of counterfeit pharmaceuticals and synthetic narcotics, including fentanyl, which can be found on the streets in the U.S. and Canada.

"They produce a huge amount of counterfeit Viagra, which is a big problem for Pfizer,"Ashersaid.

The government also reaps funds from currency and cigarette counterfeiting, he said, andtrading in banned products like rhino hornsand illicit mineralssuch as conflict diamonds.

'Nationalized crime'

This isn't a case where the government has turned a blind eye to criminalactivities ortaking kickbacks from criminals. Experts say the regime itself sanctions and is involved in the criminal enterprises.

"The best way to think about it is kind of like a Sopranos state, like a Mafia state or Mafia country," said Paul Rexton Kan, an associate professor of national security studies at the U.S. Army War College in Carlisle, Pa.

"They sort of nationalized crime and they've industrialized it, and now they sort of weaponized it as well," he said. "It is sort of one whole state that is dedicated to organizedcriminal activitiesas a way to fund the regime, fund their programs."

Thisgovernment bureaucracy focused on pursuingillegal activitiesfor profit began under KimIl-sung, the nation's founder, Kan said. Much of the information about these schemes comes from former government officials who have defected.

Many of the schemes arerun out of "Central Committee Bureau 39" of the Korean Workers Party,he said,which enlists military officials, bureaucrats and members of the diplomatic corps to organize and participate in the manufacture and distributionof criminalgoods.

The North Korean military, for example, will work withcriminal organizations like the Japanese Yakuzaor Malaysian organized crime to distributedrugs internationally, Kan said.

The government will also use its diplomaticcorps to collect proceeds from these activities and depositthem in various bankswhere they're posted, he said. Many diplomats, in fact, are sent overseas for that specific reason tolaunder money and sendproceeds from their criminal enterprisesback to the regime, he said.

"It's criminal entrepreneurship at its best."

So does this make KimJong-una pseudoMafia don?

"Oh, he's thedon,but he's the all-powerful don," saidBalbinaHwang, former U.S. State Department adviser and member of theNational Committee on North Korea,a non-governmental organization of experts."And should anybody attempt to cross him, just as ruthless if notmorethan any of these Mafia or drug carteldons."

While other governments around the world are certainly corrupt, North Korea is unique in that many schemes arecompletely directed, channelledand controlled by the state, saidHwang.

How much North Korea profits from such activities is difficult to determine because it'ssuch a closed society. Kan estimates the government has raked in billions.

No 'imminent signs of collapse'

Whatever the figure, illegal revenueis certainly the reason the regime has managedto survive economically despite a series of international economic sanctions, analystssay.

"And I do not believe there are any imminent signs of collapse," Hwang said.

"North Korea does know how to efficientlyearn money. It's very unfortunatethat the mostefficientway that it knows how to do that is illegally."

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In the early2000s, for example,the U.S. government dubbed North Korea's counterfeit U.S. $100 bills "supernotes,"and the U.S. Treasury was forcedto change its currency and come up withspecialized paper and holographic images.

Hwangsaid the Trump administration's recent announcement that it will put North Korea back on the list of countries that are state sponsors of terrorism gives the U.S. greater licenceto target the regime's illegal cash flow.

"That designation then allows the U.S. government and all its various agencies to start to go after specific North Korean activities ... that it would otherwise not havebeen able to do."