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Pyongyang's Banking Beachhead in Europe

By Bertil Lintner

One of the few things that Kim Kum Jin and Sun Hui Ri didn't leave behind when they fled Slovakia in August last year was their collection of bank records. Their invoices came to millions of dollars, but the documents recovered by Slovak police don't make clear where all the money went. Some answers could probably be found just up the Danube River from Bratislava. Since 1982, the North Koreans have had their own bank in Austria's capital, Vienna. It's called the Golden Star Bank--almost the same name as a North Korean company in Beijing that was used by Kim.

According to official Austrian bank documents seen by the REVIEW, the Golden Star Bank is 100% owned by the Korea Daesong Bank, a state enterprise headquartered in Pyongyang. Kim Dok Hong, a top North Korean official who fled to South Korea in 1997, says that both banks come under the jurisdiction of Bureau 39, a shadowy wing of the ruling Korean Workers' Party controlled by North Korean leader Kim Jong Il. Western and Asian intelligence services believe it was set up in 1994 to generate hard currency for Kim's impoverished nation.

For more than two decades, the Austrian police have kept a close eye on the Golden Star Bank, but there is no law that forbids the North Koreans from operating a nonretail financial institution in the country. Nevertheless, Austria's police intelligence department stated in a 1997 report: "This bank [Golden Star] has been mentioned repeatedly in connection with everything from money laundering and distribution of fake currency notes to involvement in the illegal trade in radioactive material."

But finding hard evidence of illegal activity is another matter and the bank continues trading in the Austrian capital. While documents left behind in Bratislava by Kim Kum Jin and Sun show dealings with respected banks such as the Bank of China and the National Bank of Egypt, there is no paperwork connecting them directly to the Golden Star Bank. But the Austrian police report's assertion that "Vienna must be seen as North Korea's centre for financial transactions in Europe" remains relevant today.

The former Portuguese enclave of Macau--where the North Koreans have had a discreet but solid presence since the mid-1970s--plays a similar role in East Asia, according to Western and Asian intelligence officials. The North Koreans do not have their own bank in the largely autonomous Chinese territory, but they operate through locally owned family banks, the officials believe.

In an October 2000 conference paper, Marcus Noland of the Washington-based Institute for International Economics asserted that money owed by South Korea's Hyundai company to the North Korean government had gone "into the Macau bank account of 'Bureau 39'." The payments were for permission to operate tourist trips to Mt. Kumgang in the North. An official at Hyundai Asan, which organizes the tours, says only that royalties are paid to North Korea through Korea Exchange Bank's branches in unspecified third countries.

The Congressional Research Service--which provides United States congressmen with background briefings--reported on March 5 last year that "the U.S. military command and the Central Intelligence Agency reportedly believe that North Korea is using for military purposes the large cash payments, over $400 million since 1998, that the Hyundai Corporation has to pay for the right to operate [the] tourist project."

Noland, an expert on Korean affairs, asserted in his paper that this income was used for "regime maintenance," or to strengthen the government and its armed forces. Bankers and Western security officials believe this is also the case with money earned from the operations in Europe and the Middle East.

The Macau Connection
The Former Portuguese Colony was a Terrorist Base for Pyongyang

Avenida de Sidonio Pais is not Macau's busiest street. And the trading company that is located on the fifth floor in a nondescript concrete building doesn't even have a sign outside. But this is where Zokwang Trading is located--and from where the North Koreans have conducted some of their more nefarious activities in East Asia. The company was set up shortly after the Carnation Revolution in Portugal in 1974, when the old fascist dictatorship was overthrown and the new, left-leaning leaders recognized North Korea.

But Zokwang, which ironically means "morning light" in Korean, has always been more than a trading company. This was the alleged planning base for the 1983 bombing in which North Korean agents killed 17 South Korean officials, including four cabinet ministers, who were visiting the Burmese capital, Rangoon. In 1987, another set of North Korean agents bombed a Korean Air jet, killing all 115 people on board. One of those agents, Kim Hyun Hee, now lives in Seoul and describes in her autobiography, The Tears of My Soul, how she was trained in Macau. There, she and other North Korean agents learnt Cantonese so that they would be able to pose as Macau or Hong Kong Chinese when sent on overseas missions. They were also trained to shop in supermarkets, use credit cards and visit discos--amenities that did not exist in their homeland.

In 1994, the head of Zokwang and four other North Koreans were arrested in Macau for depositing millions of dollars worth of counterfeit $100 bills. But nothing came of the investigation and in 1999, more counterfeit dollars were discovered in Macau. The North Koreans were also suspected of peddling drugs and guns through the then Portuguese enclave. Once a week, the North Korean national carrier Air Koryo flew from Bangkok to Pyongyang with a stopover in Macau. The flights, now monthly, carried few passengers--but plenty of cargo.

So Western and Japanese intelligence agencies were apprehensive when North Korea was allowed by the Chinese government to open a new consulate general in Hong Kong on February 16. Air Koryo had applied in April last year for permission to use Hong Kong's new Chek Lap Kok airport instead. But the airport authorities turned the request down. Air Koryo's old Tupolev Tu-154 aircraft were just too noisy.

But those who thought Hong Kong would become a new centre for North Korean crime have so far been proven wrong. Perhaps under Chinese pressure, the North Koreans in Hong Kong have become model diplomats: open, approachable and eager to forge links with the local business community. Hong Kong has also eclipsed Macau as the centre for North Korean businesses in East Asia, and the new style may serve as a harbinger for change. No one wants to see another terrorist state emerge in Asia.

Issue cover-dated October 25, 2001

This article first appeared in the Far Eastern Economic Review, February 13, 2003

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