North Korea’s Overseas Trading Networks

A 2016 Asan Institute study of North Korea’s overseas trading networks using corporate and tax registries in East Asian countries was able to identify 562 ships, companies, and individuals that are within one degree of separation from North Korean entities. In one example a Chinese trading conglomerate had conducted over $500 million in business with North Korea in the past five years. It is asserted in the report:

North Korea’s external economy has increasingly assumed the characteristics of a hybrid network of licit and illicit components. These networks have grown adept at hiding their illicit activities within licit systems of global trade, finance, and transportation. They use a variety of schemes to disguise beneficial ownership, including using flags of convenience for ships, establishing shell and front companies to register their holdings, fabricating manifest and financial documents, and using multiple layers of intermediaries to conduct business. The net result, as UN Panel Expert Katsuhisa Furukawa has noted, is that various legitimate companies, including multi-national banks, shipping companies, and air carriers, are likely to be inadvertently facilitating North Korean illicit activity. (1)

These overseas resource and capital lifelines to the Kim regime are vulnerable to primary and secondary sanctions mandated under UN Resolution 2270. However, the detection and enforcement of illegal activities will be difficult without Chinese compliance and oversight, which to this point has been virtually nonexistent.

(1) Quoted from “In China’s Shaddow: Exposing North Korean Overseas Networks”, The Asan Institute for Policy Studies, (August 2016); also see “Note by the President of the Security Council”, United Nations Security Council, (February 23, 2015), http://www.ncnk.org/resources/publications/DPRK_Panel_of_Experts_2015.pdf; and K. Furukawa, “The Sanctions Regime of UN Security Council Resolutions 1718 (2006), 1874 (2009), 2087 (2013) and 2094 (2013)”, (April 20, 2015), https://csis.org/files/attachments/150406_FurukawaPresentation.pdf.

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