Pubdate: Sun, 25 Apr 1999 Source: Washington Post (DC) Page: A21 Copyright: 1999 The Washington Post Company Address: 1150 15th Street Northwest, Washington, DC 20071 Feedback: http://washingtonpost.com/wp-srv/edit/letters/letterform.htm Website: http://www.washingtonpost.com/ Author: John Pomfret, Washington Post Foreign Service N. KOREA'S CONDUIT FOR CRIME Cash-Poor Pyongyang Uses Tiny Macau to Move Its Dirty Money MACAU0 - The run-up to the 87th anniversary of the birth of Kim Il Sung, North Korea's late "Great Leader," was a busy time for North Korean operatives around Macau. Intelligence reports say North Korean diplomats ferried $620,000 in counterfeit U.S. currency through this tiny Portuguese enclave from late December to March. "They needed money for the festivities back home," a Western intelligence official said. "They moved counterfeit currency through Macau and it helped them pay for a party in Pyongyang." There is no exact estimate of the celebration's cost. But singers, dancers and other performing troupes from more than 30 countries, including Russia, China and Canada, participated in the festival commemorating Kim's birthday April 15 in Pyongyang. Kim died nearly five years ago; the North Korean government has renamed his birthday "The Day of the Sun." Trafficking in U.S. dollars is just one part of a skein of secretive North Korean government operations that use criminal activity to obtain hard currency for the cash-strapped hermit kingdom. While the focus of Western intelligence agencies remains North Korea's on-again, off-again program to build a nuclear weapon, what Western and Asian intelligence officials call the criminalization of North Korea's government is also raising concerns. "In Macau, we are very attentive about this nuclear issue and at the same time about North Korean crime," a Western security official said. "The same people are doing both." Two weeks ago, South Korea's National Intelligence Service charged that North Korea refined 50 tons of opium last year along with five tons of morphine and heroin for sale abroad -- up from three tons of opium in 1992. A February report by the U.S. Congressional Research Service said "conservative estimates" of North Korea's criminal activity, "carefully targeted to meet specific needs," generated about $86 million in 1997 -- $71 million from drugs and $15 million from counterfeiting. Since January 1998, North Korean diplomats have been caught trafficking in 77 pounds of cocaine from Mexico to Russia, attempting to sell an unspecified amount of North Korean-made heroin in Germany, passing $30,000 of counterfeit U.S. currency in Vladivostok, Russia, and trying to smuggle 500,000 tabs of the stimulant methamphetamine into Egypt, according to published reports. North Korean production of inexpensive methamphetamine has contributed to a three-fold drop in the price of the drug in South Korea, police there say. On April 13, Japanese police discovered 220 pounds of it on a Chinese cargo ship that had just arrived from Hungnam, North Korea. The motivation behind these criminal enterprises is money. Since 1994, when food shortages began in North Korea, the country has fallen into an economic tailspin. Thousands of North Korean refugees have poured into China; they speak of a country lacking an economy, pockmarked by empty factories and hungry children. The $9.39 billion budget that Pyongyang announced on April 7, for example, is less than half of North Korea's budget in 1994, the last time the Stalinist nation announced its annual expenditures. The United Nations, mostly through the World Food Program, plans to send $376 million in aid to North Korea this year. Last year, relief agencies gave $218 million in aid. Western and Asian intelligence officials say the gambling enclave of Macau, a tiny speck on the coast of southern China known for its sometimes lax law enforcement and links to organized crime, has been the center of North Korean activity for 25 years. Portugal established ties with North Korea following Portugal's 1974 revolution. In all, about 38 North Koreans have diplomatic passports and live in Macau; another 60 or so travel frequently to the territory. Macau, a kind of Asian Casablanca where tattooed triad members and Russian prostitutes freely operate, has been a natural base for Pyongyang's operations. In 1983, for example, North Korean agents are believed to have used Macau to plan a bombing in Burma that killed 21 people, including top South Korean officials. And a North Korean agent, Kim Hyun Hui, was trained in Western ways for two months in a Macau flophouse before she planted a bomb on a Korean Air Lines jet in 1987 that killed 115 people. North Korea's main base in Macau is the Zokwang Trading Co., which is staffed by officials who carry diplomatic passports from Pyongyang. In June 1994, Zokwang executives were arrested after they deposited $250,000 in counterfeit notes at a Macau bank. Zokwang apparently has not reformed its ways. Asian intelligence officials identified Ahn Jin-Woo, a senior Zokwang executive, as the courier who brought $100,000 in counterfeit bills to Macau in late December. They said Zokwang officials also brought $400,000 in fake U.S. currency to Macau in January. Two months later, a North Korean diplomatic courier moved $120,000 in bogus U.S. bills through a branch of the North Korean Bank of Trade in Zhuhai, a Chinese city over the border from Macau, intelligence officials said. At Zokwang's headquarters in Macau, where the doorbell plays "Frere Jacques," times seem to be tough. The office is vacant except for one room with overstuffed leather couches and photographs of North Korea's father-son leadership duo -- Kim Il Sung and Kim Jong Il, North Korea's current leader. Executives are meticulous about saving electricity. All the lights are turned off. Booted out of a three-story colonial mansion that has since been redeveloped, Zokwang has relocated to the fifth floor of a shoddy apartment building on a bustling avenue. "We have opened the gates to our country," said Han Myong Chol, the firm's deputy general managing director, who has been in Macau for six years and speaks fluent Mandarin Chinese. "The time has come to invest in North Korea." Brig. Gen. Manuel Suares Monge, the secretary for security in Macau and a Portuguese army officer, said he believes companies like Zokwang are an indication of how far North Korea's economy has fallen. "They are buying things like milking machines for cows," he said. "They really have nothing in their country." Monge said his government watches the North Koreans closely and cooperates with Western security organizations. "North Korea is a very serious dictatorship, and its illegal businesses are sometimes state businesses," he said. "It's very difficult to deal with these activities. We have diplomatic relations with North Korea and we have to follow diplomatic protocol." South Korean officials said they feared that their government's "sunshine" policy, which encourages contacts between Seoul and Pyongyang, could result in more North Korean dirty tricks and crime. "When West Germany embraced ostpolitik [its opening to the east], East Germany responded with espionage and other problems," said a South Korean diplomat. "We are very aware that Pyongyang could do the same." Perhaps North Korea's presence in Macau is tolerated because it is better to have its agents operating in a Westernized city than somewhere less exposed. "It is much easier to watch them here than if they worked in Iran," said Monge with a smile. "Open spaces like Macau are exceptional for espionage." In December, Macau will return to Chinese rule. Western and Asian sources say North Korean businesses are eager to move -- next door, to Hong Kong, the Asian financial center. Since that former British colony returned to Chinese control on July 1, 1997, North Korea has been lobbying Beijing for permission to establish a presence in the territory, Western and Asian sources said. The issue was raised when Kim Sungki, an official from the North Korean Foreign Affairs Ministry, secretly went to Beijing on March 7 to help plan the celebration of the 50th anniversary of diplomatic relations between the countries, Western sources said. In Pyongyang, the criminal enterprises are run from Bureau 39, a shadowy wing of the Korean Workers' Party under President Kim's control, Western and Asian intelligence officials said. They say the bureau, which runs a string of factories and opium fields, was formed in 1994, when North Korea's economic troubles became apparent. In April 1998, Kil Chaegyong, a 65-year-old North Korean government official, was caught trying to exchange $30,000 in counterfeit U.S. bills in Vladivostok. He was later identified as the deputy director for international affairs of the Korean Workers' Party and an official attached to Bureau 39. In the 1970s, Kil was deported from Sweden after he was linked to a narcotics smuggling case. - --- MAP posted-by: Jo-D