China & front firms in HK, taiwan N-powered kim

A web of companies operating through Chinese-held territories provide not only finances but also supply critical missile components to North Korea

Published: 23rd September 2017 11:00 PM  |   Last Updated: 23rd September 2017 02:05 PM   |  A+A-

Kim Jong-un watches a nuclear missile launch

Since February 2017, North Korea has continued to defy the UN security resolutions by launching a record 15 ballistic missiles or other systems using surface-to-air technology. Last year, Kim Jong-un focused on reinforcing his power base around the neighbourhood and had conducted 26 missile tests. How a country with an impoverished population, which is struggling to survive, is able to build its nuclear capability? The answer lies in the web of front companies operating through Chinese-held territories to provide not only finances but also critical missile components.

The UN investigators had collected debris from the February 7, 2016 rocket test conducted by North Korea that had a camera electromagnetic interference (EMI) filter, ball bearings and pressure transmitters. The source was traced to Beijing East Exhibition High-Tech Technology Co Ltd. The pressure transmitters were manufactured in the UK and shipped to North Korea through Xinjianteng Century Technical Technology, a front company based in Taiwan. Kim is getting military communication equipment and related accessories—including high-frequency software-defined radios, crypto-speaker microphones, GPS antennas, high-frequency whip antennas, and clone cables—through Beijing Chengxing Trading Co. Ltd.

Investigations into Korean missile power reveal some components are procured through a Malaysia-based company which acts as a front for North Korea’s Pan Systems Pyongyang branch, which in turn is linked to a Singaporean company named Pan Systems (S) Pte Ltd.Financial aspects of Pan Systems Pyongyang’s operations reveal that the network utilised bank accounts, front companies and agents—mostly located in China and Malaysia—to procure components and sell complete systems. Suppliers were mostly located in China (particularly in Hong Kong), and many of them were selling widely available electronic products. Components were sent to Beijing or Dandong. Pan Systems Pyongyang—operated by the Reconnaissance General Bureau, the country’s premier intelligence agency—used Malaysia as a base for its key representatives abroad and for the companies that have acted on its behalf. 

“In its banking operations, Pan Systems Pyongyang and its front companies used an extensive network of individuals, companies and offshore bank accounts to procure and market arms and related materiel. The global network consisted of individuals, companies and bank accounts in China, Indonesia, Malaysia, Singapore and the Middle East,” the UN report said.

There are seven key traffickers of technology—Ryang Su Nyo, Pyon Won Gun, Pae Won Chol, Ri Sin Song, Kim Pyong Chol (all based in North Korea), Kim Sung Su (based in China) and Kim Chang Hyok (based in Malaysia).“Entities have intensified their business dealings via commercial online sources through complex networks of front companies, gradually disappearing in public business registries, which shows their adaptability and survivability in the sanctioned environment. Key trusted individuals continue to operate multiple companies at different addresses, allocating each company to trade in a specific type of business,” the UN report added.

Kim is also generating money by supplying arms and arms-related material such as man portable air defence systems, surface-to-air missiles and radar to ‘Monte Binga’, a company controlled by the Government of Mozambique. A $6-million contract was signed by Choe Kwang Su, the representative of Haegeumgang Trading Corporation, in Mozambique. Choe is also the third secretary at the embassy of the North Korea in Pretoria.North Korea is also shipping 122-mm guided rockets and aerial missiles to Sudan. UN investigation reveals Kim supplied 100 guided rocket control sections and 80 air attack satellite-guided missiles to the country. The arms were shipped to Sudan Master Technology Engineering Company through two contracts.

The UN report stated that the North Korea regime adapted to its sanctions, using evasive methods to maintain access to formal banking channels and bulk cash transfers to facilitate prohibited activities. The networks behind this activity consist of a core of agents who are highly experienced and well trained in mobilising money, people and goods, including arms and related materiel, across borders. These agents use foreigners as facilitators with varying degrees of complicity, and rely on numerous front companies bearing no paper trail that leads to the rogue country. The business conducted by some of these networks generates significant revenue for North Korea. Most of the financial activity investigated by the UN panel was denominated in the US dollars and euros.

Several banks of North Korea continue to operate abroad subsequent to sanction by setting up representative offices as corporate entities rather than as financial institutions to avoid scrutiny. Bank records show that the payments to suppliers were made by Malaysia-based International Golden Services and multiple other front companies through accounts in the banks in Singapore, in the Chinese mainland and in Hong Kong, China. In terms of incoming transfers, Pan Systems Pyongyang received large remittances from an account at a major bank in Malaysia, as well as from numerous front companies of North Korea, including Hungbal Trading Co., Kumbong Trading Co. and Mubong Trading Co. 

Research Support

The UN investigation reveals that Kim Il Sung University, the Kim Chaek University of Technology, the Pyongsong College of Science and the National Defense University are the main institutions feeding the nuclear or ballistic missile programmes of the country. Some of these institutions have bilateral agreements with at least four universities in China and two in the Russian Federation. The UN investigators have also probed two Italian institutions—the International Centre for Theoretical Physics and the International School for Advanced Studies—with students from the department of physics of Kim Il Sung University.

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