North Korean money man reveals smuggling operations

Story highlights

  • Ri Jong Ho defected from North Korea in 2014
  • He says he used to work for "Office 39," which has been described as a slush fund for Kim Jong Un

Washington (CNN)Ri Jong Ho had simply had enough. He'd seen too many executions.

Ri, a high-profile North Korean defector, spent years working for what is essentially a slush fund for one of the most notorious regimes on the planet, Kim Jong Un and his compatriots.
Life was good. Ri helped bring in somewhere between $50 million and $100 million for North Korean elites, and was handsomely rewarded with luxuries most North Koreans couldn't dream of in years past: a car, a color TV and some extra cash on the side, once rarities in the communist state but more commonplace now in the capital, Pyongyang.
    But he watched the regime kill his peers and their families, even children.
    "It was not just high level officers, officials, but their families, their children (and) their followers," Ri told CNN in his first interview to a major US broadcast network. "It was not just once or twice a year -- it was ongoing throughout the year, thousands of people being executed or purged."
    Ri said the final straw came in late 2013, when Kim Jong Un executed his own uncle, Jang Song Thaek, with an anti-aircraft gun.
    "It was a cruel and crude method of execution," he said. "After all these years living in the socialist system, I never witnessed anything like that."
    Ri was living in China at the time, and in 2014 was able to safely defect with his family.
    And just like that, Kim lost one of his top money makers.

    Office 39

    Ri said he worked for decades in what's known as "Office 39."
    The office is in charge of bringing in hard currency for the regime. Ri calls it a "slush fund for the leader and the leadership."
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    Ri told CNN "Office 39" is not engaged in illicit activities, but the US Treasury Department says otherwise.
    The US government accused the office of engaging in "illicit economic activities" to support the North Korean government. It has branches throughout the nation that raise and manage funds and is responsible for earning foreign currency for North Korea's Korean Workers' Party senior leadership through illicit activities such as narcotics trafficking.
    North Korea has been accused of crimes like hacking banks, counterfeiting currency, dealing drugs and even trafficking endangered species.
    Workers who help bring in cash for the regime are granted access to the outside world -- especially China -- in order to establish networks that are crucial to making money, analysts say. They often have diplomatic privileges that allow them to evade their host country's domestic laws, experts say.
    Ri said he was not involved in illegal activities and that they were not under the purview of Office 39, but did not deny they occurred. He said much of North Korea's hard cash is earned through exporting labor -- the country sends workers across the globe and collects much of their pay, according to the UN -- and exporting natural resources like coal, which China used to buy but has since stopped.
    Illicit activities make a lot of money, though. The Congressional Research Service estimated in 2008 that North Korea could earn anywhere from $500 million to $1 billion from these types of illicit activities.
    That money helps fund the lavish lifestyles of the North Korean elites while sanctions limit the country's ability to make money. That keeps North Korea's leadership happy and helps Kim prevent coup attempts, analysts say.
    "They (North Korean leaders) are focused on maintaining their ruling power, and they are working on making this dynasty-like system lasting for a long time," Ri said. "So instead of focusing on their economic development or better life, they are more focused on maintaining their system.
    Some of Office 39's profits also go to the country's nuclear and missile programs, which crossed an important threshold this month with the testing of two intercontinental ballistic missiles, weapons that experts say likely put the United States homeland in North Korea's range.
    CNN reached out to the North Korean mission at the United Nations for a response to the interview with Ri. An official at the mission said Ri was lying to "make money and save his own life."
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    'Hundreds of fishing boats'

    Analysts say Office 39 is likely now in the cross hairs of US President Donald Trump's administration.
    The Trump team has made it clear that one of the ways it plans to deal with North Korea is to squeeze its revenue streams across the globe in order to pressure them into negotiations over their weapons programs.
    Ri is not sure if the tactic will work, as he says it's easy to side-step sanctions and believes the international community has made strategic mistakes that could come back to bite them.
    North Korean companies can just change their names once sanctioned, he says. North Korean leaders don't keep much money abroad, so the sanctions against them are pointless, according to Ri. Smugglers are difficult to catch.
    "Smuggling is conducted by any and every means you could imagine. Mostly larger items are done using ships, for example by filing a cargo list ... where what's written on the (list) is different from what is really being shipped," he said. "On the open sea, the Yellow Sea, there are hundreds of fishing boats -- both from China and North Korea -- and all the smuggling is done by these so-called fishing boats.

    Going after China

    Ri believes that secondary sanctions -- targeting those who do business with North Korea, like the United States did to China's Bank of Dandong in June -- is the way to go, especially in China.
    Beijing accounts for about 85% of North Korean imports in 2015, according to UN data, though Ri revealed that Pyongyang does import some oil from Russia.
    North Korean economist Ri Gi Song told CNN in February that China accounts for 70% of trade and that trade with Russia is increasing.
    "Those companies who are paying North Korea, those are the ones that should be sanctioned by the US, not North Korean companies or North Korean leadership, for whom sanctions simply do not work. You should sanction the market, not the North Korean companies or the people in high positions," Ri said. "Expecting Chinese companies to abide by international laws, that will not bear any fruit."
    Though North Korea is likely losing money now that China has reduced coal trade with North Korea -- a very profitable endeavor for Pyongyang -- trade between the two countries is up for the year.
    China insists that none of its current trade with Pyongyang is in violation of international sanctions.
    President Trump has tried to enlist China's help in dealing with North Korea to specifically clamp down on these companies. He initially praised Beijing for its help after an April summit with Chinese President Xi Jinping, but now appears to have given up on his counterpart.
    "I am very disappointed in China," Trump tweeted Saturday. "They do NOTHING for us with North Korea, just talk. We will no longer allow this to continue. China could easily solve this problem!"

    Life after defection

    Ri now lives a quieter life, one not too far from the White House. After defecting, he moved with his family to a suburb of Washington, D.C.
    He said he doesn't fear for his safety, but South Korean authorities have accused North Korea of trying to assassinate other defectors. A South Korean investigator showed CNN weapons like a ballpoint pen that shoots poisonous bullets and a flashlight fashioned into a gun that would-be North Korean assassins were caught with.
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    When asked if any North Korean agents inside the US might be coming after Ri, an official at North Korea's UN mission laughed.
    "No, " the official said. "He's garbage."