Catherine DillCashing in on the Construction Industry

A post from my colleague Cameron Trainer.

Cashing in on the Construction Industry:
the RGB may receive funds from DPRK laborers in Russia

This week NKNews published an article of mine detailing Russian courts’ handling of three instances in which North Korean citizens tried to smuggle large quantities of cash in or out of Russia. It’s pretty dope.

I wrote the article before the release of the most recent report by the UN Panel of Experts established pursuant to resolution 1874 (2009), which details violations of the UN sanctions regime on North Korea. It features bulk cash transfers quite heavily but also provides additional information on an entity I referred to in my NKNews article. I want to dig into that entity with this post.

The Panel links what I called the Korean General Corporation for External Construction to North Korea’s intelligence apparatus, the Reconnaissance General Bureau (RGB). The Panel report refers to the entity slightly differently, as the Korea General Corporation for External Construction (GENCO)—I assume the difference in naming is due to how I translated the name from Russian court documents. Rumor has it the RGB is bad news. The UN sanctioned the RGB in 2016 and found the entity responsible for the export of armaments prohibited under the UN sanctions regime, so we should probably keep tabs on GENCO’s activities.

GENCO’s role in the bulk cash transfers I included in my NKNews article is a bit hazy. The transfers were presented as a form of remittances from North Korean workers in Russia to their relatives in the DPRK. The workers in question were ostensibly contracted by two companies, LLC “Enisei” and LLC Foreign Trade Corporation “Keisung”, for labor in unspecified roles. Their earnings—per the narrative set forth in court documents—were then given to two other DPRK nationals, Choe Hyon A and Hong Ui Sop. Those two attempted to physically take the money with them while leaving Russia for the DPRK. They were, in essence, couriers. If we take this at face value and had the attempted transfers been successful, they would have looked like the diagram below (Figure 1).

Figure 1: Taking explanation of transfers at face value

Yet, when the workers’ money was to be reclaimed, court records list a GENCO representative as the intended recipient and nominally responsible for its return to its rightful owners. Information annexed to the Panel Report (Annex 65, if you really must know) shows that, at least in one of these cases, the GENCO representative in question was the director of a GENCO representative office in Vladivostok.

In my NKNews bit, I note that the designation of a GENCO representative as recipient of the workers’ funds “[…] may provide a typology for how representatives of DPRK entities assert control over foreign workers overseas […]”. The fact that the representative actually enjoys a formal position in Russia may indicate that GENCO exerts even control over North Korean workers in Russia. Here’s how.

We know that various Russian companies are authorized to employ North Korean workers. Jason Arterburn at C4ADS has done some research on the scope of this, as seen in his Dispatched report. Suffice it to say that the two Russian LLCs mentioned above are not unique. Anyway, these Russian companies are supposed to attract the foreign workers they’re authorized to hire. The workers would then be paid at the amount specified in their work authorizations, and all this would fit the image presented in Figure 1.

If, however, the North Korean workers were instead contracted through a representative office of a North Korean company like GENCO, this picture no longer really holds true. Instead, the Russian companies would pay GENCO. GENCO would then be free to repatriate its payments in part or in full to the DPRK. This would make the attempted transfers discussed earlier look a little something like the following diagram (Figure 2).

Figure 2: Alternative understanding of attempted bulk cash transfers

While speculative, this understanding isn’t exactly unfounded. When the United States placed unilateral sanctions on GENCO, it did so for the “[…] exportation of workers from North Korea, including exportation to generate revenue for the Government of North Korea or the Workers’ Party of Korea.” Based on the Panel report, this may include the RGB.

As even a casual follower of North Korea’s sanctions evasions practices (if such a person exists) knows, North Korea has developed sophisticated means of circumventing sanctions. It’s not surprising that this would extend to the GENCO case. But the system for contracting out GENCO workers theorized above is still an important construct for sanctions-watchers to consider.

The reason the system described is theoretical at this point is due to a lack of information. We don’t have access to contracts, should they exist, between GENCO and the Russian LLCs. It’s not clear that Russia, when deciding whether to authorize the employment of DPRK nationals, would either. If nothing else, this presents an enhanced argument for why it is important that countries fulfill their obligations under UN Security Council resolution 2397 (2017) to repatriate all North Korean workers in their territory by the end of 2019.