Production began in the mountainous Hamgyong and Ryanggang Provinces, particularly in the village of Yonsah, where Kim Il Sung sanctioned the creation of an opium farm. It is alleged that North Korea's illegal drug trade dates back to the 1970s and includes the manufacturing, selling, and trafficking of illicit drugs, as well as counterfeit otherwise legal pharmaceuticals. Main article: General Association of Korean Residents in Japan Drug trade The KNIC (which had offices in Hamburg, Germany and London, United Kingdom) was reported to have had assets of UK£787 million in 2014 and had been involved in scamming insurance markets and making investments in property and foreign exchange. In 2015, the European Union placed the Korean National Insurance Company (KNIC) under sanctions and added that the KNIC had links to Room 39. In August 2014, Yun Tae-hyong, a senior representative of North Korea's Korea Daesong Bank, which is suspected of being under control of Room 39, was reported to have defected to Russia taking $5 million with him. By 2009, the office allegedly had upwards of $5 billion in assets, much of which was spread in banks throughout Macau, Hong Kong, and Europe. In 2010, the department was reported to have had 17 overseas branches, 100 trading companies and banks under its control. Room 39 oversees many of the government's illegal activities (although the military also has its own illegal activity division) such as counterfeiting and drug production. Room 39 (or Office 39) is the primary government organization that seeks ways to maintain the foreign currency slush fund of North Korea's leader. Lankov suggests that smuggling was never intended to earn currency for the regime, but was simply a means of survival for diplomats whose funding was cut. Instead, these activities exposed the country to international condemnation in exchange for marginal gain. Īccording to North Korea scholar Andrei Lankov, the country's illicit activities never developed into lucrative hard currency earners. She has queried the assumption that all the activities are directed by North Korea's government. She has pointed out that there have been very few criminal convictions. The British academic Hazel Smith has argued that the allegations have a weak foundation, being largely based on the claims of a few US officials and North Korean defectors. Many commentators agree that the North Korean state has been behind counterfeiting currency, human trafficking, the arms trade, etc., but the level to which it has been involved in the drug trade after the collapse of the Public Distribution System in the 1990s is not clear as semi-private and private black markets have arisen since then and some high-ranking officials may only be engaged in illicit trade for personal benefit. However, there are questions remaining about the level of government involvement in each of the criminal enterprises. Unlike criminal syndicates, the extensive nature of these illegal endeavors, and the claim that they are directed and sanctioned by the highest levels of government, : 1 has led to the nature of the North Korean state being defined as a form of "criminal sovereignty" by Paul Rexton Kan and Bruce Bechtol. It is alleged many of these activities are undertaken at the direction and under the control of the North Korean government and the ruling Workers' Party of Korea, with their proceeds going towards advancing the country's nuclear and conventional arms production, funding the lifestyles of the country's elite, and propping up the North Korean economy. The alleged illicit activities of the North Korean state include manufacture and sale of illegal drugs, the manufacture and sale of counterfeit consumer goods, human trafficking, arms trafficking, wildlife trafficking, counterfeiting currency (especially the United States dollar and Chinese yuan), terrorism, and other areas.
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