North Korea Creating Gap in the Sanctions Race with Cryptocurrency
It has long been known that North Korea uses cryptocurrency to evade international economic sanctions laid down on them by the UN and backed largely by the USA. The USA is apparently trying to prevent any evasions, but the increasingly sophisticated systems employed by the hermit nation are creating a gap in the sanctions race.
One of the more recent sanctions was meted out by the US Treasury recently imposed sanctions on two Chinese nationals who “materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, a malicious cyber-enabled activity.” They are accused of stealing about $100 million worth of cryptocurrency during a 2018 cryptocurrency hack by the Lazarus group. They are said to have laundered the money to cloud their funding sources.
The Lazarus group is considered to be in the vanguard of North Korea’s cryptocurrency hacking efforts. They accomplish their nefarious deeds by spreading malicious computer viruses and malware mostly at financial institutions. They also fervently target the international cryptocurrency community and “are known to employ a variety of fake cryptocurrency trading programs that contain malware.’ According to the US treasury.
The UN Security Council sanctioned North Korea after analyzing that financial institutions and cryptocurrency trading sites in at least 35 countries. The attacks resulted in roughly $2 billion of ill-gotten funds, which represents half of Kim Jong Eun’s $4 billion slush fund.
In the traditional markets, such an amount would be far more straightforward to track and lead to prosecutions. The method of money laundering, however has become increasingly sophisticated in just the past few years as hackers are utilizing cryptocurrency on a more regular basis which cannot always be tracked via simple wallet transaction analysis. On that note, Chainalysis has reported that the volume of cryptocurrency transactions that go through a tumbler has more than doubled from $1 billion in 2018 to $2.8 billion in 2019.
Recently the DPRK appears to be paying especially close attention to Monero (XMR) which is a privacy token. It is virtually impossible to trace XMR transactions. These privacy tokens have largely been delisted by South Korean exchanges in the past year on request of the FSC due to the ease with which one may conduct money laundering with them.
Another fact that likely disturbs the US government is that the international crypto market has taken something of a shine to North Korea’s activities in the past year. Of particular concern is how the DPRK will work with China, Russia, and Iran to create a new financial system that the US cannot effectively keep tabs on. The decentralized nature of some cryptocurrencies coupled with their privacy aspects adds value to them overall, especially to those looking to subvert economic sanctions.
Virgil Griffith’s visit to the DPRK late last year demonstrates how even relatively high-profile individuals from the Ethereum project are willing to explore their options despite the risk of retribution from the US government. Griffith is accused of ignored warnings of law enforcement officials and attending a conference to provide North Korea with technical information on how to avoid sanctions and launder money with cryptocurrency.
Griffith has been released on bail, but is under trial. He has pleaded not guilty to date. He faces up to 20 years in prison if found guilty.
Despite the cases of malfeasance via cryptocurrency that have been processed and the ones that are currently in process, there are likely countless others that will never get prosecuted, and even more that will never even be discovered. Criminals and financial evangelists are finding that cryptocurrencies can deliver them the freedom from the heavy thumb of international economic sanctions that they so desire.
While South Korea last week increased its intent on putting a boot down on money laundering via cryptocurrency by passing a landmark amendment, its northern sister seems to have embraced the cold kiss of cryptocurrency for economic freedom. Time will tell how law enforcement adjusts.
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