Investigative journalists expose North Korean front companies in Malaysia

The coincidence of the Panel of Experts report’s release and the assassination of Kim Jong-nam continues to focus some of the finest investigative journalism I’ve seen in years on North Korea’s front companies in Malaysia. First up, the MKP Group, a Malaysian-North Korean joint venture that earned “tens of millions of dollars” through construction projects in Zambia, Angola, and elsewhere in Africa. To further reinforce Bill Newcomb’s comments about the links between slave labor, money laundering, and proliferation, MKP often uses North Korean laborers, who “typically must give most of their earnings to the regime as a condition of going abroad, according to human rights groups.”

The Panel of Experts is now investigating MKP and its affiliates in Malaysia, including at least one bank, for sanctions violations. So are the Malaysian authorities, who recently shut down another large North Korean front company, Glocom after the U.N. Panel and Reuters exposed it:

Malaysia is specifically trying to determine whether North Korea used the Southeast Asian nation as a hub for earning foreign exchange in violation of the U.N. sanctions, which were designed to cut Pyongyang off from global financial flows, according to a person familiar with the inquiries. [Wall Street Journal]

A specific focus is International Consortium Bank, which I wrote about earlier this week, as a likely violation of U.N. prohibitions against joint ventures and correspondent relationships with North Korean banks, and of new requirements that member states close foreign branches of North Korean banks and expel their representatives. The key to MKP’s welcome until now appears to have been close ties to local politicians:

MKP is now the main focus of Malaysia’s inquiries, though other companies are also in the mix, according to the person familiar with the Malaysian investigations. MKP lists former Malaysian government officials, including a former senior member of parliament, as shareholders or directors in corporate registration documents. [….]

In the late 2000s, MKP built 5,000 low-cost houses in Angola’s capital, Luanda, using North Korean workers, and later sold them to the government for $50,000 each, a total of $250 million, the person familiar with MKP’s business activities said. Angola’s government didn’t reply to requests for comment.

In Zambia, the chief executive of a private joint venture between MKP and the state-run National Housing Authority said it had built 428 houses there and was constructing another 253, sometimes with North Korean workers.

“We don’t really have a problem with” using the workers because MKP is a Malaysian-registered entity, said the chief executive, Charles Holland. He said he last met Mr. Han, the MKP director, about five years ago.

Two Zambian government officials said that Mr. Han, also known as Han Hun Il, has been an influential businessman in the copper-rich African nation for almost two decades. MKP implemented $50 million in contracts in Zambia between 2006 and 2015, according to a foreign ministry official.

But in the end, few Zambians could afford the houses, most of which are empty now.

In Malaysia, MKP sought to hire or award ownership stakes to politically connected Malaysians to build local support and win contracts, including a road-building deal, another person familiar with the company’s activities said.

The person said people awarded stakes included Malaysia’s former navy chief, Adm. Mohd. Ramly bin Abu Bakar, a shareholder of an MKP subsidiary, according to corporate records, and a senior retired Malaysian member of parliament, Karnail Singh Nijhar, who is a director of the subsidiary.

Other information I’d heard about MKP is that they may have a history of not necessarily building the things they contract to build. One possible explanation for that is that African client was really paying for some other good or service, and the construction contact was a sham. Or, maybe the financing just fell through. When the Panel has completed its investigation of ICB, it should look into CCCL Bank and other MKP companies next.

Then, there is this report, via a site I hadn’t heard of before now, that North Korea was running a sham IT start-up in Kuala Lumpur, which raises strong suspicions about links to hacking:

From the heart of the Malaysian capital of Kuala Lumpur as well as the nearby financial center of Singapore, North Korean spies covertly ran a technology business that, until last year, publicly sold a wide array of products including iPhone apps, web development apps and even cybersecurity tools. Virtually nobody knew who really controlled the company until recently. Even today, nobody is entirely sure how it worked.

Now, CyberScoop has learned that United Nations officials are currently looking into the business as part of larger inquiries into sanctions violations by North Korea.

The connection between Adnet and the network of front companies was first uncovered by Reuters journalists who, alongside U.N. officials, began last year looking into the individuals and entities connected to North Korean companies in Malaysia. Many of the companies were said to be directed by the Reconnaissance General Bureau (RGB), the North Korean intelligence agency responsible for clandestine operations and cyber activity. Over the course of the investigation and publication of the U.N. report, most of the companies stopped operations. [Cyberscoop]

In most cases, these operations either involve blocked North Korean entities like the RGB, which member states are obligated to seize and shut down, or whose continued operation violates other provisions of the U.N. sanctions. There will be no excuse for the Malaysian (and Zambian, and Angolan) governments to let these companies continue operating, and no excuse for our own Treasury Department to allow them continued access to our banking system.

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