News24

N Korea in global money scam

2009-06-18 21:21

Washington - North Korea has been perpetrating a global system of insurance fraud to earn its communist regime hard currency and finance a weapons programme, The Washington Post reported on Thursday.

"The North Korean government has collected hundreds of millions of dollars from some of the world's largest insurance companies on large and suspicious claims for transportation accidents, factory fires, flood damage and other alleged disasters," the Post wrote.

The funds also facilitate the lavish lifestyle of Pyongyang's "Dear Leader," Kimg Jong-Il, according to the Post.

"This money helps keep Kim Jong-Il in power at a time he is engaged in nuclear brinksmanship," former state department official David Asher told the leading US daily.

"It has become one of the North's largest illicit revenue generators," added Asher, who supervised a State Department unit that sought to track North Korea's illegal activities during former president George W Bush's tenure.

"The exact scale of the fraud is hard to determine... because the insurance industry has been so gullible."

Helicopter crash

Several insurers, including Germany's Allianz Global Investors and Lloyd's of London, disputed claims by Pyongyang over an alleged 2005 helicopter crash into a government-owned warehouse.

According to court documents cited by the Post, the companies claimed that North Korea had faked the crash, that a North Korean court's decision to uphold the claim was rigged and that Pyongyang often used funds from insurance fraud for Kim's personal use.

But in December, the plaintiffs agreed to a $58m settlement - 95% of the North Korean claim. According to an analysis by London-based Law-Now, the reinsurers settled because they had tied their hands, having agreed to be subject to North Korean law for the matter.

Pyongyang filed claims for three other disasters - two train crashes and a ferry sinking - in 2006, according to the Post. The claims came one year after the North Korean companies linked to counterfeiting saw their assets frozen at Banco Delta Asia in Macau.

Banking on disaster

"The major point of the reinsurance operation is that they are banking on disaster," Kim Kwang Jin, a former manager for state-owned Korea National Insurance Corp., told the Post.

"Whenever there is a disaster, it becomes a source of hard currency," added Kim, who said that during his six-year tenure at KNIC, the company provided cash shipments of $20m gained from reinsurance claims to the "Dear Leader" each year for his birthday.

Several companies are now refusing to insure North Korea having been burnt in such schemes, the Post added.

SAPA