US Treasury Cracks Down On Illicit DPRK Financial Activity

The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has imposed sanctions on three individuals for providing support to the Democratic People’s Republic of Korea (DPRK) through illicit financing and malicious cyber activity. Wu Huihui and Cheng Hung Man are being designated for providing material support to the Lazarus Group, which was previously sanctioned for cyber espionage, data theft, monetary heists, and destructive malware operations. Sim Hyon Sop is being sanctioned for acting on behalf of the Korea Kwangson Banking Corp (KKBC), which has been designated for providing financial services to entities involved in the proliferation of weapons of mass destruction.

Illicit Facilitation Networks

The DPRK uses illicit facilitation networks to access the international financial system and generate revenue in virtual currency to support its unlawful weapons of mass destruction and ballistic missile programs. According to Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson, the DPRK’s use of such networks directly threatens international security, and the US and its partners are committed to preventing the DPRK’s destabilizing activities.

The Lazarus Group is controlled by the Reconnaissance General Bureau, the DPRK’s primary intelligence bureau, and is involved in the trade of DPRK arms. Wu is a PRC-based OTC virtual currency trader who facilitated the conversion of virtual currency stolen by DPRK actors working with the Lazarus Group to fiat currency. Cheng is a Hong Kong-based OTC trader who worked with Wu to remit payment to companies in exchange for virtual currency. Both Wu and Cheng facilitated the conversion of millions of dollars’ worth of virtual currency into fiat currency for DPRK cyber actors. They utilized front companies to enable DPRK actors to bypass countering illicit finance requirements at financial institutions and access the US financial system.


OFAC Sanctions

Sim is a KKBC Deputy Representative who recently relocated to Dandong, China. He has coordinated millions of dollars in financial transfers for the DPRK. The DPRK maintains a workforce of thousands of highly skilled IT workers around the world to generate revenue that contributes to its unlawful WMD and ballistic missile programs. Since September 2021, Sim has received tens of millions of dollars in virtual currency, part of which was derived from DPRK individuals unknowingly hired by US-based companies to provide IT development work. These DPRK IT workers typically use fake personas to apply for jobs and request to be paid in virtual currency. They then send the majority of their salaries through a complicated laundering pattern to funnel these illegally obtained funds back to the DPRK.

The OFAC sanctions aim to safeguard the international financial system and prevent its use in the DPRK’s destabilizing activities, especially in light of the DPRK’s three launches of intercontinental ballistic missiles (ICBMs) in 2023 alone. They were taken in close coordination with the Republic of Korea, highlighting the commitment of both countries to address the threat posed by the DPRK’s illicit activities.