Room 39, also known as Bureau 39, Division 39, Office 39 and also by its official name the Central Committee Bureau 39 of the Workers’ Party of Korea, is a covert North Korean party organisation which generates a slush fund for North Korean leaders. Through varying means, such as methamphetamine production and insurance fraud scams it generates illegal funds used by the country’s leaders. Estimated to bring in over $1 billion a year it is involved in multiple illicit businesses and circumventing sanctions which prevent the generation of funds.
1 Creation of Room 39
In 1972, Kim Jong Il, heir to then-North Korean President Kim Il Sung, formed a new central party department known as “Office No. 39”. It was named after the office in which it started. Since its beginning, it has acted as a slush fund of sorts. This means it has provided a way for the North Korean leaders to circumnavigate sanctions aimed at preventing the regime from generating foreign currency.
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1.1 Merger of Room 38 and Room 39
In 2010 it was reported that Room 39 and Room 38, another bureau within the North Korean government, had merged. This was done to simplify Kim Jong Il’s slush fund supply.
However, according to a North Korean insider, when it became difficult to supply hard currency due to international sanctions,
“Room 38 seems to have been restored because there was a feeling that Room 39 alone can’t meet the need.”
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2 Organisation and purpose of Room 39
Room 39, also known as Office 39, is located within the vast bureaucratic structure of the Workers Party of Korea and is one of the specialised departments which deals with the generating of funds for the leaders of North Korea.
2.1 Industries which Room 39 is Involved in
Room 39 is involved in several illicit industries which range from narcotics manufacturing to insurance fraud schemes. It has also been reported that the organisation is involved in the production of forged $100 bills dubbed ‘supernotes’.
2.1.1 Money Laundering through Room 39
Room 39 is involved in the laundering of funds which are procured through the other means which are listed below. This will often involve the organisation taking the profits from its illicit enterprises and funnelling them through China. This is done by purchasing goods and resources which it then goes on to sell in other markets.
In 2005 the United States sanctioned the Banco Delta Asia (BDA) bank in Macau after it had designated the bank as
“a primary money laundering concern”.
These sanctions banned all US citizens and companies from dealing with the bank. This came after allegations were levelled at the bank accusing it of working with DPRK officials. These allegations also accused the officials at the bank of accepting counterfeit US currency. They were also alleged to agree to place this currency into circulation.
The BDA was also accused of facilitating finances for a DPRK front company. This front company was suspected of distributing fake tobacco products, drug trafficking and counterfeit currency distribution.
2.1.2 Counterfeit Money Production linked to Room 39
Room 39 is also alleged to be involved in the production of so-called ‘supernotes’. These are $100 bills which are extremely hard to detect whether or not they are fake. This is because they are highly detailed and use many of the same security features as normal $100 bills.
In 2004, a Panamanian-flagged ship sailing from China berthed in the Port of Newark. As the cranes unloaded the ship’s containers a container was singled out. It was then placed onto a truck and driven to a warehouse several miles from the port.
Once at this warehouse, FBI and US Secret Service Agents, acting under a sting operation, opened the container. Beneath cardboard boxes full of toys they uncovered $300,000 worth of counterfeit, ‘supernotes’.
They were nearly flawless and contained several features such as:
- The same colour-shifting ink used on actual US dollar bills
- Paper with the same fibre composition as actual US dollar bills
- Engraved images which were alleged to be finer than those produced by the US Bureau of Engraving and Printing
The only way these bills could be confirmed as imitations was when they were subjected to deep forensic analysis.
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2.1.3 Narcotics Manufacturing Linked to Room 39
Room 39 is believed to be involved with the production and synthesis of several illicit substances such as
- Methamphetamine
- Morphine
- Conversion of morphine into heroin
- Fake viagra
In the 1990s Room 39 began to encourage the production of crystal meth to sell abroad as an additional way to generate funds. Additionally, methamphetamine produced by Room 39-linked business’ was so popular with the upper and lower classes of North Korean society that
“Taking a hit in front of others involved little stigma”.
It has also been reported that methamphetamine has been used as a substitute for medicine in North Korea. This is due to the fact that many people who lack the funds to purchase legitimate medicine will turn to meth to gain some form of temporary pain relief.
2.1.4 Insurance Fraud Schemes Linked to Room 39
Insurance fraud is another area in which Room 39 has operated. This involves taking out fake insurance policies on people who either haven’t died or did not exist in the first place.
According to Syung Je Park, a director at the Asia Strategy Institute in 2009, the North Korean government life-insurance corporation had recouped around $100 million from European insurance companies for payouts on life insurance policies of people who had been killed in unrelated train, and ferry and helicopter crashes.
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2008 Helicopter Crash Court Case
A 2008 court case brought forward by Allianz Global Investors, Lloyds of London and several other reinsurance companies disputed a North Korean reinsurance claim for a 2005 helicopter crash.
The North Koreans alleged that a helicopter had crashed into a government-owned warehouse and were attempting to claim the insurance policy. However, these insurance companies disputed it stating that it had been staged and the North Korean court documents which they had brought out to support it were fake.
A British appeals court allowed the court case to go ahead, but as it went to trial the insurance companies settled and retracted all allegations of fraud against Korea National Insurance Corp (KNIC), the North Korean company which had brought the insurance claim forward. The insurance companies paid out 95% of the North Korean claim, which was about $58 million.
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2.2 Companies Connected to Room 39
There are reportedly, more than 120 companies under the control of Room 39 which are involved in the production of and or generation of funds for North Korea’s elites. Some of these companies are listed below:
- Korea National Insurance Corp (KNIC) [Source]
- Pyongyang Restaurant chain [Source]
- Korea Kaesong Koryo Insam Trading Corporation [Source]
- Daeheung [Source]
- Korea Kumgang Group [Source]
- Taesong Bank [Source]
- Zokwang Trading [Source]
3 Location of Room 39
Room 39 is believed to be located inside a ruling Workers Party building in the North Korean capital, Pyongyang, not far from one of the residences of the North Korean President.
It is alleged to be on the third floor alongside Office 35 and Office 38, which are tasked with intelligence and legal financial activities respectively.
4 Ties to China
Room 39 and the illicit drug production trade it facilitated are heavily linked to China. It has been reported that although China had pressured the North Koreans to stop producing and exporting meth to China itself, Chinese smugglers were willing to supply ephedrine, one of the precursor chemicals which is used to produce methamphetamine.
There are also ties between China and Room 39 regarding resource trading. Within this field, Room 39 will send textiles, coal and minerals such as gold over the border to China to sell them on the international market under a false label.
A 2009 report by the Chatham House think tank stated that the Chinese company China Sonangol had lined up a Chinese state-owned group to carry out seismic test explorations on two oil prospecting sites within North Korea. Additionally, a China Sonangol jet was spotted in Pyongyang in 2013.
5 Conclusion
Room 39, known by other names such as Bureau 39, Division 39, Office 39 and also by its official name the Central Committee Bureau 39 of the Workers’ Party of Korea, is the covert North Korean party organisation which generates a ‘slush fund’ for the North Korean elite. It is estimated to bring in over $1 billion a year and is involved in multiple illicit businesses such as the generation of fake currency, the production of illegal drugs and also fake insurance claims. This ‘Office’ has allowed the North Korean government to circumnavigate sanctions which have been levelled against the rogue state, allowing the country’s elites to generate illicit funds through covert if not outright illegal means.
