A 10.1 Billion Won Bounty: Who Is North Korea's "Shadow Banker" Shim Hyunseop?

WSJ: North Korea Launders Money Through "Shadow Bankers" Like Shim Hyunseop

The US Federal Bureau of Investigation (FBI) has offered a reward of 7 million dollars (approximately 10.1 billion won) for Shim Hyunseop, who has been identified as a key figure in the so-called "shadow banker" network that cashes out funds raised by the North Korean Kim Jong Un regime through the theft of virtual assets to evade US sanctions.

The Wall Street Journal (WSJ) reported on Shim Hyunseop on December 25 (local time), based on indictments from the US Department of Justice and other sources.

Wanted screen of Shim Hyunseop by the US FBI. Screenshot from the FBI website

He operated mainly in Arab countries, using the names "Shim Ali" or "Shim Hajim." US prosecutors believe that Shim participated in money laundering and sanctions evasion on behalf of the Kim Jong Un regime.

According to US law enforcement officials and cybersecurity analysts, every year, thousands of North Korean workers and hackers, who disguise their identities, earn hundreds of millions of dollars in places like Russia, China, and Africa, and deliver these funds to North Korea. The illicit funds thus obtained must be laundered to avoid detection by US financial regulations and to obscure any connection to North Korea. It is at this point that bankers like Shim come into play.

Ryu Hyunwoo, a former acting ambassador at the North Korean Embassy in Kuwait who defected, stated that he met Shim more than ten times in Kuwait in the past. Shim was dispatched overseas as the head of an affiliate of North Korea's Foreign Trade Bank and operated in Kuwait and the United Arab Emirates (UAE), among other places. According to Ryu, Shim once explained his money laundering method: after converting virtual assets into cash through brokers, the funds would be moved to accounts of shell companies and then withdrawn.

When North Korea's "IT workers" steal virtual assets through hacking, they send them to Shim. These assets pass through multiple digital wallets to make tracking difficult. Shim then converts the virtual assets into dollars through brokers in the UAE, China, or other countries, whom he had secured in advance. The brokers transfer the money to accounts of Shim's shell companies.

This allows Shim to purchase goods for the Kim Jong Un regime directly, without remitting money to North Korea. According to one of the charges brought by the US, Shim purchased a helicopter in Khabarovsk, Russia in 2019, and transferred 300,000 dollars for the transaction through a law firm in Zimbabwe.

Additionally, with funds obtained from a virtual asset theft in 2017, he purchased telecommunications equipment. At the time, 50,000 dollars worth of Bitcoin was transferred to another wallet managed by an over-the-counter trader, and the funds were converted to dollars and flowed into a bank account of a shell company in Hong Kong. According to US prosecutors, this money was then sent to a telecommunications equipment vendor in Thailand.

Shim also played a role in the manufacture and smuggling of "counterfeit cigarettes," a major foreign currency earning method for North Korea. North Korea produces counterfeit versions of famous brands such as Marlboro and sells them in countries like Vietnam and the Philippines. He used shell companies set up in China or the UAE to purchase tobacco leaves, which were then shipped to North Korea by sea. The payments for these transactions were also settled in dollars through banks including Citi, JPMorgan, Wells Fargo, Deutsche Bank, HSBC, and Bank of New York Mellon.

According to data from Chainalysis, a company that tracks virtual asset thefts, North Korean bankers like Shim have laundered more than 6 billion dollars in stolen virtual assets for North Korea over several years.

The WSJ reported that, for now, it is nearly impossible to apprehend Shim. He has been included on the sanctions lists of the United Nations (2016) and the United States (2023), and is believed to have moved to Dandong, China after being deported from the UAE in 2022.

The Chinese Ministry of Foreign Affairs told the WSJ that it is unaware of Shim's activities and opposes the US Treasury Department's unilateral sanctions against him.