The US Federal Bureau of Investigation (FBI) has offered a reward of 7 million dollars (approximately 10.1 billion won) for information leading to the arrest of Shim Hyunseop, who has been identified as a key figure in the so-called "shadow banker" network. This network is responsible for converting funds raised by the North Korean Kim Jong Un regime through virtual asset theft, in order to evade US sanctions, into cash.
The Wall Street Journal (WSJ) reported on Shim Hyunseop on December 25 (local time), citing US Department of Justice indictments and related documents.
He operated mainly in Arab countries under 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, thousands of North Korean workers and hackers, using false identities, earn hundreds of millions of dollars annually in places like Russia, China, and Africa, and remit these funds to North Korea. These illicit funds must be laundered to evade US financial regulations and to conceal any connection to North Korea. This is where 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. Shim was dispatched overseas as the head of an affiliate of North Korea's Foreign Trade Bank, operating in countries such as Kuwait and the United Arab Emirates (UAE). According to Ryu, Shim once explained his money laundering methods: after converting virtual assets into cash through brokers, the funds would be transferred to accounts of shell companies and then withdrawn.
When North Korean "IT workers" steal virtual assets through hacking, they send them to Shim. These assets are routed through multiple digital wallets to make tracking difficult. Shim then uses brokers, whom he has secured in advance in countries such as the UAE or China, to convert the virtual assets into US dollars. The brokers transfer the funds 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 US indictments, in 2019, Shim purchased a helicopter in Khabarovsk, Russia, and transferred the payment-worth 300,000 dollars-through a law firm in Zimbabwe.
In another instance, Shim used funds obtained from virtual asset theft in 2017 to purchase telecommunications equipment. At the time, he transferred about 50,000 dollars worth of Bitcoin to another wallet managed by an over-the-counter trader. The funds were then exchanged for US dollars and deposited into a bank account of a shell company in Hong Kong. According to US prosecutors, the money was subsequently sent to a telecommunications equipment vendor in Thailand.
Shim also played a role in the production and smuggling of counterfeit cigarettes, a major foreign currency source for North Korea. North Korea manufactures counterfeit versions of well-known brands such as Marlboro and sells them in countries like Vietnam and the Philippines. Shim used shell companies established in China or the UAE to purchase tobacco leaves, which were then shipped to North Korea. Payments for these transactions were made in US dollars through banks including Citibank, JPMorgan, Wells Fargo, Deutsche Bank, HSBC, and Bank of New York Mellon.
According to data from Chainalysis, which tracks virtual asset theft, 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, at present, it is nearly impossible to apprehend Shim. He has been listed as a sanctioned individual by the United Nations (since 2016) and the United States (since 2023), and is believed to have moved to Dandong, China after being expelled from the UAE in 2022.
The Chinese Ministry of Foreign Affairs told the WSJ that it is unaware of Shim Hyunseop's activities and opposes the US Treasury Department's unilateral sanctions against him.
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