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UN Report: North Korea pocketed $571 million from exchange hacks

A new U.N. report is linking cryptocurrency exchange hacks to North Korea. The report reveals that the embattled dictatorship continues to wage cyber attacks against other countries as a way to circumvent global sanctions and acquire foreign currency, using digital currencies to launder its illicit gains.

For over a decade now, the global community has been issuing sanctions against North Korea as a reaction to its nuclear weapons program. In 2006, when Pyongyang implemented its first test on a nuclear device, the world was concerned with the potential implications of such activity.

As dialogue extended with no foreseeable agreement in the near future, talks eventually fell apart resulting in economic sanctions imposed on Pyongyang over its continued nuclear energy-related activities. The sanctions have severely affected North Korea’s economy.

North Korea has been accused of attempting to circumvent the sanctions imposed by several countries. The U.N. is currently investigating activity allegedly perpetrated by Kim Jong Un-sanctioned operatives which are in direct contravention of economic sanctions imposed against North Korea. The organization believes the contraventions happened, breaking sanctions for at least twenty countries.

In the report, North Korea is accused of engaging in cyber attacks, especially targeting banks and other financial institutions in order to get around the issue of restricted access to the global economy. The U.N. report detailing the countries alleged crimes stated that Pyongyang has "stolen money through cyber attacks, creating a pool of illicit funds that has grown since 2016," according to Asian Nikkei.

The report provides insight into the organizational structure of the alleged attacks, which it says originate from a special unit within the North Korean military. Due to the increased gains seen from the unit, it has now been elevated in terms of North Korea’s military hierarchy.

Another report seen by The Guardian explains that much of the activity ran by the unit consisted of launching online attacks designed to "illegally force the transfer of funds from financial institutions and cryptocurrency exchanges".

The report details a concrete allegation, linking Kim Jong Un to the theft of private data from Interpark, a popular South Korean e-commerce website. Its authors believe that North Korea stole the private data of over ten million users and demanded an amount exceeding $2.7 million as ransom for restoring the stolen data to its rightful owners. The U.N. says that the motive for the attacks was primarily around obtaining foreign currency, which has been hard to come by for Pyongyang.

As for the North Korean nuclear weapons program which is the original cause for the global outcry, it continues to stay active. The U.N. report explains that the Hwasong-15 intercontinental ballistic missile is being assembled near the capital while another similar device, the Hwasong-14 ICBM, was tested at Pyongyang International Airport.

The crypto connection

While sanctions on many of North Korea’s main export goods are hurting the government’s access to the global economy and foreign currency, Pyongyang has allegedly found a solution in blockchain technology and cryptocurrencies.

The report references Marine Chain, a now-closed blockchain-based firm which is now being linked to North Korea. The Hong Kong-based firm claimed to work on the tokenization of shipping vessels to build a global maritime marketplace. However, the U.N. now alleges the firm was used to supply North Korea with digital currencies until its eventual closure in September 2018.

The report further explains that North Korea waged cyber attacks on overseas financial institutions from 2015 to 2018. Specifically, U.N. experts determined that Pyongyang was behind attacks launched against cryptocurrency exchanges in Asia at least five times between January 2017 and September 2018. The losses estimated from these attacks come to around $571 million.

According to the report, the total profit garnered by North Korea through its alleged criminal activity online totals to around $670 million. Employing a wide array of techniques and brazenly ignoring sanctions has been North Korea’s strategy for years, however, the U.N. believes digital currencies provide a greater risk because they: "provide the Democratic People’s Republic of Korea with more ways to evade sanctions, given that they are harder to trace, can be laundered many times and are independent from government regulation."

The U.N. is recommending increased collaboration between its member states to better prevent the attacks by North Korea. Because it appears Pyongyang follows a loosely defined ‘manual’ for cyber crime, nations may be able to stay safe if they share information. Also, an increase in the number of cryptocurrency service providers meeting the new KYC and AML directives put in place by authorities globally is making illicit movement of funds more difficult.


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