human trafficking supply chain

The risk of DPRK labour in your supply chain

In its landmark report “Profits and Poverty: The Economics of Forced Labour” (2014), the International Labour Organization (ILO) outlined three areas of exploitation from human trafficking, the world’s 3rd largest criminal activity (by revenue) generating an estimated USD$150 billion a year, namely:

  • sexual exploitation – estimated to account for 22% of victims of forced labour
  • labour exploitation – estimated to account for 68% of victims of forced labour
  • state imposed – estimated to account for 10% of forced labour

Whilst the numbers of victims are now estimated to be much higher, the proportion of victims trapped in each type of exploitation is estimated to be roughly the same. Most government focus & activity has been on victims trapped in sexual exploitation, and more recently on victims of forced labour in various sectors (fishing, construction, agriculture, domestic service).

“North Korea is the biggest illegal job agency in the world”
– Dr Remco Breuker

The 3rd category – state imposed forced labour – is the least understood and often regarded as a domestic issue. The truth is very different in that several states use forced labour as part of their revenue generating activities, especially use of nationals overseas to raise much needed foreign currency. One of these is the Democratic Peoples Republic of Korea (DPRK), or North Korea.

The use of forced labour by DPRK in foreign markets has been surreptitiously operating for many years, often involving DPRK workers being used overseas in a range of industries, including but not limited to, apparel, construction, footwear manufacturing, hospitality, IT services, logging, medical, pharmaceuticals, restaurant, seafood processing, textiles, and shipbuilding.

Often DPRK labour is brought in, managed under strict surveillance , and shipped out again on completion of the project or contract. The conditions that the DRPK workers are kept under, operate under, and their compensation, all bear the hallmarks of forced labour, as defined by the ILO indicators on forced labour. The proceeds from their work are allegedly kept by the state and used to fund military programmes and the luxury lifestyle of the elite. Such workers, who may be engaged overseas for unto 3 years on projects, are termed “Dollar Heroes”, as they bring much needed foreign currency into the state, as outlined by the BBC documentary on the subject.

One report estimated that over 50,000 DPRK workers have been exploited by the state in overseas projects, some lasting upto 3 years, earning an estimated USD$1.2 to 2.3 billion per year. A more recent report estimates that DPRK was currently earning in excess of USD$500 million a year from nearly 100,000 workers abroad, of which some 50,000 were in China and 30,000 in Russia.

In 2017, it was widely reported that over 110 DPRK workers were involved in the construction of Russia’s 2018 World Cup stadiums in St Petersburg.

DPRK workers were reportedly involved in 14 African (U.N.) member states building “everything from ammunition factories, to presidential palaces, to apartment blocks”. In another report, DPRK workers were used to construct a military base (Sierra Leone), the new Ministry of Justice building (Guinea), the country’s State House and Independence Memorial Museum and secured a contract to build the defence headquarters and a munitions factory (Namibia), and build the country’s National Heroes Acre and Statue of the Unknown Soldier (Zimbabwe); a separate report highlights some of the spectacular monuments across Africa built using DPRK labour.

In the 2018 landmark report “People for Profit: North Korean Forced Labour on a Global Scale” lays bare some of the extensive financial and labour networks through which the DPRK earns its hard currency, through supplying cheap DPRK labour to Polish shipyards, Russian construction, Czech shoemaking, textile, and food industries, amongst many revelations.

In 2017, UN Security Council resolutions prohibited UN Member States from issuing new or renewed work authorisations to DPRK labourers and required States to repatriate North Korean nationals earning income overseas, subject to limited exceptions, including for refugees and asylum-seekers no later than December 22, 2019.

At the end of 2019, it is alleged that tens of thousands of North Korean citizens continued to work overseas, primarily in Russia and China. Workers were also reportedly present during 2019 in the following countries: Algeria, Angola, Bangladesh, Cambodia, Equatorial Guinea, Ethiopia, Guinea, Italy, Kyrgyzstan, Laos, Malaysia, Mali, Mongolia, Mozambique, Nepal, Nigeria, Oman, Poland, Qatar, Republic of the Congo, Senegal, Tanzania, Thailand, the United Arab Emirates, Vietnam, Zambia, and Zimbabwe. It is believe that many of these countries subsequently repatriated most or all North Korean workers during the year.

However, reports continue to suggest several countries either had not taken action or had resumed issuing work authorisations or other documentation, allowing North Koreans to continue working overseas, in violation of UN Security Council resolutions.

Russia reportedly issued more than five times as many tourist and study visas to DPRK residents as it did during the previous year, strongly suggesting that these visas are being used as a workaround for workers. Russian statistics showed that nearly 7,000 North Korean citizens arrived in Russia during the first quarter of 2020. Of these, 753 registered with Russian migration authorities as workers, 1,975 as students, and approximately 3,000 as tourists—a multi-fold increase in the number of North Korean students and tourists from the previous year. Similarly, there have been numerous reports that factories in China are employing new or existing North Korean workers.

In its most recent report, dated 28 Aug 2020, by the Panel of Experts established pursuant to UN Security Council resolution 1874 (2009), it was noted that (i) reports of information technology and other workers of the DPRK dispatched to earn income overseas, including professional athletes, medical professionals and factory, restaurant and construction workers; (ii) as of July 2020, only 40 Member States had submitted final reports on repatriation efforts due in March 2020.

What’s the risk for compliance professionals?

The use of DPRK workers in any supply chain outside of DPRK is a direct violation of UN sanctions, as well as highly likely that those DPRK workers are victims of state sponsored forced labour i.e. they are slaves. It is also likely that their compensation is going directly to the DPRK state elite, and allegedly helping fund the DPRK arms and nuclear programmes.

As has been outlined above, DPRK workers are being widely used as cheap labour in a number of industries and countries across the world, mainly Africa and Eastern Europe, as well as Middle east and South and South East Asia. There is both an AML and Sanctions risk for compliance professionals whose clients are using DPRK labour directly in their operations or for financial institutions funding clients or transactions that may involve DPRK labour. There is also a risk that DPRK organisations that are arranging the use of DPRK labour are being compensated in US dollars, which presents an additional compliance risk from USD clearing or US sanctions.

The compliance professional who would like to know more about geographic risk, industry risk, as well as the corporate structures used by DPRK to obfuscate the financing, may like to look at the following reports:

Steve Farrer

Steve Farrer MBA CAMS CFE is actively involved in working with the financial services sector, under the anti money laundering (AML) framework, to help identify and mitigate the illicit proceeds from human trafficking (modern slavery). Previously the head of global Non Government Organization (NGO) team collating information on large-scale trafficking incidences, to proactively inform financial institutions of those individuals and entities that are either directly facilitating or indirectly financially benefiting from human (and other forms of) trafficking. He has been involved in plenary sessions and working groups of the Financial Action TaskForce (FATF), the Egmont Group of Financial Intelligence Units (Egmont) and the AsiaPacific Group on Money Laundering (APGML), on the use of AML to combat the illicit proceeds from human trafficking and related criminal activities. Prior to this, he was the regional head of intelligence for a global financial institution, covering Greater China and North & East Asia, leading a world-class team, pioneering the use of open source intelligence & techniques to proactively identify & mitigate anti money laundering risk.