Tag Archives: economy

North Korea turning to human trafficking for foreign currency

WASHINGTON – To generate new income sources, the North Korean government has engaged in state-sponsored trafficking of its citizens, sending them to work as forced laborers in other countries and confiscating all or most of their wages, an issue of increased focus in the international community.

“I see it as just starting to get attention. It’s an emergent issue on the international agenda,” said Scott Snyder, senior fellow for Korea studies at the Council on Foreign Relations.

Both the Korea Economic Institute and the House’s Tom Lantos Human Rights Commission held meetings in Washington D.C. in April and May to address the trafficking.

North Korea, frequently ranked as the world’s worst human rights abuser, has lured between 50,000 and 60,000 citizens to work in industries around the globe with the promise they would keep their wages, according to a paper from the Database Center for North Korean Human Rights presented on Tuesday. Instead, the wages are sent to the North Korean government, generating as much as $2.3 billion per year.

Industries employing the laborers range from logging and mining to restaurants, and workers who complain or escape risk reprisal against themselves and their families who remain in North Korea, said Robert King, special envoy for North Korea Human Rights Issues at the State Department, at the House hearing.

Workers have been sent through bilateral contracts to around 40 countries, primarily Russia, China, Mongolia and nations in Africa, central Europe and the Middle East, according to a State Department Trafficking in Persons Report from March.

Snyder said the increased trafficking is one of North Korea’s ways of earning foreign exchange. Previously, the government sustained itself through other illicit means, such as drug trafficking, counterfeiting and weapon sales, but those income sources have been declining.

“They’re running a trade deficit with the rest of the world and it’s mostly shown in trade with China,” Snyder said.

“Whatever North Korea can do to make a profit it does, and much of it turns out to be illegal.”

One defector, Lim Il, told the Lantos commission that he had been a state employee in North Korea but went to Kuwait to work at a construction company, where he was required to put in 14-hour days under strict surveillance, with two days off per month.

“I think we were slave laborers,” Il said.

After escaping to the South Korean embassy, he learned that his salary had all gone to the Office of the Worker’s Party that manages foreign currency. “The money obtained through the export of laborers overseas [is] used as a personal fund for Kim Jong-un,” the Database Center for North Korean Human Rights paper said.

The U.S. and international community are facing difficulty curtailing the trafficking, said John Sifton, Asia advocacy director at Human Rights Watch at the House hearing. The biggest reasons are that most of the work occurs in Russia and China, it provides North Koreans minimal exposure to the outside world which may help undermine the government, and officials have not decided whether to approach it from a sanctions or human rights perspective.

“To address this is going to require attention and focus from the international community,” Snyder said. “And the best way of doing that would probably be to make this an issue of concern for the counterparts.”


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Internet currency Bitcoin lacks privacy protections

WASHINGTON — Bitcoin lacks the anonymity that many users have come to expect and desire, especially for a currency advertised as “cash for the Internet.”

All transactions made using the online currency is logged in a public ledger to ensure their validity.

“It’s inherent in the system to have it be transparent,” said Jim Harper, a senior fellow at the libertarian Cato Institute and a member of the board of directors at the Bitcoin Foundation. “You could have greater privacy if it was a system that one party controlled, but that would have costs relying on that party to get it right.”

Bitcoin is a digital currency that has no central authority and can be used, in many ways, like cash. Many businesses, from restaurants to WordPress, have begun to accept bitcoin as payment. To get started, it only takes a few minutes to go online to set up a Bitcoin wallet.

“It is fast and free,” said David Barrett, the CEO of Expensify, a company that supports Bitcoin use for international transactions. “It’s secure. And I would say it works everywhere in the world. And it is a very powerful technology for moving money around the world.”

Bitcoin offers an “acceptable level of privacy,” according to Bitcoin.org, which is managed by its developers. And for many Bitcoin users, any potential loss of privacy is an acceptable trade-off to circumvent traditional financial institutions.

“The idea of having this flexible payment system where you can pay someone on the other side of the world without having to turn to Western Union or something, that is quite an appealing concept,” said Sarah Meiklejohn, a lecturer at University College London who has done research on the currency.

Because this cybercurrency is not tied to any country or bank, it can be a relatively stable option for those in developing countries, where the local currency is often unreliable.

But, because of Bitcoin’s transparency, it is relatively easy to track a user’s entire transaction history. The public ledger shows the location of the Bitcoin user who is making a transaction as well as the history of the Bitcoin they are spending.

The public ledger shows a Bitcoin's transaction history and the user's location.

The public ledger shows a Bitcoin’s transaction history and the user’s location.

“It is kind of anonymous, but the second that you do any transaction with Bitcoin, every transaction is there,” said Barrett. “Once you pay me a bitcoin, basically I can look at the log and see every transaction you’ve made.”

Bitcoin.org claims no responsibility for any “losses, damages or claims,” for invasions of privacy or thefts, according to its terms and conditions. It suggests encrypting Bitcoin wallets and using secure connections to avoid thefts.

There are ways to improve the anonymity of the currency, but they require a concerted and technology-intensive effort that many do not even know is an option.

“There’s a thing called mixing, which is a process where you commingle your bitcoins with the bitcoins of others and the output of those transactions is harder to trace back to individuals,” said Harper, the Cato fellow. “It might make it a probabilistic calculation rather than drawing a direct line.”

This process is the equivalent to moving funds through banks in countries like the Cayman Islands and Panama which have strict bank-secrecy laws.

Today, some experts are cautious in accepting Bitcoin as a widespread currency. However, many see the Bitcoin concept as one that will remain.

“It’s actually a good alternative to a currency if there is inflation,” Barrett said. “In Venezuela and Africa, it is getting larger adoption. Russia also has a big growth in bitcoin. It’s a safer and less volatile way to keep your currency. Over time, Bitcoin will, in certain parts of the world, become a daily occurrence.”

Bitcoin and its supposed anonymity gained prominence in its role with the Silk Road, an online black marketplace known for selling illicit drugs and weapons. Buyers and sellers were able to connect virtually and use the cybercurrency to conduct anonymous transactions.

“This perception of anonymity might be driving groups towards Bitcoin, but then the transparency is giving law enforcement or anyone interested in these illicit transactions this beautiful view of all of these types of illicit transactions,” said Meiklejohn, the Bitcoin researcher. “Instead of going to somewhere like Western Union and wiring cash over to the Islamic State or whatever, if you’re doing it with Bitcoin then you are creating this paper trail that is never going to go away, literally ever.”

What may scare off more potential Bitcoin users, however, is not its lack of anonymity, it’s the volatility of the currency. In the last 12 months, the value of the currency has fallen by nearly half.

“Maybe I’m just cynical, but it’s hard to see why Bitcoin, as it is now, would achieve widespread adoption, which ultimately is what you would need to have any kind of stable currency,” Meiklejohn said. “So, as long as Bitcoin is this niche market, it is going to remain pretty volatile.”