North Korean House of Cards

The Early European Connection
In the 1970s and 1980s, a large part of the Kim family’s slush fund
was tied to Europe. The Ambassador to Sweden Kil Chae-kyong, a
Third Floor operative and reputed personal secretary in charge of
Kim Jong-il’s personal funds, oversaw the operations of the major
North Korean embassies of Europe. He also handled procurements
for the Kim family, including automobiles, liquor, cigarettes,
electrical appliances, and so on without paying customs duties by
exercising diplomatic privilege. Diplomats would secretly sell the
goods to private companies in the countries where they were posted,
regularly earning large amounts of foreign currency. They stashed
these funds in the Foreign Ministry’s “loyalty funds” account in a
bank in Bern, Switzerland.
These secret money-making operations were referred to as the
“movement to earn foreign currency for ensuring loyalty.” It began in
the early 1980s at the prompting of Kim Jong-il. At first, then Foreign
Minister Huh Dam, a confidante to Kim Il-sung, had overall responsibility
for the operations. However, as power passed to Kim Jong-il
in the latter half of the 1980s, Ri Chol, a member of Kim Jong-il’s
inner circle and future North Korean Ambassador to Switzerland,
took over that role. In 1998, Kil Chae-kyong was arrested by Russian
police for trying to sell $30,000 in counterfeit U.S. currency. 395
At its inception, Office 38 was dedicated to creating a hub for securing
South Korean aid and investment into North Korea. Previously, South Korean
funds had come into North Korea through a variety of channels controlled by a
number of state and Party entities. Some of these supply channels belonged to
Office 39 through the Finance and Supply Department (FSD). Others were tied
to Kim Il-sung’s Presidential Supply Department, as well as the Party apparatus
and state bodies.
This created a problem for Kim Jong-il. First, his ability to account for
these funds and tap into them for his personal use was complicated by many
competing interests within the leadership. Second, and more importantly, hard
395 “Tracing the Whereabouts of Kim Jong-il’s ‘Secret Funds’ –Kim Jong-un Inherits Huge Amount
of Money Together with the Transfer of Power,” Bessatsu Takarajima, Issue No. 1984 (April 25, 2013).
Committee for Human Rights in North Korea
182