Cash, Yachts, and Cognac: Kim Yo-Jong’s Links to the Secretive Office Keeping North Korea’s Elites in Luxury

For years, intelligence officials around the world have been watching a secretive office on the third floor of the Korean Worker’s Party headquarters in Pyongyang, North Korea. There, in Office 39, the country’s ruler Kim Jong-Un has continued his father and predecessor Kim Jong-Il’s practice of rewarding himself and loyalists in the military, intelligence apparatus, and government with lavish gifts ranging from cash to cars to cognac, intelligence officials and experts say.

Like his father, they say, Kim has maintained the family’s control over Office 39. Though it is one of the hardest intelligence targets in the most secretive nation on earth, U.S. and other intelligence analysts think he has assigned his sister and potential successor, Kim Yo-Jong, and her husband significant roles in overseeing the money that flows through it from a wide variety of legitimate and illicit activities to family bank accounts and government slush funds.

The officials and outside experts readily concede that with the exception of visible missile launches and flagrant airport assassinations, they are skeptical of intelligence on North Korea on its best days. But the information available from defectors and other sources indicates that Kim’s sister and her husband, by some accounts a son of the nation’s nominal head of state, have their hands on the office’s purse strings, U.S. intelligence officials say. That insight has become particularly relevant in recent weeks as Kim has been out of sight, prompting questions about whether Kim Yo-Jong could be next in line. Through her role in overseeing Office 39, “she effectively has control over one activity that is central to regime survival,” says one U.S. official, who spoke on the condition of anonymity.

“Ms. Kim has numerous ties to Office 38 and 39, from reportedly being married to someone linked to the office, to running components of the office in conjunction with her sister, Kim Sol-song,” North Korea experts Harry Kazianis, John Dale Grover, and Adriana Nazarko wrote in The National Interest on Feb. 24. Officials believe Office 38 handles the Kim family’s personal finances. “While the extent of her role in maintaining the office is not known, it is likely that due to her position in managing the Kim family, she plays some part in overseeing financial transactions that directly relate to the slush funds financing the regime.”

While much of the regime’s overseas money-making activities remain shrouded in secrecy, Washington has been trying, with limited success, to uncover Office 39’s secrets ever since Kim’s grandfather Kim Il-Sung created it in the 1970s.

On August 30, 2010, after North Korea sank a South Korean warship in international waters, President Barack Obama signed Executive Order 13551, targeting for sanctions “individuals and entities facilitating North Korean trafficking in arms and related materiel; procurement of luxury goods; and engagement in certain illicit economic activities, such as money laundering, the counterfeiting of goods and currency, bulk cash smuggling and narcotics trafficking.” An annex to the order named Office 39, Green Pine Associated Corporation, the regime’s Reconnaissance General Bureau, and Gen. Kim Yong-Chol, who headed the RGB, Pyongyang’s main intelligence agency.

On Nov. 18, 2010, the U.S. Treasury Department designated “key nodes of the illicit financing network of North Korea’s Office 39,” naming the Korea Daesong Bank and the Korea Daesong General Trading Corporation. It alleged the office was “a secretive branch of the government of the Democratic People’s Republic of Korea (North Korea) that provides critical support to North Korean leadership in part through engaging in illicit economic activities and managing slush funds and generating revenues for the leadership.”

Then on Jan. 11, 2017, just before Donald Trump assumed the presidency, the Treasury Department added Kim Yo-Jong to its list of sanctioned individuals. Publicly, U.S. officials said at the time, she was included along with six others for her role as vice director of the Korean Worker’s Party Propaganda and Agitation Department, but current and former officials tell TIME the real aim was to curb Office 39’s ability to raise funds for the leadership — and for the country’s nuclear program.

“The sanctions have less to do with human rights abuses and propaganda — nobody is naïve enough to think sanctions are going to change those — but with the Kim family’s ability to maintain its standard of living and maintain the loyalty of the people it needs to survive,” says a former Treasury official who was involved in preparing the 2017 round of sanctions.

U.S. intelligence officials say they have concluded from defectors’ reports and other intelligence that Kim Yo-Jong has a significant role in Office 39 through her post as the de facto leader of the powerful Organization and Guidance Department (OGD), which is responsible for enforcing the teachings and directions of Kim Il-Sung. Retired Defense Department analyst Robert Collins’ extensive study of the OGD also documents her role in the Propaganda and Agitation Department, where Office 39 is housed. “In the OGD, issues that require Kim-Jong-Un’s ratification go through Kim Yo-Jong,” Collins wrote. “Party cadre are reported to both fear and respect her.”

The available intelligence, officials say, also indicates that she is married to Choe Song, the second son of KWP Secretary Choe Ryong Hae, the ceremonial head of state and a top aide to her brother. Her husband, the officials say, is tied to Office 39 through his role in the Finance and Accounting Department of the Propaganda and Agitation Department.

In a country for which little information is available beyond sanitized propaganda, Office 39 has a colorful history, including a failed sanctions-busting attempt to smuggle two Italian yachts worth more than $15 million into North Korea through China. The department has overseen fraudulent insurance scams and illicit arms sales to countries in Asia, Africa, and the Mideast in violation of United Nations Security Council Resolution 1874, adopted in 2009, current and former officials say. It has also been counterfeiting $100 bills, manufacturing and selling Viagra, methamphetamine and opiates, some of which are derived from poppies grown on Office 39’s own farms, the officials say.

North Korean diplomats are sent abroad with fundraising quotas from these illicit dealings and from legitimate business deals that can include selling everything from low-quality gold mined in the country to North Korean pine mushrooms. The proceeds are sent home in sealed diplomatic pouches that are immune to foreign scrutiny, the officials said.

Much of the business, they said, is conducted through North Korean front companies. “Korea Daesong Bank and Korea Daesong Trading Co. are key components of Office 39’s financial network supporting North Korea’s illicit and dangerous activities,” Stuart Levey, then Under Secretary of the Treasury for Terrorism and Financial Intelligence, said when the 2010 sanctions were announced.

One clue that the proceeds are intended to reward loyalty is that, in general, North Korea’s imports of luxury goods have exceeded even the Kim family’s appetites, and nobody else in the impoverished country could afford them. At the time of Kim Jong-Il’s birthday in 2008, for example, the South Korean newspaper Chosun Ilbo reported that a North Korean source said the regime had imported more than 200 cars, including foreign cars, jeeps, and large vans across a bridge over the Yalu River from China to North Korea.

“Criminal proceeds are distributed to members of the North Korean elite (including senior officers of the armed forces); are used to support Kim Jong-Il’s personal lifestyle; and are invested in its military apparatus,” concluded a 2010 study by Professors Paul Rexton Kan and Bruce Bechtol of the U.S. Army War College and retired Defense Department analyst Robert Collins that was reported by the North Korea Leadership Watch publication.

Over the years, various sanctions and law enforcement have put a crimp in the office’s activities. Twenty-five million dollars were frozen in 2005 when the Treasury Department designated Banco Delta Asia, a sprawling financial institution that, according to the Treasury, operated eight branches in Macao, including one in a casino, as a “primary money laundering concern” for its role as what Levey called “a willing pawn for the North Korean government to engage in corrupt financial activities.”

“No doubt the sanctions have had an effect,” says one of the U.S. intelligence officials. “But judging from his girth, Kim still has access to the same kinds of stuff… We don’t know if he’s addicted to Marlboro (cigarettes) like his father was, and if he dies young, whoever takes over is might need to spread the bling around a little more widely.”