Room 39 is a secretive North Korean party organization that seeks ways to maintain the foreign currencyslush fund for the country's leaders. The organization is estimated to bring in between $500 million and $1 billion per year or more and may be involved in illegal activities, such as counterfeiting $100 bills, producing controlled substances, and international insurance fraud. Although the seclusion of the North Korean state makes it difficult to evaluate this kind of information, many claim that Room 39 is critical to the Kim family's continued power, enabling them to buy political support and help fund North Korea's nuclear weapons program. Room 39 is the largest of three influential so-called Third Floor offices along with Office 35 tasked with intelligence and Office 38 which handles legal financial activities. Room 39 is believed to be located inside a ruling Workers' Party building in Pyongyang, not far from one of the North Korean leader's residences. All three Offices were initially housed on the third floor of the building where Kim Jong-il's office used to be, hence the moniker "Third Floor".
History
Room 39 was established by Kim Il-sung in the late 1970s. It has been described as the linchpin of the North's so-called "court economy" centered on the dynastic Kim family. According to Kim Kwang-jin, in 1972, Kim Jong-il created the central party department called "Office No. 39", which was named after the arbitrary office number where it began operations. Initially the Office was under the Finance and Accounting Department of the Central Committee of the Workers' Party of Korea. In early 2010, South Korea's Yonhap news agency reported that Kim Dong-un, head of the department, was replaced by his deputy, Jon Il-chun. The Chosun Ilbo reported that Room 38, led by Kim Jong-il, was merged into Room 39 in late 2009, but the two were split again in 2010 due to difficulties in obtaining foreign currency. Room 38 handles funds of the Kim family in legal businesses and acts as a front organization for Room 39. In July 2017, Chon Il-chun, first vice department director of the party's Central Committee and a former classmate of Kim Jong-il was leader of the office.
Purpose and activities
Room 39 is also involved in the management of foreign currency earnings from foreigners' hotels in Pyongyang, gold and zinc mining, and agricultural and fisheries exports. They are believed to run networks of illegal and legal companies that often change names. The number of companies -- at one point, reportedly up to 120 in number -- believed to be controlled by Room 39 include Zokwang Trading and Taesong Bank. Many of the $500 million worth of textiles North Korea exports each year have phony "made in China" labels attached to them and the wages of the estimated 50,000 North Korean workers sent abroad to work are reported to have added $500 million to $2 billion a year to Room 39's income. A 2007 report published by the Millennium Project of the World Federation of United Nations Associations said North Korea makes an estimated $500 million to $1 billion annually from illegal enterprises. Criminal operations reported to be run by Room 39 include trafficking fake US dollars, peddling bogus Viagra, exporting the recreational drugN-methylamphetamine and obtaining Russian oil using dealers in Singapore. At some point, transactions and trade by Office 39 reached 25 to 50% of the total of North Korea. In 2009, a Washington Post report outlined a global insurance fraud scheme by the North Korean government. The state-owned Korea National Insurance Corp sought reinsurance contracts with international reinsurers and then submitted fraudulent claims; the contracts were governed by North Korean law and legal challenges were fruitless. Document forgeries are also reported. Room 39 is also believed to be operating the overseas North Korean restaurant chain called Pyongyang. In 2015, the European Union placed the KNIC under sanctions and added that the KNIC had links to Office 39. The KNIC was reported to have had assets of UK £787 million in 2014 and had been involved in scamming insurance markets and making investments in property and foreign exchange. Thae Yong-ho, a North Korean diplomat who defected in 2016, said that North Korea earned each year "tens of millions of dollars" with insurance fraud. Ri Jong-ho was a senior official in the Room 39 organisation for about 30 years. He defected to South Korea in 2014 and to the United States in 2016. Ri was chairman of the Korea Kumgang Group that formed a joint venture with a Chinese businessman to run a taxi company in Pyongyang, the president of a North Korean shipping company and head of a Chinese branch of Daeheung, a North Korean trading company involved in seafood, coal, shipping and oil. In a 2017 newspaper article Ri described how he evaded sanctions by transferring cash from China to North Korea by ship and by train.
