How South Korea can curb Pyongyang’s job scams in Laos, weapons programmes

South Korea should use its growing economic clout over Laos to crack down on Pyongyang’s IT workers allegedly using the Southeast Asian nation as a base to secure remote jobs under false identities and funnel earnings to their regime’s weapons programmes, according to analysts.

Authorities in Seoul and Washington have launched investigations into such schemes, with analysts warning that Laos is emerging as a hub for North Korea’s operatives exploiting its weak banking networks and enforcement.

Analysts say South Korea could leverage its trade and infrastructure investments in Laos and growing interest in its rare earths to pressure Vientiane on the issue.

On November 10, the Federal Bureau of Investigation posted a notice seeking to identify “businesses that may be victims of a North Korean IT worker scheme”. US investigators are probing whether remote workers in North Korea have applied for jobs in American-based companies using fake details.

Their salaries “directly funded” Pyongyang’s weapons of mass destruction and ballistic missile programmes, the FBI said on its web page.

In an article published this week by the Korea Economic Institute of America, its non-resident fellow Benjamin Young wrote: “To combat this illicit activity, US and South Korean authorities should target the locales from which these North Korean operatives work abroad. While many North Koreans work from China or Russia, some use Laos as their hub of cyber operations – and Vientiane is far easier to pressure than Beijing or Moscow.”

In March, the US Department of the Treasury imposed sanctions on Yun Song-guk, who leads a North Korean IT worker unit in Boten, Laos. Yun laundered the IT workers’ salaries through bank accounts in Laos before transferring them to Pyongyang, according to the US Treasury.

Seong-hyon Lee, an associate-in-research at the Harvard University Asia Centre, said Laos played a “low profile” role as a conduit for North Korea’s overseas tech workers, where “small North Korean teams rent clean local IP addresses, launder crypto, and slip into Western corporate payrolls to fund Pyongyang’s weapons programmes”.

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North Korea’s Kim attends live-fire drone and rocket demonstration in Wonsan

Anton Ponomarenko, a non-resident Kelly Fellow at Pacific Forum, said it remained to be seen whether Laos would go as far as closing all North Korean businesses in the country tied to cyber operations and money laundering or banning North Korean nationals from obtaining e-visas to Laos.

Of particular concern to South Korea was the North’s partnership with crime networks in Laos, said Ponomarenko, who is also an emerging scholar fellow at the Stimson Centre’s 38 North.

Apart from channelling much-needed funds to Pyongyang through money laundering and cybercrimes, North Korean IT workers could work with Laotian criminals on other illegal operations such as cross-border human trafficking and defector smuggling, Ponomarenko warned.

Young said the North Korean workers appeared to share money laundering networks with local fraudsters and drug traffickers in Southeast Asia.

According to him, while the US and South Korea cannot pressure China or Russia for hosting North Korean workers that could be involved in the schemes, they could pressure Laos to crack down against the North’s illegal cyber activities. He cited the disparity in Laos’ trade with North Korea and South Korea as a bargaining chip.

While annual trade between North Korea and Laos was US$300,000 on average in recent years, trade between South Korea and the Southeast Asian nation was up to US$300 million on average over the same period, Young said.

He also cited South Korea’s interest in rare earth deposits in Laos as leverage that it could use to put pressure on Vientiane.

“Laos sits on a large supply of rare earths, which South Korea needs for its industrial policy and defence sector. Chinese investment in Laotian critical minerals sector is quite high, and Vientiane does not want to become a Chinese dependency,” Young said.

Ponomarenko said Laos would likely agree to take enforcement action over North Korea’s money laundering and online scams given that the economic benefits of its ties with the South outweighed the political costs from such a move against Pyongyang.

“Considering the upgrade of the relationship between Seoul and Vientiane to a comprehensive strategic partnership, Seoul now has more ways in which it can put pressure on Laos regarding the North Korean IT workers,” Ponomarenko said.

With South Korea having already invested billions of dollars in Laos, along with the prospect of further investments, Seoul could wield “a stick and a carrot” by using its economic clout, he added.

“Deeper cooperation on curbing North Korean IT workers in Laos, therefore, may turn into a prerequisite for further investment.”

Lee, who is also a senior fellow at the George H. W. Bush Foundation for US-China Relations, believed that South Korea’s approach in quietly reaching out to Laos to deal with the matter would likely yield results.

“Seoul’s smart play isn’t demanding a flashy public expulsion that would embarrass Vientiane, but quietly nudging Lao authorities to make visa renewals, front-company paperwork and local banking so tedious that North Korean IT managers simply pack up and leave on their own,” he added.