Southeast Asia’s Cryptocurrency Sector could be targeted by North Korea

north korea cryptocurrencyNorth Korea is well known for being one of the most secretive and reclusive countries in the world. For years, it has been under heavy sanctions from the United Nations, the United States and other countries over its nuclear program. It has also been accused of using cyber warfare in order to gain funds to sustain its nuclear program.

RUSI (the Royal United Services Institute) is the world’s oldest independent think tank on international defence and security. The organization recently stated that North Korea has shown an increasing interest in virtual assets, as sanctions are getting harder to circumvent. RUSI cited North Korean hackers for the alleged hijacking of crypto exchanges in South Korea as well as the “WannaCry” global ransomware attack that infected many computers around the world in 2017.

David Carlisle, a former official at the U.S. Treasury department’s office of terrorism and financial intelligence, along with Kayla Izenman, a financial crime and terrorist finance expert, stated the following in their report, “Closing the Gap: Guidance for Countering North Korean Cryptocurrency Activity in Southeast Asia”:

“North Korea has gone to extremes to raise funds and evade international sanctions, recently expanding these efforts to include the exploitation of cryptocurrencies such as Bitcoin.”

“As a determined and sophisticated cyber actor in need of financial resources, North Korea is likely to continue to find ways of obtaining and exploiting cryptocurrencies.”

The report stated that North Korea posed a “sustained security challenge” to other countries, due to their constant need for funding amid the squeeze of sanctions.

Vulnerability of Southeast Asia’s Cryptocurrency Market

In the report, Carlisle and Izenman stated Southeast Asia’s inability to mitigate infiltration from North Korean agencies, thereby placing the region’s virtual asset sector under “systemic risk”:

“North Korean networks have engaged in fundraising and have evaded trade and financial restrictions through the use of front companies, agents and deceptive financial techniques at banks across the region.”

“Because Southeast Asia is also host to a growing number of cryptocurrency businesses and users, countries in the region could prove vulnerable to North Korea’s cryptocurrency-related activity as well.”

On North Korea’s ability to convert digital currencies into fiat currencies, the report stated:

“North Korea could cash out its cryptocurrency profits by relying on its extensive overseas financial networks to open and operate accounts at cryptocurrency exchanges in the region.”

The Financial Action Task Force, the organization that sets global standards for fighting against money laundering and terrorist financing, is working with multiple Southeast Asian countries to set standards for crypto asset regulation.

Regulations however, can only do so much. Internal risk assessment measures, plus increased training for law enforcement would also be required, as the report stated:

“If carried out with the appropriate urgency and in line with global … standards, countries in the region can succeed in making themselves less vulnerable to the risks of North Korean cryptocurrency activity.”

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