Portrait of Sim Hyun-seop, wanted by the FBI. Captured from the FBI website.

Dozens of "shadow bankers" are involved in cashing out cryptocurrency stolen by the North Korean regime under Kim Jong Un, a primary channel for the regime to finance itself and evade U.S. sanctions.

A prime example is Sim Hyun-seop, 42. Using the aliases "Sim Ali" or "Sim Hajim," he operated mainly in Arab countries and is believed to be currently in China. The U.S. Federal Bureau of Investigation (FBI) has raised the bounty on him to $7 million (approximately 10.4 billion won).

Based on indictment documents from the U.S. Department of Justice, The Wall Street Journal reported on the 25th (local time) that Sim Hyun-seop's main mission was to launder illicit funds for the Kim Jong Un family abroad.

North Korea earns foreign currency through thousands of disguised North Korean workers and hackers. They generate hundreds of millions of dollars annually from regions like Russia, China, and Africa.

The challenge is to cash out these illicit funds without revealing ties to North Korea and while evading U.S. financial regulations. This is where bankers like Sim Hyun-seop come into play.

Sim Hyun-seop was dispatched abroad as a representative of a subsidiary of North Korea's Foreign Trade Bank and operated in Kuwait and the United Arab Emirates (UAE). Ryu Hyun-woo, a former North Korean ambassador to Kuwait who defected, stated that he met Sim Hyun-seop multiple times there.

Sim Hyun-seop reportedly explained his money laundering methods to former Ambassador Ryu, describing a process where cryptocurrency is converted to cash through brokers, then transferred to shell company accounts for withdrawal.

North Korean IT personnel with disguised identities. Yonhap News

When North Korea's "IT workers" steal cryptocurrency through hacking, they send it to Sim Hyun-seop. The funds pass through multiple digital wallets to make tracking difficult.

Sim Hyun-seop hands over the cryptocurrency to brokers he has pre-arranged in countries like the UAE or China, converting it into U.S. dollars. The brokers then deposit this money into Sim Hyun-seop's shell company accounts.

Instead of remitting the money to North Korea, Sim Hyun-seop directly purchases goods for the Kim Jong Un regime. In 2019, $300,000 laundered by Sim Hyun-seop was used to purchase a helicopter in Khabarovsk, Russia, and deliver it to North Korea. This money passed through a law firm in Zimbabwe.

Western leading banks were deceived by his operations, which were disguised as legitimate financial transactions. According to indictments and related court documents, in a single operation, Sim Hyun-seop conducted 310 financial transactions totaling $74 million (approximately 109.6 billion won) through U.S. banks such as Citi, JP Morgan, and Wells Fargo.

According to data from Chainalysis, a firm that tracks cryptocurrency theft, North Korean bankers like Sim Hyun-seop have laundered over $6 billion (approximately 8.9 trillion won) in stolen cryptocurrency for North Korea over several years.

Former Ambassador Ryu recalled Sim Hyun-seop as a "go-getter" and "the most useful individual for all money laundering-related matters in the Arab world."

Sim Hyun-seop also played a role in the manufacturing and smuggling of "counterfeit cigarettes," another means of foreign currency earning for North Korea. North Korea counterfeits popular brands like Marlboro and sells them in countries such as Vietnam and the Philippines, and Sim Hyun-seop supplied the tobacco leaves needed for this.

In this process, Sim Hyun-seop used shell companies he established in China or the UAE to purchase tobacco leaves and ship them to North Korea by sea. Payments for these purchases were also settled in dollars through banks such as Citi, JP Morgan, Wells Fargo, Deutsche Bank, HSBC, and Bank of New York Mellon.

Sim Hyun-seop was designated as a sanctions target by the United Nations (in 2016) and the United States (in 2023). He was expelled from the UAE in 2022 and is understood to have moved to Dandong, China. However, WSJ reports that apprehending him is currently nearly impossible.

The Chinese Ministry of Foreign Affairs informed WSJ that they are unaware of Sim Hyun-seop's activities and oppose the unilateral sanctions imposed by the U.S. Treasury Department against him.