A Korean woman pass by the Yalu River border between Hyesan, North Korea, and Changbai, China, where smuggling is a perennial problem. Photo: AFP

A report by Seoul-based news organization Daily NK says North Korea’s border city of Hyesan and the surrounding province have been “thrown into a state of chaos” by a gold-smuggling incident that occurred early this month.

Daily NK relies heavily on reports from North Korea residents who clandestinely report via cellphone. Reporter Lee Chae Un quoted an unnamed source as having said that cadres of the Ministry of State Security sent from Pyongyang to Hyesan conducted an intensive investigation during a 20-day lockdown that was implemented after a border guard who had been busted while attempting to smuggle gold disappeared early this month.

The article says the Ministry of State Security – the secret police – apparently sent a report to North Korean leader Kim Jong Un, “believing the problem to be too big to resolve on its own as it implicated countless people, from cadres of the provincial Military Security Command and Ministry of Social Security [regular police] to the officers and enlisted personnel of the province’s border patrol.”

The events in Yanggang Province so disturbed regime leaders in Pyongyang that Ri Pyong Chol, vice chairman of the Central Military Commission, was hastily dispatched to Hyesan to clean up the mess, Daily NK reported.

Hearing this story, North Koreas’s former longtime London bullion agent, Colin McAskill, told Asia Times it didn’t seem completely to add up.

“I find it difficult to understand how any bullion can be smuggled out unless it is in its unrefined, non-assayed state,” McAskill messaged in response to an Asia Times query.

Colin McAskill (L) is shown with a North Korean contact. Photo courtesy Colin McAskill.

“From my experience this is very tightly controlled. In my day all mining, sorting and initial smelting was controlled by the Korea Daesong Economic Group under the group chairman,” said McAskill, who supervised Pyongyang’s London bullion business for more than a decade from 1983-93.

“After that. the smelted bullion was transferred to the central bank for refining to 999.9 purity and assayed by the central bank as such. The assayed bullion was then returned to Korea Daesong Bank for sale to the London bullion market, where the mark of the central bank was accepted as good delivery.  

“After the demise of my friend the chairman he was replaced by a lesser member of the Kim family more aligned with the military and it must be at this point the reliability of the bullion business disintegrated and no further shipments came to the London market.”

As for Hyesong, McAskill said that from the Daily NK report “it would appear that this local area can only be smuggling unrefined bullion or even only ore-bearing rock to be smelted and refined elsewhere and assayed to a recognized acceptable mark to be sold as such.

“It is highly unlikely that they could smuggle and sell North Korea-marked bullion because it is traceable; it would, at some point, have to be re-marked with an acceptable mark. In my view that would require complicity at a high level of the recipient of the smuggled contraband.”