The Department of Foreign Asset Control (OFAC) coordinated with South Korea to sanction three individuals that the agency said provided material support to the North Korea-based Lazarus hacking group to convert stolen cryptocurrency to fiat currency.
OFAC said in its report the Lazarus Group is connected to illicit financing and cyber activity supporting the North Korean regime’s development of weapons of mass destruction (WMD) and ballistic missile programs.
Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson said North Korea’s illicit activities to “generate revenue using virtual currency for the regime’s unlawful weapons of mass destruction(WMD) and ballistic missile programs directly threatens international security.”
He also noted that North Korea has launched three intercontinental ballistic missiles already this year.
The stolen cryptocurrencies are converted to fiat through networks of North Korean and Chinese over-the-counter traders (OTC) that North Korea often uses, “to conduct transactions on their behalf to avoid detection by financial institutions or competent authorities,” said OFAC.
Wu Huihui was sanctioned by OFAC in connection with providing material assistance to the Lazarus Group and Cheng Hung Man was also added to the sanctions list for aiding Wu.
Sim Hyon Sop, who OFAC said acted on behalf of Korea Kwangson Banking Corp., an entity previously connected with providing financial services to entities proliferating WMD, was also sanctioned.
OFAC alleges Sim received cryptocurrency from North Korean nationals fraudulently performing IT work abroad. In turn, Sim is said to have directed OTC traders, such as Wu and Cheng, to send funds to front companies that used them for goods including tobacco and communication devices, said OFAC.
North Korean actors stole nearly $1.7 billion in virtual currency through hacking in 2022, said OFAC, citing public records. That means North Korea accounted for nearly half the $3.8 billion stolen last year, according to Chainalysis.
Now that Sim, Wu, and Cheng have been sanctioned, all of the trio’s property and interests therein, are blocked by OFAC. And any person or financial institution that engages in certain transactions or knowingly provides “significant financial services” to them could also find themselves on OFAC’s sanctions list.