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North Korean Escapee Remittances: Why they matter and How we should respond |
| March 27, 2025 |
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Peter WardResearch Fellow, The Sejong Institute | pward89@sejong.org
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In past week, there has been considerable interest within the legal community and among North Korean escapee organizations regarding a judgement handed down by the Uijongbu District Court in February about a North Korean escapee defendant who was prosecuted for sending funds back to their family in North Korea and assisting other North Korean escapees in doing the same. This judgement raises fundamental questions about North Korean human rights in both North Korea itself and South Korea.
There are approximately 30,000 North Korean refugees living in South Korea, a vulnerable population that often struggles to adapt to life in the South. Despite these challenges, many remain deeply family-oriented and seek to support their relatives back home by sending money. However, since there are no legal channels for such remittances, informal brokerage networks operating through China have become essential.
Traditionally, the South Korean government has taken a lenient stance, refraining from prosecuting North Korean refugees who engage in these transactions—provided they are not aiding the North Korean regime. The distinction between the North Korean state (legally classified in South Korea as an "anti-state organization") and the North Korean people is a well-established principle in South Korean policy. This remains true under the current administration, which has shown a particular focus on North Korea’s human rights abuses.
However, recent crackdowns on remittances by North Korean refugees raise serious human rights concerns—both for the refugees themselves and for their families in North Korea. For the refugees, the risk of legal consequences, including a criminal record, legal fees, and social stigma, can be daunting. Yet, many still choose to take these risks, as their families depend on these funds for survival. In some cases, recipients inside North Korea manage to use the money to start businesses, improving their financial independence despite state repression.
Meanwhile, within North Korea, growing crackdowns on brokers and foreign exchange traders—intensified by the regime’s border closures during the COVID-19 pandemic—have made it even harder for families to receive outside financial support. Remittances are not just a lifeline for individuals; they also help weaken the regime’s economic grip by enabling private enterprise and reducing dependence on state-controlled distribution systems.
This underscores the need to strike a careful balance: preventing the North Korean regime from securing illicit funds, ensuring the proper regulation of foreign currency transactions, and allowing North Korean refugees to support their families. Legal reforms should create exemptions for refugees sending money for humanitarian reasons while redirecting law enforcement resources toward genuine threats—such as espionage and illicit financing by the North Korean regime, which remain serious concerns -
(1) How the networks work
North Korea has no private commercial banks, legal bank-mediated consumer finance, or commercial lending for individuals. Those who need credit for significant purchases—such as a refrigerator or expensive medication—must rely on informal financing, usually from individual money lenders. Aspiring entrepreneurs or market participants in need of seed capital must also turn to these informal channels or find alternative means. However, private money lending is illegal, and since contracts cannot be legally enforced, lenders face considerable risks. As a result, interest rates are high to compensate for the potential losses.
Until recently, remittances provided an alternative. In most countries, money transfer operators (MTOs) like Western Union and MoneyGram, bank transfers via the SWIFT network, or informal systems like Hawala enable cross-border financial transactions. In North Korea, however, financial transfers rely on an underground brokerage network spanning three countries.
The workings of these networks are relatively well-documented by scholars such as Joung Eunlee and Choi Hee. The process typically begins with a North Korean escapee living in South Korea. They seek out a transfer agent who arranges contact with the escapee’s family inside North Korea. The South Korean transfer agent then connects with their counterpart in North Korea, ensuring that the family is aware of the amount they will receive.
The escapee provides the funds either to the transfer agent in South Korea or directly to a China-based intermediary who works with the North Korean transfer agent. The money is then smuggled into North Korea, often by traders involved in cross-border commerce, customs officials on the North Korean side, or other illicit couriers who physically transport cash.
Once inside North Korea, the cash is handed to the local transfer agent or a lender near the border. The agent then ensures delivery to the intended recipient—the escapee’s family. To confirm the successful transaction, the agent facilitates a phone call between the family and the escapee in South Korea.
As a result, these transactions often involve long chains of intermediaries, including: (1) the South Korea-based transfer agent, (2) a China-based recipient of the funds, (3) a courier who can cross the Sino-North Korean border, (4) a representative of the North Korea-based transfer agent near the border, and (5) the North Korea-based transfer agent who ensures final delivery.
These complex intermediary chains exist because the North Korea-China border is tightly controlled, and regular cross-border financial transactions are impossible due to sanctions and the lack of appropriate financial institutions. The reliance on multiple agents significantly raises transaction costs, with each intermediary facing considerable legal risks—risks that have worsened over time, particularly inside North Korea.
Beyond the dangers faced by North Korean refugees and South Korea-based transfer agents, couriers crossing the North Korean border and those facilitating transactions inside the country now face an increasingly aggressive crackdown. According to Daily NK, an outlet with sources inside North Korea, the regime increasingly views brokerage networks as aiding escapes from the country. The Ministry of State Security has been ordered to arrest brokers and confiscate their funds whenever possible. Even recipients of remittances are subjected to public criticism and scrutiny.
Making international calls to North Korea has also become far more difficult. Legal methods are virtually nonexistent, and brokers rely on Chinese mobile phones. However, the North Korean government has imposed increasingly draconian measures to track and punish those using such devices. According to Asia Press, another media outlet with sources inside the country, the secondary market for Chinese mobile phones is slowly collapsing as a result of these efforts.
Another major disruption, beginning with the COVID-19 pandemic, has been the partial collapse of cross-border informal trade (smuggling) between North Korea and China, alongside severe restrictions on inter-provincial trade within North Korea. The border itself is far more tightly guarded and fortified than it was before 2020 with more fencing, CCTV and more effective management of border guards.
Reports indicate that small-scale smuggling networks—previously crucial for facilitating informal money transfers—were severely disrupted by pandemic-era border controls. The partial dismantling of these networks has further undermined the functioning of remittance brokerage systems.
Compounding the problem, stricter internal travel restrictions within North Korea have made it increasingly difficult to move funds from border areas to inland regions, adding another layer of complication to remittance deliveries.
(2) Helping families and supporting North Korean society against state power
For many North Koreans, remittances are a vital lifeline. North Korea is not unique in this regard—around the world, diasporas play a crucial role in supporting the livelihoods of families back home. In fact, remittances constitute a significant share of GDP in many countries. According to World Bank data from 2023, remittances accounted for nearly 5% of GDP on average in lower-middle-income countries. In some cases, the reliance is even greater. The chart below shows the top 20 countries where remittances make up the largest share of GDP in 2023.
No official data exists on remittance flows to North Korea, and given the relatively small size of the North Korean diaspora, total volumes are likely below the average for lower-middle-income countries. However, survey data from the South Korea-based Database Center for North Korean Human Rights (NKDB) indicates that between 85% and 93% of North Korean refugees send remittances to family members inside the country. This suggests the existence of a sustained, informal financial channel into North Korea, beyond the state’s direct control.
The need for such external support is well documented. Drawing on in-country surveys and satellite imagery, the World Food Programme (WFP) and Food and Agriculture Organization (FAO) estimated that approximately 45.5% of the North Korean population was undernourished during the 2020–2022 period. These figures continue to be cited by the UN Special Rapporteur on the Situation of Human Rights in the DPRK and are widely considered credible.
Moreover, many North Korean escapees originate from provinces with disproportionately high levels of poverty and food insecurity—such as Ryanggang, Jagang, and North and South Hamgyong. Most came from socioeconomically disadvantaged backgrounds prior to their defection and have likely left behind family members facing similar or worsening hardship. These relatives are typically excluded from elite networks and are unlikely to have access to well-compensated positions in the party, military, or state-owned enterprises, making remittances one of the few available means of support.
What is more, many of the relatives of North Korean escapees may not be of working age. Refugees often leave behind elderly parents or grandparents with limited income and little capacity to engage in sufficient labor to maintain an adequate standard of living or secure access to basic necessities such as food. In many cases, they may require remittances to afford essential medicines or urgent medical treatment.
While there is a strong humanitarian case for allowing North Korean refugees to send funds to their families, there is also a broader political argument: that such remittances ultimately serve South Korea’s long-term policy and security interests. Over the past three decades, markets have become powerful drivers of social change in North Korea. Remittances play a key role in this transformation by providing private resources that weaken the regime’s economic monopoly and strengthen household resilience.
Comparative political science research supports this view. A growing body of literature—including the work of Abel Escribà-Folch, Covadonga Meseguer, and Joseph Wright—demonstrates that remittances can increase the likelihood of protest and even democratic transition in authoritarian regimes. This is especially true in party-based systems like North Korea. The mechanism is clear: remittances offer citizens access to resources outside the control of the state, enabling greater independence, including for those who are more likely to resist or challenge state authority.
This literature offers insights into the long-term potential of remittances to support positive societal change in North Korea. In the short term, we already have evidence—based on interviews and surveys with North Korean escapees—that remittances are used to finance escapes, support families in becoming financially independent, and enable the launch and maintenance of small businesses.
A closer look at the remittance chain illustrates the diffuse benefits of these transactions. Once funds reach China, a smuggler, trader, or customs official typically brings them into North Korea. These individuals often earn commissions, which may help them achieve or sustain their own financial autonomy. The same is true for North Korea-based brokers and intermediaries involved in money exchange and lending—each actor in the chain earns income that supports livelihoods outside the state economy.
Most importantly, the relatives of escapees who receive remittances can purchase food, medicine, and other essentials, but also invest in small-scale productive assets—such as sewing machines, food processing equipment, or farming tools—that support household businesses. These ventures allow families to generate income independent of the state, expanding the informal economy and enabling new forms of autonomy.
Although such activities are unlikely to catalyze immediate political change, they contribute to a gradual shift in social dynamics. As more North Koreans gain financial independence, they can form friendship- and trust-based networks outside of state institutions. These grassroots ties among market actors and household producers may, over time, form the foundation of a nascent civil society. Remittances are only one element of this broader transformation, but they represent a potentially important contributor to long-term change within North Korea.-
Until recently, North Korean escapees who sought to send remittances to their families—whether for survival or to finance additional escapes—were largely left alone by the South Korean government. Investigations and prosecutions were rare and typically only pursued in cases involving clear evidence of espionage. However, despite this historical leniency, several legal provisions exist that restrict such transactions and could have been enforced more strictly in the past.
One of the key legal barriers facing North Koreans attempting to remit funds is the Foreign Exchange Transactions Act (FETA), particularly Article 8, which sets out specific licensing requirements for businesses engaged in foreign exchange transactions. These requirements include adequate facilities, minimum capital thresholds, and staff with specialized knowledge. Additionally, such businesses must be formally registered with the Minister of Economy and Finance (MOEF).
Brokerage networks assisting North Korean escapees do not necessarily operate as for-profit businesses, nor do they usually have formal legal standing. In many cases, they function as informal sole proprietorships or partnerships—run by individuals in South Korea with connections in China and North Korea—who facilitate money transfers without legal authorization. This issue was central in a recent ruling by the Uijeongbu District Court, where the defendants were found guilty primarily for operating without proper registration, rather than for seeking illicit profit. Their lack of compliance with legal formalities was the main reason for their prosecution, despite their humanitarian intent.
Although North Korea is not legally considered a foreign country under South Korean law, transactions involving foreign currency remain subject to FETA restrictions. This was a key legal point in the Uijeongbu ruling, which found that while domestic transactions inside North Korea may not necessarily fall under FETA, any financial activity involving foreign currency—which is unavoidable due to the necessity of passing through China—remains prohibited under South Korean law.
In addition to FETA, the Inter-Korean Exchange and Cooperation Act (IKECA) imposes further restrictions. Article 13 stipulates that all financial transactions, as well as other economic exchanges, require prior approval from the Minister of Unification. While the law allows for pre-approval of multiple transactions, the fundamental principle remains that any economic activity between South and North Korean residents must receive prior government authorization. This provision extends explicitly to remittance transactions.
However, while the law itself is clear, the rationale behind the recent surge in enforcement is not immediately apparent. According to reporting and investigations by the Database Center for North Korean Human Rights (NKDB), until 2020, cases involving illicit financial transfers—when suspected of being linked to espionage—fell under the investigative authority of the National Intelligence Service (NIS). Following revisions to the National Intelligence Service Act in December 2020, however, counterespionage investigative authority was transferred to the police. Subsequently, police reportedly received anonymous tip-offs alleging that some North Korean escapees were collaborating with the North Korean Ministry of State Security (MSS).
Given North Korea’s status as South Korea’s principal adversary—and the Ministry of State Security’s (MSS) documented role in both domestic human rights abuses and overseas espionage—it was understandable that the police proceeded with investigations following the tip-offs. However, during the course of these investigations, no concrete evidence emerged linking the suspected brokers to the MSS. Despite the absence of substantiating evidence of espionage, the police did not close the cases. Instead, they proceeded to charge the individuals involved with violations of the Foreign Exchange Transactions Act (FETA)—a far less serious offense compared to collaboration with a hostile anti-state organization (i.e., North Korea).
It is also worth noting that similar restrictions on remittances do not exist in many other jurisdictions. Under United Nations Security Council (UNSC) sanctions and regulations enforced by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), the sending of non-commercial, personal remittances to North Korea remains legal, provided such transfers do not involve sanctioned entities. OFAC regulations cap such remittances at $5,000 per year per individual, but this still permits the kind of informal brokerage activity that is currently criminalized under South Korean law.
Importantly, South Korean law enforcement agencies retain discretion over whether to pursue these cases. The fact that police continued their investigations and referred cases for prosecution—despite the lack of evidence of espionage—suggests a possible absence of clear policy guidance. Previously, such guidance may have contributed to the more lenient stance typically shown toward North Korean escapees involved in remittance transfers. -
Remittances represent a crucial channel for influencing authoritarian regimes in general and North Korea in particular. They rely on sophisticated transnational networks to facilitate the flow of resources not only to individuals in need but also to sustain private commercial activity within North Korea.
Private commerce serves as an essential foundation for civil society. The networks of trust and mutual dependence fostered directly through remittances, as well as through the businesses they support, create “third spaces”—informal settings outside both the home and state institutions where North Koreans can engage with one another, discuss shared concerns, and build non-state affiliations. Over time, such ties could prove instrumental in fostering constructive social and political change within North Korea. The importance of these informal economic and social networks is underscored by the North Korean regime’s own intensifying efforts to dismantle them—through stricter border controls, crackdowns on Chinese mobile phone usage, and increased restrictions on inter-regional travel.
Given the positive direct and indirect spillover effects of inter-Korean financial flows, there is a pressing need to reassess South Korean policy toward remittances sent by North Korean refugees.
First, South Korean law enforcement agencies should recalibrate their enforcement priorities regarding remittance-related cases. While all credible allegations of espionage should continue to be thoroughly investigated, the criminal prosecution of North Korean escapees solely for engaging in informal financial transfers is counterproductive. Such actions have a chilling effect on an already vulnerable and stigmatized community, discouraging them from maintaining legitimate ties with family members in North Korea. Rather than treating remittances as a security risk, law enforcement should prioritize investigating actual cases of illicit financing linked to the North Korean regime.
Second, the Foreign Exchange Transactions Act (FETA) and the Inter-Korean Exchange and Cooperation Act (IKECA) should be revised to account for humanitarian cross-border remittances. As currently enforced, these laws place disproportionate restrictions on North Korean refugees, infringing upon their right to private and family life, as well as the rights of their relatives inside North Korea. While these laws were not originally designed with such an outcome in mind, targeted exemptions for humanitarian remittances should be introduced—either through legislative amendments or adjustments to their implementation ordinances.
Finally, beyond legal and enforcement reforms, South Korea should consider practical measures to facilitate remittance transfers in a more secure and efficient manner. Establishing a formal South Korea-based money transfer operator dedicated to handling these transactions would be the most effective solution, though political constraints may render this infeasible in the short term. Nonetheless, the South Korean government could take intermediary steps, such as providing financial literacy programs for North Korean refugees to help them navigate remittance processes more effectively. Training programs led by experienced North Korean refugees familiar with brokerage networks could help ensure that funds reach their intended recipients safely and efficiently.
By adopting a more balanced approach to remittances, South Korea can align its enforcement and regulatory policies with both humanitarian principles and long-term strategic interests.
| North Korean remittance networks
| The South Korean law and law enforcement concerns
| Conclusions and Policy Recommendations
※ The opinions expressed in Sejong Focus are those of the author and do not represent the official views of the Sejong Institute.
