N. Korea revives secret slush fund

SEOUL, Feb. 14 (UPI) -- South Korea says North Korea has revived a special party bureau to oversee and raise slush funds for leader Kim Jong-il and the North's ruling elites.

The Unification Ministry in Seoul says the bureau, codenamed Office 38, was merged in 2009 with Office 39, another North Korean organ that controls a wide network of business operations both legal and illegal, South Korean news agency Yonhap reported Monday.

However, Office 38 has been spun off and is now operating on its own again, a ministry official said as part of the South's annual assessment of the power structure in the communist North.

Office 38 mainly oversees transactions involving foreign currency, hotels and trade, the official said, while Office 39 allegedly derives revenue by dealing in narcotics, arms and natural resources.

A source said the separation suggests North Korea has been having trouble obtaining foreign currency since merging the two offices.

"Efficiency was probably compromised after the two, which have different functions, were combined," the source, who asked to remain anonymous given the speculative nature of the topic, said. "More importantly, it seems related to the current state of foreign currency stocks. The North is apparently trying to address those difficulties."

The United States blacklisted Office 39 in August 2010 as one of several North Korean entities placed under sanctions for involvement in illegal actions such as currency counterfeiting.

Both offices have been characterized as Kim Jong-il's "personal safes" for their actions in fueling and managing secret funds and obtaining luxury goods for the aging leader, Yonhap said.