Fraud Linked to Flood Photo

North Korea may have doctored an image in an effort to collect disaster insurance.

Experts say a photo provided by the KCNA to AP on July 16, 2011 was doctored to claim disaster insurance.
Yonhap News Agency

An altered photo distributed by North Korea’s official media may have been part of a government attempt to defraud international insurance companies which provide the reclusive country with coverage in the case of natural disasters, according to an expert.

The photo, which shows seven people wading along a submerged road near the Daedong River in the capital Pyongyang, was provided by the official Korean Central News Agency (KCNA) to the U.S. based news agency Associated Press (AP) on July 16 as part of a recently signed licensing deal.

AP transmitted the photo to its customers but withdrew the photo days later, saying that the image appeared to have been altered through the use of digital technology.

Kim Kwang-jin, Senior Researcher at South Korea’s Institute for National Security Strategy (INSS), said that the North Korean regime has been earning a lot of hard currency through insurance schemes, and that the photo could be seen as part of the same string of fraud.

“North Korea’s state insurance company is tasked with obtaining tens of millions of dollars annually, and every year kickbacks amounting to about U.S. $20 million obtained through fraudulent insurance schemes are sent to National Defense Commission Chairman Kim Jong Il,” he said in an interview.

“The North Korean regime exaggerates the extent of damage caused by natural disasters in order to obtain insurance money from international insurance companies, and the recent photo alteration belongs to the same category of attempted international insurance fraud.”

Reports of flooding

In a July 16 bulletin, the KCNA reported deaths and damage to farmland and homes from heavy rains from July 12-15 that inundated North and South Hwanghae provinces and South Hamgyong province.

“A lot of dwelling houses, public buildings, and roads were destroyed … causing casualties,” the report said.

The KCNA report immediately sparked concerns that the hardline communist state led by Kim Jong Il could face a dire need for aid, in light of already chronic food shortages that were deepened by floods last year.

But soon after the report was released, and the photo, purportedly showing heavy flooding near Pyongyang, was distributed through the AP, doubts began to surface about the severity of the claims.

Those doubts prompted the AP, which plans to become the first major Western news agency to open a bureau in Pyongyang, to send a note to its clients on July 18 asking them to remove the photo from their websites.

In an interview with RFA, Paul Colford, director of media relations at AP in New York, said the news organization had made a mistake in releasing the photo.

“The photo in question made it onto the AP wire because of human error at AP. The content of this image has been digitally altered and does not accurately reflect the scene,” Colford said.

“The AP did not intend for the photo to go on its wire. It did go on the wire by mistake.”

The people in the image appear to have been inserted with photo-altering software due to the absence of splashback from the flooded waters and lack of wet clothing.

The flooding photo is not the first time the North Korean regime has been suspected of altering images it has released to the international community.

Earlier this year, the KCNA released a photo of children sledding on the frozen Daedong River, which experts say was altered to show more children in the background.

In 2008, the news agency released an image of Kim Jong Il with a group of soldiers after rumors surfaced that the leader was suffering from poor health. Experts believe the image of Kim came from an earlier photo and was added to the scene.

Suspected fraud

North Korea has also faced allegations of insurance fraud in the past.

In July 2005, a helicopter belonging to North Korea’s Air Koryo crashed into a warehouse where emergency supplies including food, clothing, and medical equipment were stored, which subsequently burned down.

The North Korean authorities claimed insurance compensation under disaster coverage offered by international insurance companies.

The state-owned Korea National Insurance Corporation (KNIC) settled the insurance claim by the airline, which had compensated the owner of the warehouse, and claimed this back from its foreign reinsurers.

German insurance giant Allianz Global Investors, Lloyd's of London, and several other reinsurers lodged a complaint that the crash was attempted fraud, but they lost their case, as the initial insurance contract with the North Korean regime provided that North Korean law was applicable to any claims.

Eventually, North Korea received 39.2 million euro (U.S. $60 million) as insurance compensation for the helicopter crash.

In 2006, North Korea also filed claims for two train crashes and a ferry sinking. The claims came amidst a freeze on assets at the Macau-based Banco Delta Asia of North Korean companies linked to counterfeiting after the U.S. Treasury accused the bank of money laundering.

Food shortages common

The U.S. and South Korea accuse North Korea of involvement in a wide range of illicit activities, including drug smuggling, to raise funds for a government under wide-ranging sanctions due to its illicit nuclear program.

Christian relief groups who have previously delivered food aid to North Korea say the country faces serious and imminent food shortages.

Critics in South Korea argue that Pyongyang may be overstating its shortages in order to supply the upcoming 100th anniversary celebration of founding father Kim Il Sung’s birthday next year.

Experts say past food donations have been used exclusively to feed North Korea’s military and political elite, or have been distributed to the populace as part of lavish festivals held to celebrate the regime’s continued power.

Reported by Ahreum Jung for RFA’s Korean service. Written in English by Joshua Lipes.


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