How does impoverished North Korea afford all those nuclear bombs? It makes money just like the mafia: Insurance fraud and selling counterfeit boner pills.

The Washington Post takes a look at North Korea's global insurance scheme, which is interesting, but drops this nugget, which is really interesting:

For years, the U.S. government and law enforcement agencies around the world have documented what they describe as state-sponsored criminality in North Korea. They have linked the North to illegal manufacturing and trafficking of drugs ranging from heroin to Viagra, as well as to expert counterfeiting of $100 bills and the production of high-quality counterfeit cigarettes.

Kim Jong Il personally drafts all those "buy now Viagra 100mg x 90 pills $1.78 per pill" spam e-mails himself, from a bunker inside his palace.

But the insurance fraud is presumably much more profitable: North Korea's state-run insurance company KNIC entered into reinsurance contracts with nominally not-stupid companies like Lloyd's of London and Allianz Global Investors, obligating them to reimburse KNIC for certain claims. Then North Korea would fake-crash a helicopter into a warehouse, walk down the hall and file a claim with KNIC, and then KNIC would send a bill to Lloyd's for $58 million. Incredibly, many of KNIC's reinsurers agreed in their contracts to let any disputes be adjuticated by North Korean courts, and some of the companies "were unaware that North Korea is a secretive totalitarian state with one of the world's worst human rights records."

"All these companies learned a lesson," said an expert on the British insurance industry who is familiar with the helicopter case. "Never agree to have disputes decided in a North Korea court and never reinsure KNIC."

North Korea's claims were filed notoriously quickly, with meticulous documentation.

The scam paid off handsomely: An exiled North Korean dissident who worked for KNIC said managers in the company's Singapore office sent annual birthday gifts to King Jong Il—$20 million in cash stuffed into duffel bags. He would send back "gifts that included oranges, apples, DVD players and blankets" in return, presumably unaware that such niceties weren't as valuable in Singapore as in North Korea.

Allianz and Lloyd's sued KNIC over the scehem, but ended up settling and withdrawing their claims of fraud, owing to the fine lawyering of Tim Akeroyd, KNIC's (and by extension Kim Jong Il's) London attorney:

"There wasn't a shred of credible evidence to support their allegations of fraud," said Tim Akeroyd of the London firm Elborne Mitchell. "Anything you say suggesting that the North Koreans have been guilty of reinsurance fraud would be staggeringly unfair."

Nice work Tim! Blanket's in the mail.