BERLIN — The City Hostel Berlin operates out of a large, anonymous building in what was Communist East Berlin, but it’s a short walk from Checkpoint Charlie and other attractions and has become a popular place to stay, with good ratings on TripAdvisor and Yelp.

The only tip-off that this hostel differs from others in a city long a magnet for the world’s youth is the dreary embassy next door, where North Korea’s flag flaps from a pole near a poorly tended garden and that country’s ruling family, the Kims, is enshrined in a photo display on a gray metal fence.

The hostel, a former diplomatic quarters, has been earning the Kim government tens of thousands of euros a month over the past decade, but it will soon be closed to comply with the latest UN sanctions imposed over North Korea’s nuclear tests.

The German government confirmed Wednesday (May 10) that it was acting “as swiftly as possible” to cut off the currency flow after German news outlets reported that North Korea was charging an unnamed German businessman 38,000 euros a month (about S$58,300) to operate the hostel.

Some years after the fall of the Iron Curtain, North Korea, in a classic capitalist manoeuvre, leased the building, which had been the home of dozens of its diplomats. Its prime location in the centre of Berlin made it popular with backpackers and students on field trips.

Mr Martin Schaefer, a spokesman for Germany’s Foreign Ministry, said the hostel would be closed in compliance with stiffer sanctions passed in November by the United Nations that specifically ban any commercial dealings with North Korean embassies or on their property. The German authorities are acting as fast as they can within German law, Mr Schaefer added.

Mr Philipp Lengsfeld, a Berlin deputy for the center-right Christian Democrats in Parliament, said the North Korean connection “was an open secret - every cabdriver knew that.”

The unusual rental arrangement began in the 2000s, according to various German news outlets. Mr Lengsfeld, who visited North and South Korea with a German parliamentary delegation in 2015, declined in a brief telephone interview to say whether the government of Chancellor Angela Merkel should have acted sooner to end it.

North Korea has relatively few embassies in Europe, and many of them are holdovers from Communist times. Its Berlin mission stands on Glinkastrasse, once a central thoroughfare in the government district of East Berlin. A middle-aged woman emerged after a reporter rang the bell during office hours. In halting English, she said that diplomats in authority were not around.

In the hostel, the young German employees were also reticent, referring reporters to the hostel’s website, which promises “cheap accommodation in the city centre,” and even covering their name badges.

The rooms range from singles and doubles to bunks for four or eight guests in a room, according to the hostel’s website. Prices are listed as low as 17 euros a bed (about US$18.50), rising to 59 euros (about US$64) for a single room. A man answering the telephone at the hostel said it was booked Wednesday and most coming days.

Guests came and went at lunchtime Wednesday. Three teenagers on a school trip from Pforzheim in southwestern Germany were smoking in the courtyard, unaware of the North Korean connection. They, like other guests, did not seem perturbed when told about it.

The lively reception area boasts a terrace with a beer garden, an electronic baby grand piano and vivid signs, all of which enlivens the distinctive uniformity of East German architecture.

But a mural on the back wall might upset the landlords back in Pyongyang, where rigid Marxism still reigns. In cartoon style, it depicts a slice of Berlin’s Cold War history. Jagged fragments of a structure litter the picture while a quiet sign off to the left announces: “Construction of the Wall, 1961. Wall falls, 1989.” NEW YORK TIMES