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N. Korea charged in counterfeiting of U.S. currency

- The Washington Times - Thursday, December 1, 2005

North Korea's government has produced more than $45 million in high-quality fake $100 bills since 1989 and is the world's only state-sponsored producer of the so-called "supernote," according to U.S. law-enforcement officials.

The recent arrest of Sean Garland, head of the communist Workers Party of Ireland, provided the first confirmation of the Pyongyang government's links to the supernote or superdollar, which was discovered as part of a 16-year-old probe by the U.S. Secret Service, which is in charge of investigating illegal money production.

Vic Erevia, assistant special agent in charge of the criminal investigative division at the Secret Service, said the probe resulted in 160 arrests linked to counterfeiting and related activities worldwide.

Meanwhile, the State Department yesterday defended Treasury Department sanctions imposed in September on the Banco Delta Asia in Macao for its role in North Korean counterfeiting and money laundering.

"We said from the very beginning that we are not going to fail ... to act concerning issues that are of concern to us, whether that happens to be on the human rights front, or whether that happens to be on taking steps to prevent disbursement of counterfeit U.S. bills on the world market," said spokesman Sean McCormack.

The Treasury Department said senior officials at Banco Delta Asia handled large cash deposits, including counterfeit U.S. currency, supplied by North Korean officials and agreed to put the fake currency into circulation.

The department blocked the bank from doing business with U.S. financial institutions. Pyongyang suggested it might back out of the six-party nuclear talks in protest.

19 variations of note

"This is one of the most significant cases we've had, especially with this particular, highly deceptive counterfeit note," Mr. Erevia said of the North Korean supernote. "The investigation remains active and ongoing."

North Korea has produced 19 variations of the supernote since it first appeared in Manila in 1989, law-enforcement officials said. Each variation was an improvement and looked and felt almost identical to genuine $100 bills. A close look shows the printing on a supernote is slightly lighter than that on a genuine note.

The bills were printed on North Korea's intaglio-process offset printing presses bought in the 1970s. The machines are used by governments worldwide to print currency and by private firms that do so.

The North Korean supernotes are considered the highest-quality forgeries and are better than the more numerous fake notes produced in Colombia. The officials said reports that Iran has produced supernotes are not true.

Pyongyang's solo role

"In this case, we don't have any indication that it was anyone other than North Korea that was producing the [supernote] from the very beginning," said an official, who with colleagues revealed details of the case on the condition of anonymity.

A cashier found the first North Korean supernote in Manila in 1989. A short time later, a North Korean diplomat was caught passing forged notes in Belgrade.

In 1994, several North Korean trading company officials were arrested after depositing $250,000 in supernotes in a Macao bank. All were carrying diplomatic passports.

Pyongyang's role in counterfeiting appears to be part of an array of illegal activities that include drug trafficking and arms sales.

"There's this whole portfolio of illicit activities which they engage in to support the regime, and this is just another one of those items in that portfolio," the official said.

One Asian diplomat said intelligence reports from North Korean defectors indicated that Pyongyang and its intelligence services have used supernotes to support personal activities and foreign purchases of leader Kim Jong-il.

Irish connection

The North Korean government's involvement in producing the note was uncovered by U.S. investigators in 1996 and confirmed in the sealed May indictment of Mr. Garland that was made public in October.

Mr. Garland was arrested in Belfast on Oct. 7 and charged with being part of a seven-member ring that trafficked in the counterfeit North Korean notes. He left Northern Ireland last month for the Republic of Ireland and is being sought by the State Department for extradition.

Informants and electronic wiretaps helped unravel the case, which included meetings in Russia and Beijing between Mr. Garland and North Korean diplomats.

"We were able to get ahead of him and actually surveil him [in Moscow]," the official said. "He is picked up by North Korean diplomats, by a North Korean limousine, and taken to the North Korean Embassy."

The official said the North Korean government's role hampered the investigation, complicating efforts to shut down the network and arrest participants. Several North Korean diplomats have been identified by U.S. officials as having a role in the network.

In March, Interpol issued a notice warning currency manufacturers and equipment providers that North Korea's government is engaged in supernote production and distribution.

$45 million seized

"We wanted to alert the industry that ... this is something they should be aware of — that a state is producing counterfeit currency and their products could be misused to further the illegal activity," a second official said.

The official said the U.S. government has seized about $45 million in North Korean supernotes over 16 years. The amount is relatively small compared with about $355 million in lower-quality Colombian counterfeit bills.

The North Korean supernotes have been found by investigators in Ethiopia, Peru, Macao and Germany.

The officials said Mr. Garland used his party connections and a Dublin business known as GKG Communications International Ltd. to arrange the supernote deals.

China link not proven

Asked about Chinese involvement with Mr. Garland and the North Koreans, one official said reports about a Chinese connection could not be confirmed.

A top-secret U.S. intelligence report obtained by The Washington Times in 1997, however, linked Mr. Garland and China to the supernotes. The report said Mr. Garland was involved in supernote trafficking and had met in 1997 with Cao Xiaobing, a Chinese Communist Party International Liaison Department (ILD) official, to discuss "unidentified business opportunities." The ILD is a party organ linked to implementing China's policy toward North Korea.

In addition to Mr. Garland's network of counterfeiters, a Chinese organized-crime group uncovered in the summer in California and New Jersey also was involved in selling North Korean supernotes, the officials said.

Problem for U.S.

Counterfeiting remains a problem for the U.S. government because even though only some of the $730 billion in U.S. currency in circulation worldwide is counterfeit, the use of fake notes undermines the integrity of all U.S. money, officials said.

"If people who use U.S. currency don't believe they can tell the difference between the counterfeit and genuine, all the currency becomes suspect," the first official said. "That's why it's very troubling."

The official said it is likely the North Koreans are using the supernotes in international drug trafficking. North Korean diplomats and intelligence personnel have been engaged in trafficking of heroin and methamphetamine to Russia, China, Japan and other nations.

The illicit activities are thought to generate hard currency for Mr. Kim's regime, accused by North Korean government defectors of directing the counterfeiting and drug trafficking.

Law-enforcement officials said it is difficult to verify the defectors' information.

However, after years of intelligence and defector reports, "you have this catalogue of information that starts to build up and you start to see a pattern develop," one official said.

According to the U.S. indictment, "Quantities of the supernote were manufactured in, and under auspices of the government of, the Democratic People's Republic of Korea (North Korea).

"Individuals, including North Korean nationals acting as ostensible government officials, engaged in the worldwide transportation, delivery, and sale of quantities of supernotes," the indictment, unsealed Oct. 7, stated.

'Soprano state'

David L. Asher, who monitored North Korean criminal activity when working at the State Department, said the scale of the crime is difficult to determine but that the activities provide hard currency for the Pyongyang regime.

"Under international law, counterfeiting another nation's currency is an act of casus belli, an act of economic war," Mr. Asher said in a recent speech. "No other government has engaged in this act against another government since the Nazis under Hitler."

Mr. Asher said that in addition to drugs and counterfeit money, Pyongyang is engaged in money laundering, arms sales and illicit trade in sanctioned items, such as conflict diamonds, rhino horn and ivory.

North Korea has become a "Soprano state," he said, a reference to the television show about a New Jersey organized-crime group.

"North Korea is the only government in the world today that can be identified as being actively involved in directing crime as a central part of its national economic strategy and foreign policy," Mr. Asher said.

North Korea's government has denied it engages in counterfeiting. The government-run Korean Central News Agency said Oct. 21 that the indictment charging a Pyongyang role in counterfeiting was part of a U.S. "smear campaign."

"The U.S.-escalated smear campaign against [North Korea] only goes to prove that the former regards it as one of the basic means to create impression that the latter is a 'rogue state' in a bid to realize its ambition for bringing down the latter's 'system' and the former remains unchanged in its policy for isolating and stifling [North Korea] internationally," the report said.