Bogus greenbacks from North Korea close to 'perfect'

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TOKYO -- Kim Il-nam's first encounter with counterfeit U.S. currency was embarrassing. On an overseas trip several years ago, the North Korean diplomat took a $100 bill from a wad of more than $7,000 he had received from the Trade Bank in Pyongyang to the front desk of his hotel.

"I had to buy some toiletries, so I asked the cashier at the hotel front desk to change one of the new bills," said Mr. Kim, who uses a pseudonym to protect his identity since defecting. "She took my note away and returned, saying, 'Sir, this is fake.' I felt like a criminal and protested to the Trade Bank when I got back to Pyongyang."

Things are different now. A new generation of fake "supernotes," far harder to detect, has appeared, counterfeiting experts say.

Feeling the latest $100 bill from North Korea, Yoshihide Matsumura, whose Matsumura Technology Co. supplies counterfeit-detection machinery to Japan's post offices, banks and law- enforcement agencies, said: "This is the closest to perfect counterfeit U.S. money ever made."

Counterfeit dollars are one of the issues that have complicated the six-party talks over North Korea's nuclear weapons program. Before Kim Jong-il's government admits United Nations inspectors, it is demanding release of $25 million in frozen accounts at a Macao bank the U.S. accuses of laundering counterfeit dollars. North Korea denies making or trafficking in counterfeits.

In separate interviews, Mr. Kim and Mr. Matsumura, 57, identified a printing factory in Pyongsong, on the outskirts of Pyongyang, as the location of presses that print counterfeit currency.

Mr. Matsumura, whose Tokyo-based company started in the counterfeit-detection business around the time of the 1988 Seoul Olympics, said North Korea's early efforts were often seized in quantity from diplomats and trade officials.

Now that the United States, Japan and other countries have intensified their checks, "the North Koreans are more careful," he said. The greater scrutiny has restricted the spread of the fake bills in developed countries. The U.S. government has only seized about $50 million of the fake notes since they were detected in the Philippines in 1989, Michael Merritt, an official in the Secret Service, told a Senate committee last year.

The fakes still circulate in quantity in less-developed countries, Mr. Matsumura said. The U.S. Treasury Department has warned banks in Vietnam, Malaysia, Mongolia and elsewhere that they are holding accounts traceable to North Korea that may be used for money laundering.

Treasury Undersecretary Stuart Levey said on March 14 that an 18-month investigation had found the Macao bank, Banco Delta Asia, had allowed North Korea to launder money. U.S. banks have been barred from doing business with the institution.

"Many account holders at BDA had connections to entities involved in North Korea's trade in counterfeit U.S. currency," Mr. Levey said.

U.S. and Chinese negotiators in Beijing have been meeting since Monday to discuss the release of the North Korean funds frozen in Banco Delta. Obstacles include approval from account holders and reluctance of banks to handle the funds because of the U.S. blacklisting.

"We continue to make progress," U.S. Treasury spokeswoman Molly Millerwise said in an e-mail this week. "We remain committed to working through this matter as quickly as possible."

While Banco Delta rejected the U.S. finding, the designation remains in place and Treasury will work with Macao authorities on money-laundering issues, Daniel Glaser, deputy assistant secretary for terrorist financing and financial crimes, said in a March 19 briefing.

Mr. Merritt, in his testimony last year, said there are "definitive connections" between North Korea and top-quality counterfeits. Mr. Matsumura said the printing techniques and ink used on the most recent fake $100 bills are identical to those used in producing North Korea's own 100-won bill.

"North Korea has used front companies to purchase ink for currencies," Mr. Matsumura said. "Any country that makes automobile paint can make the ink." The volume needed for a major print run could be transported in a single large paint can, he said, estimating the cost of producing each fake note at around 4 U.S. cents.