David Asher, former State Department coordinator for tracking North Korean illicit activities, said in a speech in February that the Banco Delta Asia case involving North Korean counterfeiting was “the tip of the iceberg” in Pyongyang’s global moneymaking operations. Mr. Asher said undercover FBI agents in Macao documented the activity, including counterfeiting, that involved “hundreds of millions of dollars” until the bank was sanctioned.
“Banco Delta Asia was washing massive amounts of money,” he said, noting that more steps need to be taken to halt Pyongyang’s illicit activities and arms trafficking.
The U.S. Treasury Department barred U.S. contacts with the bank in 2005, labeling it a “primary money-laundering concern.” The bank froze about $25 million in North Korean funds but released the money in 2007 under U.S. pressure to get North Korea to return to diplomatic talks about its nuclear program.
According to the report, North Korea’s hard currency income from trafficking in counterfeit supernotes and drugs is used to buy luxury goods for Mr. Kim and to develop conventional arms and weapons of mass destruction.
Bob Hamer, a retired FBI agent who worked undercover as part of an operation designed to expose illegal North Korean activities, including supernote distribution, said Pyongyang’s supernote production remains a “major problem.”
Gen. O’s son, O Se-won, works with his father as one of two key overseas officials involved in North Korean counterfeiting, the report said. In addition to O Se-won, another relative of Gen. O, identified as Lee Il-nam, was a councilor at the North Korean Embassy in Ethiopia and operated as a supernotes courier, making visits from Pyongyang, to Beijing to Ethiopia and back from May 2003 to September 2004, according to the report.
The report says North Korea uses front companies and shell companies overseas to facilitate the illicit trafficking in supernotes. The use of fake companies increased after the Treasury Department barred U.S. companies from working with Banco Delta Asia.
To further hide the transactions from international financial authorities, the North Korean party office used a financial front company, set up in China in 2006, to make payments as part of the purchases, the report says. North Korea also set up a front company in the British Virgin Islands in the mid-2000s to take advantage of lax banking regulations and tax laws there, it says, and other branches of the front company were established for financial support activities in China, Russia and Southeast Asia.
One front company bought luxury yachts, Mercedes-Benz cars and personal helicopters for Mr. Kim and his family, the report said.
• Betsy Pisik in New York contributed to this report.