Counterfeit Currency—North Korea

When Sean Garland was arrested in Northern Ireland at the beginning of October, it seemed a rather innocuous event. He was, if you recall, accused of engaging in “buying, transporting and either passing as genuine or reselling large quantities of high quality counterfeit notes.’^[1] The allegation that he had obtained those notes from North Korea seemed, at the time, almost beside the point.

That is not the case now as an enormous amount of attention has been directed at North Korea and allegations that that country is producing massive quantities of counterfeit notes and distributing them across the globe. In fact, the United States’ chief delegate at the six-party talks on North Korea’s nuclear weapons programs, Assistant Secretary of State Christopher Hill, said yesterday that “he and other foreign diplomats, including those from South Korea, have accepted evidence that North Korea is counterfeiting American $100 bills.”^[2] Mr. Hill has said that he has actually seen the so-called “supernotes” in person, and that “if someone gives you a $100 note, look at it very carefully.”^[3]

The implications of these counterfeited bills are far-reaching. In a story we discussed in mid-September, the Macau-based Banco Delta Asia was designated by the US Department of Treasury [hereinafter DOT] as a “primary money laundering concern” under the less-well-known Section 311^[4] of the USA PATRIOT Act.^[5] At the time of the announcement, the DOT mentioned somewhat in passing that “[o]ne well-known North Korean front company that has been a client of Banco Delta Asia for over a decade has conducted numerous illegal activities, including distributing counterfeit currency and smuggling counterfeit tobacco products.”^[6]

The counterfeit currency that has been allegedly distributed is said to amount to “tens of billions of dollars.”^[7] That is at least 100 million separate $100 bills that have allegedly been produced and distributed into the world’s markets. And since Mr. Garland’s arrest, the issue of these “supernotes” has become a bigger story than it had originally seemed. For example, casinos in Las Vegas are noticing that some of these bills have been used in casinos on the Strip, but they don’t see it as too large a problem.^[8] According to the US Secret Service, Las Vegas casinos “probably take in $50,000, $60,000, $70,000 in counterfeit money in town per week.”^[9] Furthermore, both the conclusion of “Operation Smoking Dragon,” which we discussed in August, as well as the subsequent indictment of two Chinese men accused of trying to smuggle MANPADS, which we discussed in early November, are related to the increased attention to the Korean “supernotes.”

The recent attention on North Korean counterfeiting activities comes after 15 years of investigations which suggest that the “counterfeiting operation began a quarter-century ago at a government mint built into a mountain in the North Korean capital. Using equipment from Japan, paper from Hong Kong and ink from France, a team of experts was ordered to make U.S. $100 bills. … ‘The main motive was to make money, but the secondary motive was inspired by anti-Americanism.’”^[10] The indictment and extradition request of Sean Garland, as well as the denomination of Banco Delta Asia as a primary money laundering concern, are now seen as pieces of a long-scale puzzle that is intended to “starve impoverished North Korea of as much as $500 million a year in profits from counterfeiting currency and other criminal activities.”^[11]

As the United States prosecutes these allegations, it will prove extremely tricky to prevent the six-party talks from collapsing. The State Department might like to think that “law enforcement matters are not six-party, not diplomatic, nor political issues,”^[12] but North Korea is not likely to take these allegations very lightly in the least.

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[1] Henry McDonald, IRA Veteran Bailed over US Counterfeiting Charge, The Observer, Oct. 9, 2005.
[2] U.S. Has No Doubts About N. Korea Counterfeiting Dollars: Hill, Kyodo News, Dec. 20, 2005.
[3] Id.
[4] Codified at 31 U.S.C. § 5318A.
[5] US Money Laundering Accusation Ignites Resentment in Macao, Asia Pulse via Yahoo!, Sept. 19, 2005, no longer available online; see also Macau Bank’s Customers Withdraw, CNN.com, Sept. 19, 2005, no longer available online; DOT, Treasury Designates Banco Delta Asia as Primary Money Laundering Concern Under USA PATRIOT Act, Sept. 15, 2005.
[6] DOT, supra note 5.
[7] Kyodo News, supra note 2 (emphasis added).
[8] Howard Stutz, Casinos Defend Against ‘Supernotes,’ Las Vegas Review-Journal, Dec. 16, 2005.
[9] Id.
[10] Josh Meyer, et al., U.S. Accuses North Korea of Conspiracy to Counterfeit: Irish Rebels, a Major Asian Bank and Chinese Gangsters Also Implicated in Government-backed Scheme to Flood American Economy with Phony $100 Bills, LA Times, Dec. 12, 2005.
[11] Id.
[12] Kyodo News, supra note 2.