It's time to answer questions about North Korea's long-reported production and laundering of high-quality counterfeit US $100 notes. There's a good opportunity at hand: an unusual meeting this week in New York between senior US and North Korean officials. One of its purposes is to reopen talks about Pyongyang's alleged illicit financial operations.
Back in 1976, Pyongyang purchased from a specialized Swiss firm a sophisticated intaglio (high-pressure) press for printing currency. At the time, it was identical to the presses used by the US Treasury's Bureau of Engraving and Printing to turn out hundreds of millions of dollars in genuine greenbacks annually (and is thought to be still highly similar).
After nearly a decade's delay, high-quality counterfeit intaglio-printed $100 bank notes with only microscopic flaws – dubbed "Supernotes" by bankers and currency buffs – were spotted and seized, first in the Philippines, then in Hong Kong, Thailand, and finally, in the early-1990s, in Europe and the Americas.
Despite North Korean defectors' reports, congressional and independent investigations, and published news reports pointing to North Korea and Iran as likely sources, the US Treasury long kept officially mum. The Treasury and the Secret Service, which has protected the dollar against forgery since the US Civil War, prefer not to weaken international confidence in the dollar with excessive publicity about counterfeiting.
US analysts believe that North Korea's main purpose in money forgery and laundering operations has been to finance terrorism and drug deals and purchase arms and contraband goods. (Throughout history, rulers and their intelligence services have tried to undermine opponents by counterfeiting the enemy currency. Adolph Hitler's Nazis forced Jewish master engravers and printers, held in concentration camps, to print huge quantities of forged British Sterling notes and other Allied currencies to undermine the Allied war effort.)
Since 1996, US currency has undergone major design changes, incorporating new security devices to fight counterfeiting, from the hundred-dollar bill down to the five-dollar note, the new version of which was unveiled last month and will enter circulation in 2008.
The Bush administration broke official silence and publicly charged North Korea with counterfeiting US currency in September 2005. It imposed tough sanctions on Banco Delta Asia (BDA) in Macao, a territory of China. Senior US Treasury officials blamed BDA for allegedly laundering money acquired through counterfeiting, smuggling, and arms proliferation.
The Macao bank was forced to freeze all North Korea-related accounts, including funds allegedly reserved for North Korean leader Kim Jong Il's purchase of Western luxuries. Pyongyang retaliated by boycotting the six-party denuclearization talks in which the US, China, Japan, Russia, and South Korea aimed at getting Mr. Kim to give up his declared nuclear-weapons program.
Following last year's North Korean missile tests and a nuclear test explosion, US, Japanese, and probably some Chinese pressure helped reopen the six-party nuclear talks with Pyongyang. Amid much bartering, the US agreed to the release of about $25 million in North Korea's funds at the Macao bank early this year. This helped ease the talks toward an agreement during the summer, looking so far like one of the Bush administration's few notable foreign-policy successes. The US and UN's nuclear watchdogs are being allowed to inspect the dismantling of the North's nuclear facilities.
The US and its four partners in the six-party talks hope for eventual destruction of Pyongyang's nuclear weapons. All this in return for massive shipments of fuel oil, food, and other commodities that North Korea's long-suffering people urgently need.
Meanwhile, there have been contradictory claims by South Korean and Western media and officialdom about whether Pyongyang has continued, curbed, or even halted its production of Supernotes, at a time when the US dollar is under attack and has fallen on international exchange markets.
In Switzerland, a country that's expert in bank-note printing and counterfeit detection, the federal police issued a press statement last summer doubting whether North Korea has now or has for some time previously had the capacity to produce hi-tech dollar or other money forgeries. Senior US Treasury and Secret Service officials have quietly disagreed.
Daniel Glaser, deputy assistant US Treasury secretary in charge of terrorism financing, money laundering, and issues surrounding counterfeiting, has a chance at the New York meeting and beyond to probe for the facts in talks with the North Korean delegates. Will he get straight answers? Bankers, the finance markets, and the general public would like to know the truth. It's a question everyone has a strong interest in closely following and finally resolving.
John K. Cooley is a former Monitor correspondent in the Middle East and at the Pentagon. His forthcoming book, "Currency Wars," deals with counterfeit money as a weapon of covert warfare by governments throughout history.