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North Korea gets Chinese help laundering counterfeit US dollars
May 12, 2006
Counterfeiting has been steadily on the rise over the past decade, as evidenced by the increasing demand for our counterfeit detection products from businesses of all shapes and sizes. It should not be surprising, then, to learn that, in addition to the “home-grown” counterfeiters here in the U.S., using scanners, Photoshop and high-end color printers to produce “pocket money” when they go out shopping, some foreign governments are also in the business of producing fake money. However, the fakes produced out of these large scale state-endorsed operations are a far cry from the college student with photo shop and an HP printer.
For more than a quarter century, Pyongyang’s state run currency printing plants have been producing high-grade counterfeit U.S. dollars and Euros. Recently, evidence has surfaced that the People’s Republic of China has been a willing ally in North Korea’s traffic in counterfeit currency.
During the early 1990’s, the North Korean government acquired the same advanced high-speed banknote presses as those used by the U.S. Treasury Department. Shortly thereafter, extremely high-quality copies of foreign currency notes - dubbed “supernotes” by the U.S. Secret Service – began to flood the market. It is estimated that in 2003, North Korea earned as much as $100 million from counterfeit currency. In 2005, an interagency U.S. task force broke a number of North Korean counterfeit cases, which received widespread press coverage. The task force estimated that $45 million to $60 million in Pyongyang’s counterfeit currency - mostly in the form of U.S. $100 bills - was in circulation.
The link to China comes through banking operations located in Macau. Prior to reunification with China in the year 2000, Macau was governed as a Portuguese colony. Counterfeit money laundering operations were not pronounced before reunification, with the only large scale incident occurring in 1994, when Portuguese police arrested several North Korean trading company executives, who carried diplomatic passports, for depositing $250,000 in counterfeit notes in a Macau bank. After control over the area was transferred to China in late 1999, this began to change. From that time until September 2005, when a U.S. law-enforcement case known as “Operation Smoking Dragon” traced a large quantity of counterfeits to a Macau bank known as Banco Delta Asia, North Korea’s state-run global money-laundering operations were based in Macau.
The United States government imposed strict financial sanctions on Banco Delta Asia, naming it as a “a willing pawn for the North Korean government to engage in corrupt financial activities through Macau, a region that needs significant improvement in its money-laundering controls.” Although the U.S. Treasury was candid about the Banco Delta Asia sanctions, there was no comment regarding whether the Treasury was also investigating Bank of China branches in Macau. U.S. law enforcement members were upset that the Justice Department decided not to name China and North Korea as the sources of counterfeit currency and other goods. Indictments in an August 2005 counterfeiting case referred to source countries only by numbers.2 North Korea was subsequently named, but China’s role remains shrouded.
When Banco Delta Asia ceased passing supernotes for North Korea, Pyongyang’s agents moved their accounts to Chinese state-owned banks in Zhuhai, a Chinese Special Economic Zone located immediately adjacent to Macau. An article written in the Los Angeles Times claims that immediately following the U.S. Treasury action in Macau, North Korea’s flagship front-company there, Zokwang Trading Co., closed its headquarters on the fifth floor of an office building near Banco Delta Asia, and “most of its personnel have relocated to Zhuhai, just across the border in China proper.”4
According to a Korean daily newspaper, Chosun Ilbo, supernote American $100 bills can be clearly traced through China and back to North Korea. A February 12, 2006 article in this paper details the arrest by South Korean police of three people who had purchased supernote counterfeits with a face value of $140,000 from “a broker in Shenyang, China.” That same month, a South Korean legislator said he had obtained Series 2003 supernote counterfeits in the Chinese city of Dandong. “I paid $70 to get each of these [counterfeit $100 bills], but you can get them for as little as $50 in China,” the legislator told a South Korean parliamentary meeting.
In conclusion, it can be said that both North Korea and China have profited from the production of counterfeit U.S. banknotes. Recent news stories in Los Angeles detailing large-scale busts of attempted smuggling operations bringing the supernotes into the U.S. are an indication that this is not “just a foreign” problem. For every note that is caught coming into the country through U.S. sea and air ports, it must be assumed that many times that number have successfully entered the country.
For information about what you can do to protect yourself against counterfeit notes, please visit us at www.fraud-fighter.com, or call us at 800-883-8822.
