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      North Korea’s Counterfeit Benjamins Have Vanished

      North Korea’s Counterfeit Benjamins Have Vanished North Korea’s Counterfeit Benjamins Have Vanished North Korea’s Counterfeit Benjamins Have Vanished
      Photo via Wikimedia Commons

      Crime & Drugs

      North Korea’s Counterfeit Benjamins Have Vanished

      By Greg Walters

      Read and watch more about North Korea in "March Madness," a VICE News special section on the Hermit Kingdom.

      On an overcast October evening in 2005, Sean Garland, the president of the Irish Workers' Party, was dining with colleagues in a Belfast restaurant when officers from the Police Service of Northern Ireland burst through the door and seized him. The silver-haired 71-year-old faced potential extradition to the US over his alleged involvement in one of the most successful counterfeiting rings in history.

      American prosecutors accused Garland, a senior Irish Republican Army veteran, of distributing large quantities of high-quality counterfeit bills produced by North Korea known as "supernotes" — fake American $100 and $50 bills that were so convincing they could move through the global financial system largely undetected.

      The arrest marked a crescendo in a long fight by US authorities to stem the flow of North Korean supernotes, a campaign that spanned over 130 countries and involved the undercover infiltration of trafficking circles, a sham wedding ceremony on a New Jersey yacht that lured smugglers into a trap, and the discovery of $66,900 in counterfeit bills hidden inside menstrual pads stored in a locker at Moscow's Kazan Railway Station.

      Within months of Garland's detention, US officials slapped sanctions on a small bank in Macau that was suspected of laundering North Korean funds, and arrested dozens of smuggling suspects in enforcement actions dubbed Operation Smoking Dragon and Operation Royal Charm.

      North Korean supernotes, which had circulated widely for years, seemed to fade away.

      Now some observers are openly wondering whether the battle might actually be over.

      No fresh discoveries of North Korean supernotes have been made public in the past five years. Only three cases have been reported since 2008, and none of those discoveries involved the country's officials, according to data compiled by Sheena Chestnut Greitens, a non-resident senior fellow at the Brookings Institution who tracks supernotes closely.

      William Chan (L) of the US Secret Service and Ross Bautista (R), executive officer of National Bureau of Investigation, show counterfeit US bank notes popularly known as supernotes during a briefing in Manila, in March 2006. (Photo by Rico Gonzales/AFP/Getty Images)

      North Korea, the so-called Hermit Kingdom, is notoriously opaque. Statements about the country's inner workings inherently involve a degree of guesswork.

      But some analysts who carefully watch North Korea said the country appears to have significantly scaled back its US currency counterfeiting operations — or maybe even stopped altogether.

      "I don't think they're currently involved in counterfeiting anymore," stated Michael Madden, a contributor to 38 North, a North Korea analysis website maintained by the Paul H. Nitze School of Advanced International Studies at Johns Hopkins University.

      The supernotes are "not something people are seeing," said Katharine H. S. Moon, political science professor and North Korea expert at Wellesley College.

      Related: North Korea Has at Least One Thing Right About America's Plans for War

      The country may be lying low in the wake of law enforcement and regulatory moves against the supernote distribution and laundering network. If so, that campaign could be seen as a big win for the Secret Service, the American agency tasked with battling counterfeiters.

      "It's very possible that the series of US law enforcement actions made the risks and costs too high to North Korea to keep counterfeiting," Greitens said.

      North Korea began producing fake dollars as early as the late 1970s, distributing them through underground operatives, criminal syndicates, casinos — and, allegedly, men like Garland, who US prosecutors said crisscrossed the globe acquiring phony cash from North Korean operatives and selling it for a profit.

      Estimates of the country's earnings from counterfeit dollars vary widely, from as little as $1.25 million annually to as much as $250 million, although experts have put the most credible assessments between $15 million and $25 million a year.

      'The first possibility is that they got out of the game. The second is that they got even better at it, and we just haven't caught them yet.'

      To be sure, some analysts find it hard to believe that North Korea has really given up on counterfeiting: a long history of illicit activity, combined with a persistent need for hard currency, suggest otherwise.

      North Korea has been accused of engaging in a mind-boggling array of illicit moneymaking schemes — from manufacturing imitation Viagra to large-scale insurance fraud; from trafficking heroin to smuggling endangered animal parts in official diplomatic pouches.

      In the early 2000s, the country was estimated to be supplying as much as 30 percent of the Japan's imports of methamphetamine, according to congressional testimony by William Newcomb, an economic analyst who worked for both the State and Treasury departments.

      "Think about how criminal syndicates behave," said Sung-Yoon Lee, a North Korea specialist at Tufts University. "When there's a bust, they go underground for a while."

      Abandoning currency counterfeiting would be a big change for North Korea. So big, in fact, that experts mention another possibility for the apparent lack of activity: North Korea's legendary skills at printing the best knock-off dollars in the world might have improved to the point where no one can spot the fakes.

      "The first possibility is that they got out of the game," Greitens said. "The second is that they got even better at it, and we just haven't caught them yet."

      Kim Jong-il's Incredible Fake Money
      In 1989, a bank teller at the Central Bank of the Philippines in Manila noticed something odd about a particular $100 bill, and set it aside.

      The note ended up in the hands of the US Secret Service, which codenamed it C-14342 and entered it into the agency's vast library of counterfeit dollars. Similar bills started popping up elsewhere. The new fakes were so accurate that investigators started calling them supernotes.

      What alarmed officials wasn't the amount of new counterfeit bills showing up, but their exceptional quality. The standard anti-forgery devices used by most banks couldn't detect any flaws.

      The supernotes were made from the same difficult-to-create, three-quarters cotton, one-quarter linen fiber paper used in real dollars. They were produced on the same heavy, expensive, restricted intaglio printing presses used by the US Bureau of Engraving and Printing. They carried the same red and blue security fibers, security stripe, and watermark.

      As the '90s progressed, signs increasingly pointed toward North Korea. South Korean Intelligence corroborated information on North Korean counterfeiting prior to 1998, according to a Congressional Research Service report.

      The late North Korean leader Kim Jong-il appears in the foreground of an undated picture released by the North Korean News Agency KCNA in May 2011. At left is his son Kim Jong-un, who at the time was being prepared as Kim's designated successor. (Photo via KCNA)

      North Korea had defaulted on its foreign debt in 1976, leaving the country badly in need of funds, just as a new leader was on the rise.

      The ascent of Kim Jong-il, then emerging as heir apparent to his father, Kim Il-sung, tracked closely with the country's move into illicit methods of raising income.

      North Korean defectors say Kim Jong-il personally issued an order in the late 1970s that all of the country's covert operations be conducted using counterfeit US cash, according to Illicit: North Korea's Evolving Operations to Earn Hard Currency, a report authored by Greitens. Doing so, she wrote, "would have the dual benefit of funding North Korea's operations and engaging in economic warfare against the United States."

      Related: North Korea Is 'One Pandemic Away From Collapse' Says Former US Nuclear Negotiator

      The idea that North Korea could simply print US currency without anyone being able to tell the difference set alarm bells ringing in Washington, DC.

      Speaking at a hearing of the House Committee on Banking and Financial Services dedicated to foreign counterfeiting in 1996, US Congressman Spencer Bachus (R-Al.) expressed alarm at "the existence of a high-quality counterfeit $100 bill that is so good that it escapes detection by all but the most sophisticated detection equipment."

      "Secret Service indicated to my staff that they believed such currency may have been used to support terrorist activities against the United States," he continued. "That is a very disturbing prospect."

      "The Secret Service has been unequivocal that the North Korean supernotes are the best in the world," Greitens wrote in her report.

      The Irish Connection
      Supernotes started appearing in Ireland in the early 1990s, where they proliferated to the point that some Irish banks began refusing to exchange $100 bills.

      By that time, Garland was already a living legend of the Irish Republican Army.

      An ardent Marxist, Garland was a leader in the Official Irish Republican Army, a paramilitary group that splintered off from the original IRA. After helping to negotiate a ceasefire in 1972, Garland became president of the Workers' Party of Ireland, the political party associated with the OIRA.

      But the party struggled for votes and was deeply in debt by the late 1980s, prompting Garland to appeal to the Soviet Union for help, according to a 1992 report in the British newspaper the Independent. Garland asked Soviet leaders for a million Irish pounds and for the training of "five reliable and trustworthy party members" to "strengthen the security" of the Workers' Party. The requests were never met.

      By 1993, the "Garland organization" was selling high-quality counterfeit currency to a man named Hugh Todd, a dual citizen of Ireland and South Africa who later agreed to cooperate with investigators, according to details laid out in an affidavit filed in the High Court in Dublin by Brenda J. Johnson, assistant US attorney for the District of Columbia.

      The affidavit describes a transaction in April 1998 when Garland, who prosecutors said went by the pseudonym "the Man with the Hat," arrived at Todd's hotel room in Moscow's Radisson Hotel. Todd opened the door for Garland, who entered and poured $80,000-worth of counterfeit dollars from a leather bag onto the bed, the document says.

      Todd paid Garland $30,000 in real money for the fake bills, according to the affidavit.

      Sean Garland, right, at the Workers' Party of Ireland's annual conference in 2008 in Dublin. (Photo via Wikimedia Commons)

      In June 1999, Garland visited Moscow again. This time he was being watched by Russia's Ministry of Internal Affairs at the request of the Secret Service, according to the affidavit, which was filed in November 2008 to support a pending US extradition request for Garland from Ireland.

      Outside the Metropole Hotel, across the street from Moscow's famous Bolshoi Theater, Garland and his wife were observed getting into a sedan with diplomatic license plates registered to the North Korean embassy, the document says. The couple were taken to the embassy, where they remained for about two hours.

      In July 2000, a Russian-born UK resident named David Levin, who went by the alias "Russian Dave," agreed to help investigators arrange the delivery of $70,000 worth of supernotes in Moscow within a week, according to Johnson's affidavit.

      A few days later, authorities retrieved a black nylon sports bag that had been left in a temporary luggage compartment at Moscow's Kazan Railway Station.

      When Russian officials opened the bag, the affidavit says, they found $66,900 worth of counterfeit currency wrapped inside two packages of Always brand menstrual pads.

      Related: North Korea Is Apparently Using Sophisticated Tech to Jail Citizens Contacting the Outside World

      From at least 1997 to the summer of 2000, Garland and a group of associates conspired to buy, sell, and exchange counterfeit currency in Ireland, the UK, Russia, Poland, Belarus, Denmark, the Czech Republic and Germany, according an indictment filed against Garland and six others in the US District Court for the District of Columbia in September 2004.

      In 2005, Garland made a rare visit to Northern Ireland to give the keynote address at the Workers' Party annual meeting in Belfast. During a meal before the event, police officers seized him.

      "They were dressed like Star Wars characters with all their helmets and blacked out visors on," Garland later told Lookleft, a left-wing Irish periodical. "It never crossed my mind that they were there for me."

      In a statement, FBI Special Agent James Burch called Garland's arrest "one of the most significant related to the 16-year long investigation into the distribution of this family of highly deceptive counterfeit US currency notes."

      Garland protested his innocence. John Lowry, a spokesperson for the Workers' Party, told the BBC that Garland's arrest was "politically motivated," and suggested it was related to the party's opposition to the US invasion of Iraq. Released on bail, Garland fled south to the Republic of Ireland, saying he wouldn't get a fair trial in the US.

      An Irish judge refused to extradite Garland in January 2012, but said Garland could be prosecuted inside the country, and forwarded the case to the country's Office of the Director of Public Prosecutions. A spokesperson for the Director of Public Prosecutions declined to comment on the status of the case to VICE News.

      Smoking Dragon and Royal Charm
      Garland's arrest came within months of a series of other aggressive moves by the US against the supernote distribution network.

      In 2005, law enforcement initiatives dubbed Operation Smoking Dragon and Operation Royal Charm bagged $4.5 million in counterfeit currency and resulted in 87 indictments against suspects from China, Taiwan, Canada, and the United States, according to the US Department of Justice.

      The smugglers had attempted to bring supernotes into the US by placing them between the pages of books and lining them inside large rolls of fabric.

      The same operations discovered methamphetamine and fake Viagra being shipped into the US in the false bottoms of crates filled with toys, according to a statement by the FBI.

      To lure suspects to their arrest in Operation Royal Charm, the statement says investigators organized a sham wedding on a yacht docked outside Atlantic City, New Jersey. Invitations were sent out, and arrests were made when suspects showed up to be transported from shore to the yacht.

      "The whole thing began as an investigation into counterfeit cigarette smuggling," said Bob Hamer, a former FBI special agent and the lead undercover investigator in Operation Smoking Dragon. "At one point, I told them I wanted to buy some high-quality counterfeit currency."

      He said that smugglers supplied him with bills that were identified as supernotes.

      Related: Why North Korea's Space Program Is Like a PlayStation 4

      Smoking Dragon and Royal Charm uncovered a money trail that led to a small, family-owned bank in Macau, and produced evidence of illicit financial transactions through the Chinese territory that were strong enough to be presented in court and meet the test for designating banks as money-laundering concerns, according to unnamed officials cited by the New York Times.

      In September 2005, the US Treasury Department designated Banco Delta Asia, or BDA, a "primary money-laundering concern" under the Patriot Act, and accused it of providing financial services over two decades to front companies that were operating on behalf of the government of North Korea.

      The Treasury Department said that "sources show that senior officials in Banco Delta Asia are working with [North Korean] officials to accept large deposits of cash, including counterfeit US currency, and agreeing to place that currency into circulation."

      The bank denied the accusations. But banking officials in Macau, under pressure from US authorities, froze about $25 million in BDA accounts linked to North Korea.

      In response, banks throughout the region moved to sever ties with country, fearing that they could be hit with similar sanctions.

      In protest, North Korea walked away from the six-party talks, the nuclear negotiations it had been carrying out with the US, Russia, China, South Korea, and Japan.

      Eventually the BDA accounts were unfrozen. The six-party talks resumed in 2007.

      Follow the Money
      "North Korea is the first country to counterfeit another state's currency since Hitler's Germany, an act that can be described as no less than economic warfare," warned a memo prepared by California Representative Ed Royce's staff and submitted to the House Foreign Affairs Committee in 2007.

      But following Garland's arrest, Smoking Dragon, Royal Charm, and the Banco Delta Asia episode, supernotes seemed to gradually evaporate. Fresh supernotes appeared two more times in 2006, once in 2008, and twice in 2009, according to data compiled by Greitens.

      After that, nothing.

      "If the supernotes have stopped showing up, I'd venture to say that North Korea quit counterfeiting them," said Hamer, who retired from the FBI after his role in Operation Smoking Dragon. "Perhaps they've found something else that's easier to counterfeit after they lost the distribution network for the supernote."

      The death in 2011 of Kim Jong-il, whose leadership appeared to be associated with the country's move into illicit activities, might be connected to the disappearance of the supernotes, analysts said. But Kim Jong-il's successor, his son Kim Jong-un, continued many of his father's policies, including the pursuit of nuclear weapons.

      Greitens said it's possible that officials have identified supernotes since then, but kept the incidents quiet for fear of undermining confidence in US currency.

      In 2013, the US redesigned the $100 bill, adding two new, advanced anti-counterfeiting features: a woven 3D ribbon that scrolls when the bill is tilted, and a color-changing image of a bell.

      The new design may be helping to deter counterfeiters, Hamer said.

      In February, the US enacted sweeping new sanctions against North Korea after the country detonated a nuclear weapon in January and fired a missile into space several weeks later.

      A spokesperson for US Senator Bob Menendez (D-NJ), one of the sponsors of the legislation, told VICE News that North Korean counterfeiting "is still a concern."

      Professor Lee of Tufts University said he believes North Korea is probably still active in counterfeiting, just under the radar.

      "My conclusion is that they've probably tempered it, scaled it down a bit, and gotten better at hiding it," Lee said. "It was, for many decades, a major source of income for them.... I'm not convinced they're out of the game."

      But until North Korea opens up, or a new batch of supernotes is discovered, observers say there's no way to know for sure.

      Follow VICE News on Twitter: @vicenews
      Photo via Wikimiedia Commons

      Topics: north korea, dprk, counterfeit currency, supernotes, united states, us secret service, kim jong-il, kim jong-un, sean garland, operation smoking dragon, operation royal charm, asia & pacific, crime & drugs, march madness: a vice news spotlight on north korea

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