The ICAS Lectures


North Korean Counterfeiting of U.S. Currency

Raphael F. Perl & Dick K. Nanto

ICAS Winter Symposium
Humanity, Peace and Security
February 22, 2006 12:30 PM -- 5:00 PM
U S Senate Dirksen Building Room SD 226
Capitol Hill, Washington D.C. 20510

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North Korean Counterfeiting of U.S. Currency

Raphael F. Perl & Dick K. Nanto


     The United States has accused the Democratic People's Republic of Korea (DPRK or North Korea) of counterfeiting U.S. $100 Federal Reserve notes (supernotes) and passing them off in various countries. This is one of several illicit activities by North Korea apparently done to generate foreign exchange that is used to purchase imports or finance government activities abroad.

     Although Pyongyang denies complicity in any counterfeiting operation, at least $45 million in such supernotes of North Korean origin have been detected in circulation, and estimates are that the country earns from $15 to $25 million per year from counterfeiting. The illegal nature of any counterfeiting activity makes open-source information on the scope and scale of DPRK counterfeiting and distribution operations incomplete. South Korean intelligence has corroborated information on North Korean production of forged currency prior to 1998, and certain individuals have been indicted in U.S. courts for distributing such forged currency. Media reports in January 2006 state that Chinese investigators have independently confirmed allegations of DPRK counterfeiting.

     For the United States, North Korean counterfeiting represents a direct attack on a protected national asset; might undermine confidence in the U.S. dollar and depress its value; and, if done extensively enough, potentially damage the U.S. economy. The earnings from counterfeiting also could be significant to Pyongyang, and may be used to purchase weapons technology, fund travel abroad, meet "slush fund" purchases of luxury foreign goods, or even underwrite the DPRK's nuclear program.

     U.S. policy toward the alleged counterfeiting is split between law enforcement efforts and political and diplomatic pressures. On the law enforcement side, individuals have been indicted and the Banco Delta Asia bank in Macao (a territory of China) has been named as a primary money laundering concern under the Patriot Act. This started a financial chain reaction under which banks, not only from the United States, but from other nations have declined to deal with even some legitimate North Korea traders. North Koreans appear to be moving their international bank accounts to Chinese and other banks. Pyongyang has cited the Banco Delta Asia action in refusing to return to the six-party talks on its nuclear program.

     The political/security track attempts to stop the alleged counterfeiting activity though diplomatic pressures, the Illicit Activities Initiative, the Proliferation Security Initiative, and back channel talks. Bush Administration policymakers reportedly are divided between those favoring a negotiated settlement, (verifiable curtailment of illicit activities and a return to the six-party talks) and those favoring an approach of tightening economic sanctions and other measures designed to undermine support for the ruling regime and compel a change in policy. Currently the Administration's policy reportedly is to pressure North Korea, but keep the negotiations going. This report will be updated as needed.

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This page last updated 3/24/2006 jdb

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