N. Korea Producing Counterfeit U.S. 'Supernotes'

North Korea is allegedly producing counterfeit U.S. currency of such high quality that the bank notes are nearly indistinguishable from the real thing. New York Times Magazine reporter Stephen Mihm talks with Alex Chadwick about what officials are calling "supernotes."

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NOAH ADAMS, host:

It's DAY TO DAY, I'm Noah Adams.

In a few minutes, the story of synthetic diamonds, but first a sting operation by the FBI and Secret Service has uncovered hundreds of thousands of counterfeit dollars, much of it so expertly made the officials call it supernotes. And what's especially intriguing is that the creator of this currency, mostly $100.00 bills, is North Korea.

Stephen Mihm writes about the counterfeiting in this coming Sunday's New York Times magazine. He spoke earlier with Alex Chadwick, from the studios of Georgia Public Radio in Atlanta.

ALEX CHADWICK, host:

Stephen Mihm, you write that some of these bills are actually better than what we get out of the U.S. Bureau of Engraving and Printing, how could that be?

Mr. STEPHEN MIHM (New York Time magazine): It's possible because of the level of engraving, the fineness of engraving that the North Koreans are producing, is actually superior - when you look at it under a magnifying glass - than the real thing.

So, for example, on the back of the $100.00 counterfeit note, the clock tower of Independence Hall is rendered more finely on the counterfeit than it is on the genuine note.

CHADWICK: Your story says that these have been in circulation for about 15 years and they are only detectable with very fine equipment, and it took quite a long time to figure out that they indeed come from North Korea. How did they manage to figure that out?

Mr. MIHM: I think one of the key, kind of, junctures in this entire investigation began in the 1990s as the regime started to go downhill economically. You began to have a growing tide of defectors who fled the regime. More often than not they ended up in South Korea.

Many of them were high-ranking officials. And when they started debriefing these folks they began to get a fairly consistent story, that there was, in fact, an enterprise to counterfeit U.S. currency; that it had begun with an ideological edge; and now, as the regime was going downhill it was making up a deficit essentially. And a lot of the defectors started to steer people in the intelligence community toward a town outside Pyang-Yang called Pyang-Song, which is home to the national mint complex. And the national mint complex manufactures the North Korean currency, the Won, but it also, defector accounts began to make clear, manufactured counterfeits of U.S. currency.

The South Korean sources were able to piece that together in conjunction with their counterparts in this country as well.

CHADWICK: The investigations led the U.S. government to investigate a bank that's based in Macau - that bank was ultimately shut down. It was said to be a bank very friendly to the higher officials in North Korea, and that act, you write, may have precipitated the kind of break off in six party talks that were supposed to be leading Korea to renounce or stop the building of nuclear weapons.

I mean this is - it sounds like a weird, kind of off the wall sort of enterprise, but this really matters, this counterfeiting.

Mr. MIHM: It does. And to understand counterfeiting, is in many ways, to understand the North Korean regime. For decades now, they have been increasingly dependent upon illicit activities to underwrite their enterprises. And when we, and by we I mean the United States government and specifically the Treasury Department, hit this bank in Macau, Banco Delta Asia, we were essentially hitting the accounts of members of the regime's elite.

In many respects Kim John Il's under tremendous pressure now, to get those accounts unfrozen. A lot of folks I've spoken to in the government and outside, have suggested that that's one reason they walked away from the six party talks. It's even a reason, to some extent, that they have resorted to the recent spate of missile tests to try to bring the United States back to the negotiating table.

It's an odd strategy perhaps, but one that they've honed and perfected over the years.

CHADWICK: Can you see any effect of this counterfeit money on our economy, on the U.S. economy?

Mr. MIHM: No, not an appreciable effect. It was originally thought of to be a much larger threat than it actually is. Its real threat though, and one that I write about at some length, is that how do you negotiate with a country that's counterfeiting your currency? It makes it rather difficult, because if there was ever a gesture of bad faith, that would be it.

So it's played a much more important role on a diplomatic level than on an economic level.

CHADWICK: Stephen Mihm's story on North Korea and the counterfeiting of American currency is in the Sunday New York Times magazine. Stephen Mihm, thank you.

Mr. MIHM: Thank you.

(Soundbite of music)

ADAMS: More coming up on DAY TO DAY from NPR News.

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