Mick Hartley

From philately to numismatics.

What would you do, in Kim Jong-un's shoes, if you were desperate for cash and your options were running out? Sanctions continue to bite and the issue of foreign labour – North Korean workers under slave labour conditions earning money for the regime – is coming under increasing scrutiny. Well, you might consider firing up those old counterfeiting machines again:

Following initial reports last week that a North Korean agent was arrested in the border city of Dandong in Liaoning Province, northeastern China, multiple sources confirmed Wednesday that the official had been involved in distributing counterfeit U.S. dollars.

After years of circulating counterfeit $100 banknotes, North Korea’s so-called supernotes seemed to have disappeared in recent years. Pyongyang’s forged $100 bills, considered nearly flawless, were a major source of slush funds for the regime and date back to the 1970s. But a major crackdown by U.S. authorities and new security features on banknotes led to a decline in the trade.

The recent arrest indicates their possible resurgence.

"So-called supernotes" because they were so well made.

One source familiar with Beijing-Pyongyang relations told the JoongAng Ilbo that the agent captured by Chinese officials earlier this month brought $5 million in cash into China from North Korea in order to make payments for household goods and home appliances.

These goods were supposedly distributed to the North Korean people during the April 15 celebration of the birthday of the country’s late founder, Kim Il Sung, as well as during its ruling Workers’ Party’s seventh congress held in early May, the first of its kind in nearly four decades.

Because of international sanctions on North Korea, including those in UN Security Council Resolution 2270 passed in March, Pyongyang is being blocked from financial transactions giving it access to U.S. cash.

“The $5 million was exchanged at the Industrial and Commercial Bank of China and the Agricultural Bank of China for some 30 million yuan [$4.6 million] and then deposited,” the source said.

“But a number of the notes were found to be counterfeit $100 bills when they were run through the banknote counter by a bank employee, so Chinese authorities ordered the relevant account be frozen and arrested the North Korean agent.”

Some banks have note counters that detect counterfeits.

At the time of the agent’s arrest at his home in Dandong earlier this month, Chinese authorities were reported to have confiscated some 30 million yuan and gold bars. This seizure of the cash was actually misrepresented and that was the amount frozen in his bank account.

“There has been talk about the circulation of counterfeit money among businessmen in Dandong who deal with North Korea,” another intelligence source said. “The distribution of counterfeit dollars is a serious crime that damages the financial payment system, so China, taking into account that this may spread internationally, is said to be keeping silent on the case.”

“North Korea’s economy is entering a state of paralysis because of a shortage of dollars, and there is a high likelihood that it is systematically counterfeiting notes and in the process of wide-scale distribution,” the source added.

And, from Yonhap:

High quality U.S. counterfeit notes are circulating in North Korea, raising speculation that the reclusive country may be manufacturing them and handing them off to unsuspecting visitors, sources in Hong Kong said Sunday.

Sources who are familiar with the North said a Hong Kong businessmen who visited Pyongyang recently tried to deposit a US$100 note with a local bank but was told that it was a counterfeit bill.

The entrepreneur, who was not identified, claimed he got the bill just as he was checking out of the hotel he stayed in while in the North Korean capital….

Related to the discovery, a North Korean watcher said there has been speculation that counterfeit notes are circulating in the North without people knowing about it. He said with no usable sensors available in the country, there is no way for ordinary North Koreans to know that the money they have is real or fake. He added that with North Koreans not having access to good color scanners or copy machines, it may be North Korean authorities that are making such notes.

Reflecting this, authorities that checked the bill said that it was a very well-made fake. North Korea's ruling party is known to have operated a special bureau that made counterfeit currency, and in the past, the country was accused of making so-called superdollars.

Chinese media, meanwhile, said that counterfeit Chinese yuan have been found, with some authorities suspecting North Korea of making such notes.

China will be pleased.

Joshua Stanton has more detail.