Archive for the ‘Counterfeiting’ Category

US might not have a DPRK envoy, but…

Sunday, February 1st, 2009

US slaps sanctions on DPRK companies
According to the Associated Press (Via CBS):

The United States is imposing sanctions on several Chinese, Iranian and North Korean companies for violating arms export regulations governing missile technology and other proliferation activities.

The sanctions are largely symbolic as they bar the companies from trade with the U.S. that they were not likely involved in. Although they were in the works for some time, the Obama team signed off on the sanctions on Jan. 21, a day after it took office, signaling a continuing tough stance from Washington on weapons technology transfers.

U.S. Slaps Sanctions On Overseas Companies
Associated Press (via CBS)

Here is a link to the text from the US Federal Register
Below is a summary:

SUPPLEMENTARY INFORMATION: Pursuant to Section 73(a)(1) of the Arms Export Control Act (22 U.S.C. 2797b(a)(1)); Section 11B(b)(1) of the Export Administration Act of 1979 (50 U.S.C. app. 2410b(b)(1)), as carried out under Executive Order 13222 of August 17, 2001 (hereinafter cited as the “Export Administration Act of 1979”); and Executive Order 12851 of June 11, 1993; the U.S. Government determined on January 15, 2009 that the following foreign entities had engaged in missile technology proliferation activities that require the imposition of missile sanctions described in Section 73 of the AECA (22 U.S.C. 2797b)  and Section 11B of the EAA (50 U.S.C. Appx 24710b) on these entities:

Korea Mining and Development Corporation (KOMID) (North Korea) and  its sub-units and successors
–Mokong Trading Corporation (North Korea) and its sub-units and successors
–Sino-Ki (North Korea) and its sub-units and successors

And from the Donga Ilbo:

This is the eighth time for the mining company, which has been closely watched by Washington as an exporter of Pyongyang’s ballistic missiles and conventional weapons, to get U.S. sanctions.

The company was slapped with sanctions in 1992, 1998, 2000, 2003, January and August in 2007, and August last year.

Ex-IRA figure faces US counterfeiting charge
According to the Associated Press:

Irish police arrested former Workers Party leader Sean Garland, 74, outside the entrance of the fringe party’s Dublin headquarters — more than three years after he jumped bail in the neighboring British territory of Northern Ireland while facing a similar U.S. extradition warrant there.

Garland had been living openly in the Republic of Ireland — which typically refuses to extradite citizens to face criminal charges outside the European Union — since he left Belfast and abandoned a bail of 30,000 British pounds (about $53,000 at the time) following his October 2005 arrest.

U.S. authorities that year indicted Garland with receiving, smuggling and laundering millions in “superdollars” — so called because of their expert design — that the government of North Korea allegedly began distributing in the late 1980s to weaken the American currency. If extradited and convicted, Garland could face up to five years in prison and a $250,000 fine.

Only one of the past two-dozen extradition requests from the U.S. Justice Department has been approved by Irish judges, who generally oppose extradition, citing America’s harsher sentences and penal system.

Under [Garland’s] leadership, the Workers Party appealed in 1986 to the Communist Party of the Soviet Union for funds. According to the 2005 U.S. indictment, Russian officials encouraged Garland and other Official IRA activists to take counterfeit U.S. $100 bills produced by North Korea.

Read the full story here:
Ex-IRA figure faces US counterfeiting charge
Associated Press
Shawn Pogatchnik

NK Defectors’ Groups to Get US Gov’t Aid
According to the Korea Times:

The U.S. Department of State will directly provide groups organized by North Korean defectors here with financial support for the first time, according to reports Sunday.

Thus far, Washington has funded local groups working for improvement of North Korean human rights via the National Endowment for Democracy (NED), a private organization supporting freedom around the world.

The move was construed as part of increased U.S. efforts to shed light on humanitarian issues in the Stalinist state.

The State Department posted a notice on the Human Rights Democracy Fund (HRDF) last September and about 50 organizations reportedly applied for the program.

Among the beneficiaries, Free North Korea Radio and the Coalition for North Korean Women’s Rights were granted $500,000 and $300,000, respectively.

The groups will receive a certain amount of money every month for two to three years in accordance with their performance.

Kang Su-jin, founder and representative of the coalition, said she thinks that the U.S. department aims at nurturing North Korean defectors as future leaders through the direct funding.

An official of the department was quoted as saying on condition of anonymity by Radio Free Asia (RFA) that a total of $3 million has been set aside for the program.

But the official refused to elaborate on grantees, saying the issue was “very sensitive.”

Read the full story here:
NK Defectors’ Groups to Get US Gov’t Aid
Korea Times
Kim Sue-young


Nuclear declaration and US Sanctions

Friday, June 27th, 2008

UPDATE 3:  Executive Order: Continuing Certain Restrictions with Respect to North Korea and North Korean Nationals

By the authority vested in me as President by the Constitution and the laws of the United States of America, including the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.) (IEEPA), the National Emergencies Act (50 U.S.C. 1601 et seq.) (NEA), and section 301 of title 3, United States Code,

I, GEORGE W. BUSH, President of the United States of America, find that the current existence and risk of the proliferation of weapons-usable fissile material on the Korean Peninsula constitute an unusual and extraordinary threat to the national security and foreign policy of the United States, and I hereby declare a national emergency to deal with that threat. I further find that, as we deal with that threat through multilateral diplomacy, it is necessary to continue certain restrictions with respect to North Korea that would otherwise be lifted pursuant to a forthcoming proclamation that will terminate the exercise of authorities under the Trading With the Enemy Act (50 U.S.C. App. 1 et seq.) (TWEA) with respect to North Korea.

Accordingly, I hereby order:

Section 1. Except to the extent provided in statutes or in regulations, orders, directives, or licenses that may be issued pursuant to this order, and notwithstanding any contract entered into or any license or permit granted prior to the date of this order, the following are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in:

all property and interests in property of North Korea or a North Korean national that, pursuant to the President’s authorities under the TWEA, the exercise of which has been continued in accordance with section 101(b) of Public Law 95-223 (91 Stat. 1625; 50 U.S.C. App. 5(b) note), were blocked as of June 16, 2000, and remained blocked immediately prior to the date of this order.

Sec. 2. Except to the extent provided in statutes or in regulations, orders, directives, or licenses that may be issued pursuant to this order, and notwithstanding any contract entered into or any license or permit granted prior to the date of this order, United States persons may not register a vessel in North Korea, obtain authorization for a vessel to fly the North Korean flag, or own, lease, operate, or insure any vessel flagged by North Korea.

Sec. 3. (a) Any transaction by a United States person or within the United States that evades or avoids, has the purpose of evading or avoiding, or attempts to violate any of the prohibitions set forth in this order is prohibited.

(b) Any conspiracy formed to violate any of the prohibitions set forth in this order is prohibited.

Sec. 4. For the purposes of this order:

(a) the term “person” means an individual or entity;

(b) the term “entity” means a partnership, association, trust, joint venture, corporation, group, subgroup, or other organization; and

(c) the term “United States person” means any United States citizen, permanent resident alien, entity organized under the laws of the United States or any jurisdiction within the United States (including foreign branches), or any person in the United States.

Sec. 5. The Secretary of the Treasury, after consultation with the Secretary of State, is hereby authorized to take such actions, including the promulgation of rules and regulations, and to employ all powers granted to the President by IEEPA as may be necessary to carry out the purposes of this order. The Secretary of the Treasury may redelegate any of these functions to other officers and agencies of the United States Government consistent with applicable law. All agencies of the United States Government are hereby directed to take all appropriate measures within their authority to carry out the provisions of this order.

Sec. 6. The Secretary of the Treasury, after consultation with the Secretary of State, is hereby authorized to submit the recurring and final reports to the Congress on the national emergency declared in this order, consistent with section 401(c) of the NEA (50 U.S.C. 1641(c)) and section 204(c) of IEEPA (50 U.S.C. 1703(c)).

Sec. 7. This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, instrumentalities, or entities, its officers or employees, or any other person.



June 26, 2008.

UPDATE 2: How much plutonium does the DPRK have?

From the Daily Times (Pakistan):

But there may be problems ahead with the declaration. Japan’s Asahi Shimbun newspaper reported an informed source as saying the North declared it produced around 30 kg (66 lbs) of plutonium, while US officials have said they think it is closer to 50 kg. Sung Kim, a State Department envoy who witnessed the cooling tower blast, told reporters in Seoul on Saturday that there might not be enough time to complete the North’s denuclearisation before President George W Bush leaves office in January 2009.

‘Emotionally attached’: Kim said North Koreans engineers appeared to have formed an “emotional attachment” to their atomic programme that has become apparent during international efforts to dismantle it. Kim told reporters that he saw emotion in Ri Yong-ho, head of the Yongbyon nuclear reactor, and his colleagues when they all witnessed Friday’s demolition of the plant’s cooling tower. “I think I detected a sense of sadness when the tower came down but I thought he put it well when he was asked what this all meant for him and he said that he just hoped this would contribute to peace and stability,” said Ri.  

“US Treasury says N.Korea sanctions remain in place”
Reuters via Guardian
David Lawder

U.S. Treasury financial sanctions aimed at ending North Korean money laundering, illicit financing activities and weapons proliferation remain in effect despite the easing of other sanctions against Pyongyang, a Treasury spokesman said on Thursday.

The move by the Bush administration to lift some sanctions after North Korea delivered a long-delayed account of its nuclear activities will not restore the country’s access to the international banking system, Treasury spokesman John Rankin said.

North Korea was largely cut off from the international banking system in 2005 when the Treasury named Banco Delta Asia, a small bank in the Chinese gambling enclave of Macau, as a primary money laundering concern.

The Treasury accused the bank of circulating counterfeit U.S. currency produced by North Korea, and of knowingly handling transactions by North Korean entities involved in illicit activities, including the narcotics trade and sales of counterfeit cigarettes and other goods.

Both North Korea and Banco Delta Asia have denied the Treasury’s allegations.

Although about $25 million in frozen North Korean funds in Banco Delta Asia was released last year, the sanctions against the bank, which prohibit transactions with U.S. banks, remain in effect, Rankin said. International banks have largely shunned Banco Delta Asia as well.

As recently as April, Treasury officials said so called “supernotes” — high quality counterfeit $100 bills produced by North Korea, were still surfacing.

“The lifting of sanctions associated with the Trading with the Enemy Act, and removing North Korea from the list of state sponsors of terrorism does not represent North Korea’s re-integration into the international financial system,” he said.

Sanctions that prohibit U.S. companies from owning, leasing, operating, insuring North Korean-flagged shipping vessels, as well as registering vessels in North Korea, remain in place. 

ORIGINAL POST: Today North Korean made the nuclear declaration required by the February 2007 six-party agreement.  This web site does not focus on the nuclear issue, but this turn of events represents a significant US policy shift with economic implications for the DPRK.  The coverage has been overwhelming, so below are media excerpts that cover most of the angles:

“Pyongyang Submits Nuclear Declaration”
Wall Street Journal
Evan Ramstad

After keeping the U.S. and other countries waiting for 15 months, North Korea delivered a description of its efforts to develop nuclear weapons, setting up the next – and more difficult – stage in an international effort to disarm and reshape the isolated, authoritarian country.

North Korean diplomats gave a declaration of its nuclear-weapons program to Chinese counterparts in Beijing who have been coordinating the six-nation talks. In return, U.S. President George W. Bush announced the lifting of some trade sanctions and beginning of the process of removing North Korea from its list of state sponsors of terror. (Read the text of the White House statement here).

Under the February 2007 deal, North Korea also agreed to disable a nuclear plant that provided fuel for its nuclear weapons, a step that’s also nearly complete. On Friday, it plans to blow up the cooling tower at the nuclear plant and invited TV crews from several countries, including the U.S. and South Korea, to record the event.

The contents of North Korea’s declaration weren’t immediately disclosed. In recent weeks, U.S. diplomats have said they didn’t expect it to include a key piece of data – how many nuclear weapons the country has built. The document also is believed to be limited to North Korea’s efforts to develop plutonium as a nuclear fuel, but doesn’t mention suspected research into highly-enriched uranium as a fuel nor its suspected proliferation efforts to Syria.

“North Korea removed from US ‘axis of evil'”
London Times
Jeremy Page and Richard Lloyd Parry

The US move, which will also see a lifting of long-running sanctions, would mark the most significant thaw in relations between Washington and Pyongyang since the 1950-53 Korean War. Mr Bush said that it was intended to reward and encourage North Korean co-operation and accelerate the tangled negotiations on the country’s nuclear disarmament.

In the first instance, America will exempt North Korea from sanctions under the Trading with the Enemy Act, a piece of First World War legislation that was employed during the Korean War, and which restricts trade with Pyongyang by US companies and citizens. The only other country subject to its provisions is Cuba.

It also gave notice that it would start the 45-day process of removing North Korea from its list of state sponsors of terrorism, where it stands alongside Cuba, Iran, Sudan and Syria. Sanctions against them include a ban on arms sales, economic assistance, and an obligation on the US Government to oppose loans to listed countries by such international institutions as the World Bank.

“Diplomacy Is Working on North Korea”
Wall Street Journal
Condoleeza Rice
6/26/2008; Page A15

In its declaration, North Korea will state how much plutonium it possesses. We will not accept that statement on faith. We will insist on verification. North Korea has already turned over nearly 19,000 pages of production records from its Yongbyon reactor and associated facilities. With additional information we expect to receive – access to other documents, relevant sites, key personnel and the reactor itself – these records will help to verify the accuracy and completeness of Pyongyang’s declaration. North Korea’s plutonium program has been by far its largest nuclear effort over many decades, and we believe our policy could verifiably get the regime out of the plutonium-making business.

Getting a handle on North Korea’s uranium-enrichment program is harder, because we simply do not know its full scale or what it yielded. And yet, because of our current policy, we now know more about North Korea’s uranium-enrichment efforts than before, and we are learning more still – much of it troubling. North Korea acknowledges our concerns about its uranium-enrichment program, and we will insist on getting to the bottom of this issue.

Similarly, we know that North Korea proliferated nuclear technology to Syria, but we do not know whether that is the end of the story. Rather than just trying to address this threat unilaterally, we will be more effective in learning about North Korean proliferation and preventing its continuation through a cooperative effort with Japan, South Korea, China and Russia.

And in return for these steps, what have we given thus far? No significant economic assistance. No trade or investment cooperation. No security guarantees or normalized relations. And our many sanctions on North Korea, both bilateral and multilateral, remain in place.

“‘Good start’ to UN’s Syria probe”

The head of a UN team investigating allegations that Syria has been working on a secret nuclear weapons programme says their work is off to a good start.

The IAEA official, Olli Heinonen, said inspectors had taken samples at the al-Kibar site in the Syrian desert.

“It was a good start, but there’s still work that remains to be done,” he said.

“For this trip we did what we agreed to. We achieved what we wanted on this first trip. We took samples which we wanted to take. Now it’s time to analyse them.”

Mr Heinonen also said he was generally satisfied with the level of co-operation by Syria.

Additional information: 

To read a hawk perspective, see Josh’s post at One Free Korea.  Also, the Telegraph (UK) reports that Vice President Cheney tried to block the deal.

David Kang spoke to NPR’s Market Place.

US move reduces Japan’s negotiation leverage over DPRK.


U.S. counterfeiting charges against N. Korea based on shaky evidence

Thursday, January 10th, 2008

McClatchy News
Kevin Hall

Two years ago, as he was ratcheting up a campaign to isolate and cripple North Korea’s dictatorship financially, President Bush accused the communist regime there of printing phony U.S. currency.

“When someone is counterfeiting our money, we want them to stop doing that. We are aggressively saying to the North Koreans just that — don’t counterfeit our money,” Bush said on Jan. 26, 2006.

However, a 10-month McClatchy investigation on three continents has found that the evidence to support Bush’s charges against North Korea is uncertain at best and that the claims of the North Korean defectors cited in news accounts are dubious and perhaps bogus. One key law enforcement agency, the Swiss federal criminal police, has publicly questioned whether North Korea is even capable of producing “supernotes,” counterfeit $100 bills that are nearly perfect except for some practically invisible additions.

Many of the administration’s public allegations about North Korean counterfeiting trace to North Korea “experts” in South Korea who arranged interviews with North Korean defectors for U.S. and foreign newspapers. The resulting news reports were quoted by members of Congress, researchers and Bush administration officials who were seeking to pressure North Korea.

The defectors’ accounts, for example, were cited prominently in a lengthy July 23, 2006, New York Times magazine story that charged North Korea with producing the sophisticated supernotes.

The McClatchy investigation, however, found reason to question those sources. One major source for several stories, a self-described chemist named Kim Dong-shik, has gone into hiding, and a former roommate, Moon Kook-han, said Kim is a liar out for cash who knew so little about American currency that he didn’t know whose image is printed on the $100 bill. (It’s Benjamin Franklin.)

The Secret Service, the Federal Reserve Board and the Treasury Department all declined repeated requests for interviews for this story.

The first international test of the U.S. charge occurred in July 2006, when at the request of the Bush administration, the international police agency Interpol assembled central bankers, police agencies and banknote industry officials to make the U.S. case against North Korea.

The conference in Lyon, France, followed Interpol’s issuance in March 2005 of an orange alert — at America’s request — calling on member nations to prohibit the sale of banknote equipment, paper or ink to North Korea.

But after calling together more than 60 experts, the Secret Service — the lead U.S. agency in combating counterfeiting — never provided any details of the evidence it said it had, instead citing “intelligence” and asking those assembled to accept the administration’s claims on faith alone.

“I can’t remember if I was laughing or asleep,” said one person who was in the room and discussed the meeting with McClatchy on the condition of anonymity because of active contact with the Secret Service.

Interpol’s secretary general is an American, Ronald K. Noble, a veteran of the Secret Service from 1993 to 1996. He declined to discuss the supernotes in detail because he’s sworn to secrecy about classified reports he received in his old job. Noble said the Secret Service made clear it was “not at liberty to share all of the information” to which it had access.

The most definitive reaction came in May 2007 from the Swiss Bundeskriminalpolizei, which is on the lookout for counterfeit currency and has worked closely with U.S. financial authorities in the past. Calling on Washington to present more evidence, the Swiss said they doubted that North Korea was behind the supernotes.

The Swiss police agency’s doubts are based in part on the small quantity of supernotes that have been seized since a sharp-eyed banker in the Philippines first discovered them in 1989 — about $50 million worth, less than it would cost to buy the machinery to make the unique paper and print the notes.

The Swiss agency also doubted that North Korea has the technical expertise to produce the notes.

“Using its printing presses dating back to the 1970s, North Korea is today printing its own currency in such poor quality that one automatically wonders whether this country would even be in a position to manufacture the high-quality ‘supernotes,’ ” the Swiss agency reported.

It also noted that whoever is printing the supernotes has produced at least 19 different versions, each corresponding to a tiny change in U.S. engraving plates.

“It’s by far the most sophisticated counterfeiting operation in the world,” said James Kolbe, a recently retired Republican congressman from Arizona who oversaw funding for the Secret Service. “We are not certain as to how this is being done or how it’s happening. We are not certain as to how (the North Koreans) could gain access to the sophisticated (technology) to do it. It is extremely sophisticated.”

The hardest evidence to surface so far is the 2004 indictment of Sean Garland, a leader of an Irish Republican Army splinter group, who in the late 1990s allegedly ferried more than $1 million in supernotes to Europe, mostly from the North Korean Embassy in Moscow. Garland is now in the Republic of Ireland, but the Irish Embassy said the U.S. hasn’t sought his extradition.

Former U.S. officials who helped promote the allegations about North Korea offered different views about how the administration reached its conclusions.

David Asher, who was the coordinator of a working group at the State Department that collected details on North Korean criminal activities, said his group turned up evidence of the counterfeiting and didn’t rely on “intelligence” to make its case.

Asher, now a researcher at the Heritage Foundation, a conservative Washington policy organization, declined to provide any details.

But Bush, asked for proof that North Korea was counterfeiting supernotes, told McClatchy on Aug. 8, “I’m not at liberty to speak about intelligence matters.”

John Bolton, the former Bush administration official most identified with a hard line on North Korea, told McClatchy that he never saw hard evidence that the North Korean government was making the supernotes. But he said the evidence that the North Koreans distributed them is sufficient proof of bad behavior.

One former top U.S. intelligence official said that he never saw enough information to reach a conclusion.

“I never really saw the intelligence myself to make an independent judgment,” said Carl Ford, who quit as head of the State Department’s intelligence bureau in 2003 because he challenged the administration’s phony claim, based largely on defectors, that Iraq had weapons of mass destruction. The administration’s reluctance to disclose details on North Korea “doesn’t pass the smell test,” he said.

Another key piece of evidence, the alleged role that a tiny bank in the Chinese enclave of Macau played in helping North Korea launder counterfeit notes, also appears dubious. The U.S. Treasury blacklisted the Banco Delta Asia and issued a ruling in March 2007 that effectively shut the bank down.

But an audit by the international accounting firm Ernst & Young on behalf of the Macanese government and obtained by McClatchy found only a single case of counterfeit notes found at Banco Delta Asia. It occurred in 1994, and the fakes didn’t originate in North Korea. The bank found these notes itself and alerted authorities.

Macau has lifted its sanctions against the bank, but the Treasury Department, citing “intelligence,” maintains its blacklisting, although it did allow the bank to transfer $25 million back to North Korea.

Although banks around the world are still seizing supernotes, the Bush administration is no longer publicly accusing North Korea of producing them and has dropped the subject from talks on halting North Korea’s nuclear weapons program, according to State Department officials.

The question that remains is whether the administration is again retreating from a charge it can’t support or whether it’s soft-pedaling hard evidence to avoid derailing the effort to halt North Korea’s nuclear weapons program.

The mystery of the true origin of the supernotes also remains. Industry experts such as the former director of the Bureau of Engraving and Printing, Thomas Ferguson, said the supernotes are so good that they appear to have been made by someone with access to some government’s printing equipment.

Some experts think that Iran probably made the notes, and others speak of criminal gangs in Russia or China.

Klaus Bender, the author of a book on the subject, “Moneymakers: The Secret World of Banknote Printing,” said that the phony $100 bill is “not a fake anymore. It’s an illegal parallel print of a genuine note.”

“It goes way beyond what normal counterfeiters are able to do,” said Bender, whose book first spotlighted the improbability of North Korean supernotes. “And it is so elaborate (and expensive) it doesn’t pay for the counterfeiting anymore.”

Bender claims that the supernotes are of such high quality and are updated so frequently that they could be produced only by a U.S. government agency such as the CIA.

As unsubstantiated as the allegation is, there is a precedent. In his new book on the history of the CIA, journalist Tim Weiner detailed how the agency tried to undermine the Soviet Union’s economy by counterfeiting its currency.

Making limited quantities of sophisticated counterfeit notes also could help intelligence and law enforcement agencies follow payments or illicit activities or track the movement of funds among unsavory regimes, terrorist groups and others.

“As a matter of course, we don’t comment on such claims, regardless of how ridiculous they might be,” said CIA spokesman Mark Mansfield.


U.S. senator demands conditions to removing N.K. from terrorism list

Tuesday, December 11th, 2007


(NKeconWatch: Joshua over at OFK also has a contribution to this)

A senior U.S. senator introduced a resolution setting conditions for removing North Korea from the U.S. list of terrorism-sponsoring nations, one of the key incentives offered for Pyongyang’s denuclearization.

Sen. Sam Brownback (R-Kansas) submitted Resolution 399 on Monday and so far has three co-sponsors.

The resolution urges the administration not to lift the designation until it can be demonstrated that North Korea is no longer engaged in proliferation of weapons of mass destruction and no longer counterfeiting American currency.

It also demands proof that a North Korean ruling party bureau, believed to be running illicit financial activities including drug trafficking and counterfeiting, has been made inoperable.

The senator also demands that the terrorist-nation designation remain until all U.S. overseas missions have been instructed to facilitate asylum applications by North Koreans seeking protection as refugees.

North Korea was put on the list in January 1988, soon after its agents blew up a South Korean civilian aircraft. Brownback’s resolution demands North Korea’s accounting of Japanese nationals abducted by the North as well as of surviving South Korean prisoners of war.

“If the United States takes the step of removing North Korea from the terrorism list, let’s at least make clear the conditions for such a removal,” Brownback said, adding, “I question the merits of the State Department’s decision to remove North Korea from its terrorist list.”

“It is important that the United States sends a loud and clear message to the North Korean regime that we will remain vigilant,” he said.

Delisting North Korea is one of the key benefits the U.S. offered in return for Pyongyang’s disablement of its core nuclear facilities and full disclosure of its atomic programs, the steps toward full dismantlement agreed on by six nations — South and North Korea, the U.S., China, Russia and Japan.
Getting off the list would free North Korea from a number of restrictions prohibiting meaningful economic and political assistance and exchange from the U.S. and the international community.

In Seoul, a Foreign Ministry official expressed concerns the resolution, if passed, could undermine progress in the nuclear disarmament talks, but said it did not pose any immediate threats to the six-nation deal on the denuclearization of the North.

“Delisting North Korea does not depend on the resolution, but whether the North fully discloses its nuclear programs,” the official, who is deeply involved with the nuclear talks, said, asking not to be identified. “Obviously, nothing has been changed so far. The U.S. administration can still delist the North if and whenever it chooses to.”


Swiss authorities question U.S. counterfeiting charges against North Korea

Tuesday, May 22nd, 2007

McClatchy Newspapers
Kevin Hall

Swiss police who closely monitor the circulation of counterfeit currency have challenged the Bush administration’s assertions that North Korea is manufacturing fake American $100 bills.

President Bush has accused North Korea of making and circulating the false bills, so perfect they’re called supernotes, and in late 2005 the U.S. Treasury took measures to block that country’s access to international banking. North Korea subsequently halted negotiations over dismantling its nuclear weapons program, a process that remains in limbo because of the dispute.

The Swiss federal criminal police, in a report released Monday, expresses serious doubt that North Korea is capable of manufacturing the fake bills, which it said were superior to real ones.

The Swiss report includes color enlargements that show the differences between genuine bills and counterfeit supernotes. The supernotes are identical to U.S. banknotes except for added distinguishing marks, which can be detected only with a magnifying glass. In addition, under ultraviolet or infrared light, stripes appear or the serial numbers disappear on the supernotes.

The Bundeskriminalpolizei didn’t hazard a guess as to who’s been manufacturing the supernotes, but said experts agreed that the counterfeits weren’t the work of an individual but of a government or governmental organization.

The U.S. Secret Service, the lead federal agency in combating counterfeiters, declined to provide details or respond to the Swiss report. But spokesman Eric Zahren said the agency stood by its allegations against Pyongyang.

“Our investigation has identified definitive connections between these highly deceptive counterfeit notes and the North Koreans,” Zahren said. “Our investigation has revealed that the supernotes continue to be produced and distributed by sources operating out of North Korea.”

The Swiss report says the Secret Service has refused to provide any information about its investigations. It notes that if the United States produced concrete evidence to back up its allegations, “it would have a basis for going to war.” Under international law, counterfeiting another country’s currency is considered a cause for war.

But if the U.S. has a reason to go to war, against whom?

The Swiss police noted that before charging North Korea with counterfeiting, U.S. officials had mentioned Iran, Syria and East Germany as possible manufacturers. North Korea’s capacity for printing banknotes is extremely limited, because its banknote printing press dates from the 1970s. Its own currency is of “such poor quality that one automatically wonders whether this country would even be in a position to manufacture the high-quality `supernotes,’ ” the report says.

For years, analysts have wondered why the supernotes – which are detectable only with sophisticated, expensive technology – appear to have been produced in quantities less than it would cost to acquire the sophisticated machinery needed to make them. The paper and ink used to make U.S. currency are made through exclusive contract and aren’t available on the open marketplace. The machinery involved is highly regulated.

In theory, if North Korea were producing the notes, it could print $50 million worth of them within a few hours – as much as has been seized in nearly two decades, the report said.

“What defies logic is the limited, or even controlled, amount of `exclusive’ fakes that have appeared over the years. The organization could easily circulate tenfold that amount without raising suspicions,” says the Swiss police report, which also says Switzerland has seized 5 percent of all known supernotes.

Moreover, it noted that the manufacturer of the supernotes had issued 19 different versions, an “enormous effort” that only a criminal organization or state could undertake. The updates closely tracked the changes in U.S. currency issued by the Federal Reserve Bank.

The fact that the Swiss are questioning the veracity of the U.S. allegations against North Korea carries special weight in the insular world of banknote printing.

“The producers of the most sophisticated products used in banknote printing are Swiss or at least of Swiss origin. That goes for the (specialty) inks and that goes for the machines,” said Klaus Bender, a German foreign correspondent and the author of “Moneymakers: The Secret World of Banknote Printing.”

“Can the North Koreans do it, are they doing it? The answer is couched in diplomatic language, (but) the answer is clearly no,” Bender said.


“According to the US Secret Service, $50 million worth of `super-fakes’ were confiscated worldwide over the past 16 years, only a small portion of them within the United States. Measured against the US annual counterfeit damage of $200 million, the damage from $50 million worth of `super-fakes’ is not that significant. The Federal Reserve Bank produces genuine $100 dollar bills mainly for the foreign market. On their return to the U.S., the issuing bank after examination can easily distinguish the `supernotes’ from originals using banknote testing equipment, due to altered infrared characteristics. For this reason, the United States over the years has hardly suffered economic damage due to the `super dollar.’

“A (banknote) printing press like the one in North Korea can produce $50 million worth of bills in a few hours. Using its printing presses dating back to the 1970’s, North Korea is today printing its own currency in such poor quality that one automatically wonders whether this country would even be in a position to manufacture the high-quality `supernotes.’ The enormous effort put into the making of the 19 different `super-fakes’ that we know of is unusual. Only a (criminal) governmental organization can afford such an effort. What defies logic is the limited or even controlled amount of `exclusive’ fakes that have appeared over the years. The organization could easily circulate tenfold that amount without raising suspicions.”


Bank owner disputes money-laundering allegations

Wednesday, May 16th, 2007

McClatchy Newspapers
Kevin G. Hall

The owner of a tiny bank in faraway Macau that the U.S. government blacklisted after accusing it of laundering the illicit gains of North Korea’s leaders has appealed to the U.S. Treasury to reverse its decision. He claims that the U.S. government itself had encouraged him to maintain North Korea’s accounts.

The May 2 statement by Stanley Au raises new questions about the Treasury’s decision March 19 as well as the Bush administration’s assertions that the North Korean regime has used the Banco Delta Asia to introduce counterfeit U.S. $100 bills into circulation.

In his declaration, Au said that some $160,000 in counterfeit American currency had turned up at his bank in 1994 but that he’d reported the incident to Macau’s police after he’d learned the money was fake. A short time later, U.S. government agents called on him, he said.

“I cordially answered the questions and asked if their preference was that we should desist from doing business with North Korean entities,” Au wrote. “They said they would like us to continue to deal with them, as it was better that we conducted this business rather than another financial entity that may not be so cooperative with the United States.”

Au made his statement as part of an appeal of the Treasury’s blacklisting of his bank for what it describes as insufficient controls against money laundering and passing fake U.S. currency into the global financial system. The family-owned bank in the Chinese-controlled enclave of Macau is now in government receivership.

Au said that because the meetings took place 13 years ago, he’d forgotten the agents’ names. The U.S. Secret Service, under Treasury control at the time, investigates the counterfeiting of American currency, but Au didn’t specify with what agency he met.

The Treasury declined to comment on Au’s statement or the appeal.

“In the next couple of years, the Bank was periodically contacted by other U.S. government agents and we cooperated in their inquiries,” Au said in a statement to the Treasury first published by China Matters, an Internet blog.

“Since those meetings, I believed that the U.S. government knew of my willingness to cooperate with regard to the Bank’s North Korean business and, indeed, to end that business if this would help prevent unlawful conduct.”

The statement to the Treasury also said that international accounting giant Price Waterhouse Coopers audited the bank’s finances annually and didn’t raise questions about its business or accounting practices.

Shortly after the Treasury’s initial September 2005 action sent the bank into receivership, Macau’s monetary authorities asked independent auditor Ernst & Young to audit the bank’s books. The audit, obtained and published by McClatchy Newspapers, found insufficient money-laundering controls but no evidence that North Korea used the bank to introduce fake $100 bills.

Au’s 10-page declaration also countered another allegation by the Treasury, that Banco Delta Asia maintains a relationship with one source of the bills in 1994.

Au said he’d closed two of the three accounts into which the counterfeit bills had been deposited, San Hap General Trading Co. and Kwok Tou, an individual. Both were known to have been doing business with North Korea, and neither challenged the closure. Au said he’d assumed that was an acknowledgement of guilt.

However, the third company, Zokwang Trading Co. Ltd. – which the Treasury alleges remains in an unsavory relationship with Banco Delta Asia – told authorities and bank officials that the counterfeit money deposited into its account had come from China and that it had no knowledge that it was fake.

Au said he’d warned Zokwang officials that the account would be closed if counterfeit money came through again. Shortly afterward, Banco Delta Asia began sending all large U.S.-dollar deposits to Hong Kong for screening at what today is banking behemoth HSBC.

“To the best of my knowledge, Zokwang has never since 1994 been found to be the source of counterfeit funds deposited with Banco Delta Asia,” Au said.


The North Korean Economy: Between Crisis and Catastrophe

Thursday, May 3rd, 2007

American Enterprise Institute Book forum

A couple of weeks ago, I had the opportunity to attend a book forum at the American Enterprise Institute on Nicholas Eberstadt’s new book, The North Korean Economy: Between Crisis and Catastrophe.  It was very informative to hear three different perspectives on the direction of North Korea’s economic reform.

Panelists included:

Nicholas Eberstadt, AEI
Andrei Lankov, Kookmin University
Deok-Ryong Yoon, Korea Institute for International Economic Policy

In summary, Mr. Eberstadt and Mr. Lankov are pessimistic about the North Korean leadership’s desire to enact reforms–knowing that information leakages will undermine their political authority.  As Mr. Lankov pointed out, the North Korean nomenklatura are all children and grandchildren of the founders of the country who are highly vested in the current system.  They have no way out politically, and as such, cannot reform.

They argue that the economic reforms enacted in 2002 were primarily efforts to reassert control over the de facto institutions that had emerged in the collapse of the state-run Public Distribition System, not primarily intended to revive the economy.  Lankov does admit, however, that North Korea is more open and market-oriented than it has ever been, and  Mr. Yoon was by far the most optomistic on the prospects of North Korean reform.

Personally, I think it makes sense to think about North Korean politics as one would in any other country–as composed of political factions that each seek their own goals.  Although the range of policy options is limited by current political realities, there are North Koreans who are interested in reform and opening up–even if only to earn more money.  In this light, even if the new market institutions recognized in the 2002 reforms were acknowledged only grudgingly, they were still acknowledged, and their legal-social-economic positions in society are now de jure, not just de facto.  The North Korean leadership might be opposed to wholesale reform, but that is economically and strategically different than a controlled opening up on an ad hoc basis–which is what I believe we are currently seeing. Anyway, dont take my word for it, check out the full commentary posted below the fold:



32 Out of 52 BDA Account Holders Revealed

Friday, April 27th, 2007

Daily NK
Nangung Min

While the transfer of BDA’s North Korea’s accounts continues to linger on, a defector once a high authority in North Korea, recently revealed the names of 32 account holders used in North Korea.

A list of 32 account holders (out of the 52 BDA North Korea accounts) were released on the internet site of “” on the 26th, in which the defector claims to be well acquainted or have conducted direct transactions with while working in foreign trade in North Korea.

This list recorded financial ministries including the No. 39 Department for Kim Jong Il’s personal funds, the People’s Military Department, National Security Agency and Safety Agency.

If this list is proven to be true, at present the international trades of North Korea’s 4 key financial centers, the Party, the military, the administration and the security agency can be analyzed to be in a frozen state.

In addition to unveiling the list of account holders, the defector informed, “BDA is commonly known as ‘Delta Bank’ amongst the elites in North Korea” and certified, “The North Korean government used this bank to import luxury goods, gifts and undoubtedly nuclear armaments and weapons of mass destruction.”

Furthermore, the defector said that “22% of all North Korea’s transactions were conducted through BDA” and implicated that BDA played a vital role as Kim Jong Il’s personal funds.

The U.S. State Department recently accused BDA of engaging in counterfeit dollars and hence all U.S. transactions with BDA was terminated. Since, the U.S. suspended its transactions with BDA, any official bank has also been placed in a difficult position to transact with BDA.

For now, the Bank of China, Hong Kong’s HSBC and 27 other Macau banks are known to have suspended transacting funds with North Korea.

For the past 2 weeks, North Korea has refused money regarding the 52 accounts. Meanwhile, the U.S. and China are urging that either each of the 52 account holders send the money directly or a third party remits the whole amount and the frozen measures returns to normal. As a result, North Korea’s part in the preliminary implementations of the Feb 13 Agreement continues to be delayed also.


Flags that hide the dirty truth

Friday, April 20th, 2007

Asia Times
Robert Neff

Many small countries in the world have resorted to unorthodox methods of obtaining much-needed currency. Although these methods may be legal, they often assist unscrupulous individuals and governments in conducting illegal activities. One popular method of obtaining cash is through flags of convenience (FOC). Countries, even land-locked ones, register other nations’ ships under their flag for a price.

It is a profitable industry that has no shortage of customers. Shipowners choose to register their ships under a foreign flag for a number of reasons, including tax advantages, cheap non-union crews, the ships’ conditions fail to meet the standards of the owner’s country, political reasons, or to facilitate illegal activities.

Because many of these ships often exchange flags and even their names, it is difficult to trace them, thus providing the anonymity they need to conduct their illegal operations. According to a statement by David Cockroft, general secretary of the International Transport Workers’ Federation (ITF): “Arms smuggling, the ability to conceal large sums of money, trafficking in goods and people and other illegal activities can also thrive in the unregulated havens which the flag of convenience system provides.”

Flying the Cambodian flag
One of the most notorious FOC countries was Cambodia. In 1994, Cambodia established its own ship registry – Cambodian Shipping Corporation (CSC), based in Singapore – and began immediately flagging ships of other nations.

Although its beginnings were modest (only 16 foreign ships registered with Cambodia during the first year) the CSC rapidly expanded. According to CSC, prior to its closing in 2002, the number of ships registered with the company was between 400 and 600, but according to US investigators and Cambodian officials the number was probably twice that.

CSC offered basically what many other FOC countries offered: registry for any ship, no questions asked, under its (Cambodia’s) flag for a low price. But, unlike other FOC countries, it offered to do the entire process online and within 24 hours. Despite Cambodia’s relative lag in Internet technology, its operation in Singapore enabled CSC to pioneer online registration.

As more and more foreign ships registered with CSC, it soon became apparent that a large number of the ships were involved in illegal activities. Cigarette smuggling operations were discovered near Crete and Albania; during the oil embargo of Iraq, oil was smuggled out of that country; human trafficking and prostitution operations were discovered near Japan and Crete, and, of course, drug trafficking.

All of these activities were cause for concern and drew condemnation, but there was one more criminal activity that concerned many nations even more: allegations that many of the ships were running arms. “Cambodia is one of the highest-risk flags. It is particularly murky and has got to be one of the first choices if you are running arms,” a spokesman for ITF said.

When asked about CSC’s alleged illegal operations, Ahamd Yahya of the Cambodian Ministry of Public Works and Transport was reported to have told Fairplay: “We don’t know or care who owns the ships or whether they’re doing ‘white’ or ‘black’ business … it is not our concern.” (Fairplay, October 12, 2000.)

Unsafe ships
In addition to illicit activities, the condition of the ships themselves was a concern. According to an article in the Guardian of London, by 2002 the company had about 450 registered ships, and out of this number 25 had suffered shipwrecks/strandings, 41 collisions, nine fires and 45 arrests. Nine  ś% ¬’n-registered ships were deemed severely hazardous and banned from entering European ports.

By the summer of 2002, many of the leading shipping organizations were calling for action to be taken against CSC. A spokesman for ITF condemned CSC and Lloyds shipping intelligence service wrote in an opinion piece: “The world should join us in demanding that Cambodia shut down this sleazy and pestilent offshore registration. How many more people have to die in incidents involving Cambodian-flagged vessels, or its ships detained for illegal activities, before something is actually done about it?”

The North Korean connection
American and South Korean interests in CSC were aroused when it was observed that a large number of North Korean ships, at least a dozen according to Michael Richardson, journalist and author of A Time Bomb for Global Trade, were registered with CSC and flying the Cambodian flag.

It is no secret that the Cambodian royal family had, and still maintains, a close relationship with the North Korean regime. King Norodom Sihamoni has often spoken of the Kim regime in a favorable manner. Kim Il-sung provided him with asylum during the turbulent years of Cambodia’s past and even built him an extensive 60-room palace outside Pyongyang. When the royal family returned to Cambodia it was accompanied by North Korean diplomats and bodyguards.

North Korea’s involvement in Cambodia’s flag of convenience operation was suspected after an investigation revealed that one of the primary partners in CSC was Lim In-yong, a senior North Korean diplomat who had served in Cambodia for many years. His role with CSC was described as being that of “a private citizen, [and] not as a representative of the North Korean government”. Whether his role was purely that of an individual or of a more sinister nature is unclear. But the United States and several other countries became increasingly suspicious of North Korea and the company’s motives.

Among several charges of illegal operations by North Korean ships, one was drug smuggling. When it was suggested in the media that Cambodian-registered North Korean ships may have been involved in drug smuggling, CSC denied any knowledge.

Incidents of drug smuggling involving ships from other nations flagged by the company were apparent. In 2002, the Greek-owned, but Cambodian-registered Winner was seized by French forces and discovered to be smuggling a large amount of cocaine. Interestingly enough, Hun Sen, the prime minister of Cambodia, gave his permission to the French government to board the ship – an indication that he did not support CSC. A short time later he revoked CSC’s authority to grant registry to foreign ships.

Perhaps the most infamous North Korean drug smuggling operation took place in 2003. The North Korean freighter Pong-su began its journey from North Korea under its own flag, but on arriving in Singapore changed its registration and reflagged under Tuvulu. It then proceeded to Australia where it was discovered trying to smuggle in a large amount of heroin, and was eventually seized after it tried to resist Australian authorities. Although this incident did not involve a Cambodian-flagged ship, it does give some credence to speculation that North Korea had smuggled drugs using CSC-flagged ships.

Weapons smuggling
While North Korea’s attempts to gain badly needed hard currency by smuggling drugs and tobacco were of some concern to the United States, more important were allegations that North Korea was smuggling and selling advanced weapons technology to other nations.

“Of most concern to the US and indeed to South Korea was the clear evidence that North Korean freighters flying the Cambodian flag or on the Cambodian register were moving ballistic missiles to clients in the Middle East and Africa,” noted journalist Richardson.

Perhaps the best-known of these Cambodian-registered North Korean ships was the Song Sang. In November 2002, a freighter believed to be carrying weapons departed a North Korean port and was tracked by American satellites and American naval ships. In December, as it made its way through the Indian Ocean, it was stopped by American and Spanish naval forces and inspected.

The United States justified its actions by claiming that it was flying no flag and thus was considered a pirate ship. According to Richard Boucher, the State Department’s spokesman, “At first we couldn’t verify the nationality of the ship because the ship’s name and the indications on the hull and the funnel were obscured. It was flying no flag.”

On investigation it was found that the ship was the So San, which claimed to have Cambodian registry. The So San’s manifest stated it was transporting cement to Yemen, but an examination revealed 15 Scud missiles with 15 conventional warheads, 23 tanks of nitric acid rocket propellant and 85 drums of unidentified chemicals all hidden beneath the bags of cement.

It is believed that the North Koreans tried to disguise the ship (Song Sang) by painting over the last two letters in the first name and the final letter in the second name (So San) to help prevent identification. The ship was eventually allowed to continue on its course after it was determined that it had broken no laws.

World criticism
Following the World Trade Center and other terrorist attacks, world opinion began to force the Cambodian government to reconsider its policy of allowing CSC to flag ships at will. The Cambodian government felt compelled to take action before one of the ships under its flag was found guilty of terrorist activity.

“We are victims because the company recklessly allows ships to use the Cambodian flag without proper inspection or control,” said Hor Namhong, the foreign minister, adding: “The company will be audited by the government.”

In July 2002, bowing to international criticism over concern for “Cambodia’s maritime safety record”, the Cambodian government revoked CSC’s authority to grant registrations, giving that authority to the Ministry of Public Works and Transportation. Ironically, it was this ministry that had just two years earlier declared disinterest into the alleged illegal activities of ships registered under its flag.

The Ministry of Public Works and Transportation was only in control of the registry for about six months before the Cambodian government granted the authority to register and flag ships to a new company, International Ship Registry of Cambodia, and its representatives in Busan, South Korea. According to e-mail correspondence from the company’s managing director, Charles Bach, to New York Times reporter Keith Bradsher, there are no longer any North Korean ships registered under the Cambodian flag.

But Marcus Hand, the Asian editor for Lloyd’s List, explained how difficult it is to know for certain who owns what ship because so many of them are owned by different companies registered throughout the world and only the North Koreans themselves know how many ships they own and what flag they fly.

Not only does North Korea purchase flags of convenience, it also sells them for nearly three times the normal asking price. According to ITF in 2006, out of 408 North Korean-flagged ships, only 187 of them were actually owned by North Korea; the rest were owned by other nations including Cambodia, Tonga, Comoros and Sao Tome and Principe – nations that are infamous for their own flags of convenience.

Prior to the United Nations Security Council’s resolution following North Korea’s nuclear test in October 2006, some of the ships registered to North Korea may have done so to avoid inspection while they carried out illegal activities.

There is some question as to the number of ships that were owned by United States-based companies and registered and flagged under North Korea. According to the American Central Intelligence Agency’s Fact Book, there were three, but Bill Gertz, in an article published with The Washington Times (June 8, 2006), listed nine ships owned by foreign companies, such as Egypt and Syria, based in Delaware, United States. One of these ships was discovered in March 2006 engaged in smuggling migrants off the coast of Europe. Under sanctions that went into effect in May 2006, the companies were required to cancel their registrations with North Korea and seek new registrations with other countries.

The new threat
With the CSC no longer able to grant registrations and Cambodia and South Korea’s progressively warmer relationship, North Korea has been forced to look elsewhere to register its ships. According to The Straits Times, at least 40 nations in the world engage in flags of convenience; many of them willing to flag North Korean ships for a price. North Korea does business with several of them, but a surprising replacement for Cambodia has apparently been found – Mongolia, a land-locked nation.

However, following North Korea’s nuclear test in October of last year, Mongolia’s Ship Registry has urged ships under its flag to abide by the United Nations resolution against North Korea. It is unclear what effect this has had on North Korean ships registered with Mongolia.

In addition to the North Korean threat of nuclear weapons, it has been speculated that North Korea may have the ability to launch modified missiles from its submarines and cargo ships. North Korean-flagged ships would be more susceptible to being stopped and searched by United Nations forces, but ships under FOC might pass unnoticed through surveillance and pose a significant threat to the enemies of the Pyongyang government and to the reputations of the governments which flagged them.


U.N. Officials Knew Earlier of N. Korea Fake Currency

Tuesday, April 3rd, 2007

New York Sun
Benny Avni

As federal investigators examine how the leading U.N. agency in North Korea illegally kept 35 counterfeit American $100 bills in its possession for 12 years, documents indicate that more officials were aware of the existence of the fake currency — and earlier — than the agency has reported.

Spokesmen for the United Nations Development Program have said top officials at the agency’s New York headquarters learned in February that their safe in Pyongyang contained the counterfeit bills and immediately reported it to American authorities. But several documents shown recently to The New York Sun indicate that higher-ups knew much earlier that the safe held counterfeit money.

The documents are part of a worldwide reporting system that allows the agency to keep track of the contents of its office safes.