Austin Bay Blog

The NY Times Sunday Magazine publishes an in-depth article by a scholar with genuine expertise in counterfeiting–Steve Mihm at the University of Georgia.

Key excerpt:

This past August, in the wake of the arrests, Justice Department officials unsealed indictments in New Jersey and California that revealed that the counterfeits were purchased and then seized as part of an operation that ensnared several individuals accused of being smugglers and arms traffickers, some of whom were suspected of having connections to international crime rings based in Southeast Asia.

The arrests also prompted a more momentous accusation. After the indictments were released, U.S. government and law-enforcement officials began to say in public something that they had long said in private: the counterfeits were being manufactured not by small-time crooks or even sophisticated criminal cartels but by the government of North Korea. “The North Koreans have denied that they are engaged in the distribution and manufacture of counterfeits, but the evidence is overwhelming that they are,” Daniel Glaser, deputy assistant secretary for terrorist financing and financial crimes in the Treasury Department, told me recently. “There’s no question of North Korea’s involvement.”

Last September, the Treasury Department took action to signal its displeasure. The department announced that it was designating Banco Delta Asia, a bank in Macao with close ties to North Korea, a “primary money-laundering concern,” a declaration that ultimately led to the shutting down of the bank and the freezing of several key overseas accounts belonging to members of North Korea’s ruling elite. In a public statement, Treasury officials accused Banco Delta Asia of facilitating North Korea’s illicit activities by, among other things, accepting “large deposits of cash” from North Korea, “including counterfeit U.S. currency, and agreeing to place that currency into circulation.”

The counterfeiting of American currency by North Korea might seem, to some, to be a minor provocation by that country’s standards. North Korea, after all, has exported missile technology in blatant disregard of international norms; engaged in a decades-long campaign of kidnapping citizens of other countries; abandoned pledges not to pursue nuclear weapons; and most recently, on July 4, launched ballistic missiles in defiance of warnings from several countries, including the United States.

But several current and former Bush administration officials whom I spoke with several months ago maintain that the counterfeiting is in important ways a comparable outrage. Michael Green, a former point man for Asia on the National Security Council, told me that in the past, counterfeiting has been seen as an “act of war.”  

A caveat, but an explanation of how counterfeit bills can wreak havoc in small economies:

When supernotes are discovered in a smaller foreign economy that makes use of American currency, they can cause a local crisis of confidence in the dollar (this has happened in Taiwan and Ireland, for instance). But in the United States, the economic threat is minimal. For this reason, many analysts, particularly those outside the administration, like Raphael Perl of Congressional Research Service, express concern about making the issue into a diplomatic crisis. 

Read the entire excellent article.

And here’s more on NoKo as a criminal state.