Is counterfeit American dollars challenge to economy

Supernote or counterfeit United States dollars are becoming a great headache for the U.S. administration as well as several large financial institutions in the world. According to rough estimation, a few hundred million counterfeit currency enter into regular circulation each year, which will ultimately turn into a big problem for the global economy.

British daily The Independent published a very interesting thus investigative report on the counterfeit U.S. dollars last week. In this report, The Independent said, “the existence of the supernote came to the notice of Western governments just after the fall of the Berlin Wall in December 1989, when a money handler at Central Bank of the Philippines became suspicious of a banknote that passed all the usual tests but still felt odd. The note, a $100 bill supposedly printed in the year 1988, made its way to Yoshihide Matsumura, a Japanese currency expert whose machines for detecting fake bills are among the most advanced in the business. The bill was an astoundingly accurate fake, Matsumura decided, the best that he had ever seen - yet it did not show any of the characteristics of the advanced fakes that he had encountered from Japan and Russia.

“Like the real $100 bills, the fake was printed on paper that was made of three-quarters cotton and one-quarter linen fibres, which is manufactured for the US government using specialised machinery by Crane & Co, the stationary company. The images are then stamped on the paper using an intaglio press - a piece of specialised printing machinery so heavy and expensive that only governments normally own them. The fake made its way to the headquarters of the Secret Service in Washington, D C, where it was compared to the agency's master file of 20,000 examples of forged US currency. The bill was assigned the identifying numeric C-14342, the letter "C" indicating that it was a circular, or the first in what was expected to be a series of high-quality forgeries from a single source.

“Bills from the same series turned up a year later in Lebanon's Bekka Valley, leading to suspicion that the supernote was being printed in the Islamic Republic of Iran, which needed foreign currency to fund an estimated $100 million a year in donations to Hezbollah and other terrorist organisations - who, as it happened, were being trained in bomb-making in Lebanon by Sean Garland. Intelligence analysts noted that Iran had taken delivery of two intaglio printing presses shortly before the fall of the Shah, who had sent a team of 20 master engravers to be trained by the Federal Bureau of Engraving in the US.

“Since the beginning of its investigations, the Secret Service has routinely declined to comment on the origins and distinguishing characteristics of the "supernote", for fear of aiding the forgers and a variety of other reasons - including the fact that the supernote represents a gigantic, ongoing law enforcement failure fuelled by the agency's early and continuing refusal to acknowledge the nature, scope and source of the threat. The Secret Service discourages currency experts from discussing identifying flaws in the supernote and admonishes those who speak to the press. Still, it is known that the first widely-distributed supernote carried the date "1988" and was distinguished by at least three flaws, one of which may have been deliberately introduced by the forgers so that they could demonstrate the difference between real money and their own fakes.

“Money handlers often refuse to handle certain series of $100 bills because of the high percentages of bad notes, with $100 bills from the years 1996 and 1999 attracting a high degree of scrutiny. "Any one series of supernotes stays in production only a few months or a year or so before the counterfeiters have to change to keep up," the currency expert said.

“According to a recent study by two economists with access to Secret Service data, at least one in every 10,000 US banknotes in circulation is a fake. One reason that the Secret Service showed so little initial interest in the supernote is that they were found overseas, where two-thirds of the $800bn in US currency circulates.

"It's a spit in the ocean compared to what's being printed," the Secret Service liaison at the American Embassy in London, John Sullivan, told a newspaper in 1993 in response to an inquiry about counterfeit $100 bills and other fakes, whose numbers had more than quadrupled between 1990 and 1992 - from $29.9m to $137.7m. By 1994, the Secret Service still had only six agents on permanent detail overseas to deal with what had become an epidemic that worried bankers and criminals alike. In December of 1993, for example, gunmen stormed a classroom in the Russian city of Rostov and demanded a ransom of $10m in $100 bills - along with a sophisticated machine to weed out the fakes.

“Where circumstantial evidence about the source of the supernote had originally pointed towards the Shah's intaglio presses and US-trained engravers now under the control of the Islamic Republic of Iran, the Secret Service was eventually forced to start looking elsewhere. In 1994, executives of a North Korean trading company carrying diplomatic passports were arrested for depositing $250,000 in supernotes in a bank in Macao. Similar incidents involving a weird assortment of diplomats, terrorists and criminals with ties to North Korea followed. In January 1996, a middle-aged Japanese man approached a money changer in the beach resort of Pattaya, Thailand and gave him 90 crisp US $100 bills in exchange for 225,000 baht. The bills were fake, and were soon traced to Yoshimi Tan-aka - a Japanese Red Army terrorist who had disappeared inside North Korea in 1970. Tanaka fled to Cambodia and took refuge in the North Korean embassy in Phnom Penh. He was later apprehended at the Vietnamese border in an embassy Mercedes after trying to bribe a border guard with $10,000 in $100 bills, which the guard wisely refused - they were probably counterfeit.

“The revamped $100 bill, unveiled in 1996, featured a new engraving by the artist Tom Hipschen, who gave Franklin an enigmatic look that recalled the half-smile on the face of the Mona Lisa, and drew attention to the portrait. Microprinted in Franklin's lapel were the words "United States of America", a phrase that was also microprinted inside one of the numbers on the bill, which were printed in colour-shifting OVI ink. Concentric lines in the oval surrounding the portrait were designed to create interference when scanned by a laser. Red and blue fibres were embedded in the paper, along with other safety features designed to protect the banknote from forgers. Tiny security threads that repeated the denomination of each bill were embedded in the paper to prevent counterfeiters from washing off the ink and turning dollar bills into hundreds - a favourite trick of Columbian counterfeiters. Within two years, all of these features would be successfully copied in the "big head" incarnation of the supernote, which turned up in London first and was called C-21555 by the Secret Service.

By the late 1990s, nearly all available evidence pointed to North Korea as the source of the supernote: Sean Garland's trips to Moscow were made for the purpose of picking up a new supernote that precisely replicated the safety features of the redesigned US currency. By the time Garland was arrested on 7 October 2005, in a hotel in Belfast, Northern Ireland, it was estimated that he and his associates had passed $28m in redesigned supernotes produced inside North Korea. According to the Congressional Research Service (CRS), Garland's network, while sizeable, distributed only a tiny fraction of the supernotes still in circulation. At least $45m in North Korean supernotes have been detected in circulation, out of an estimated production of bills with a face value of $45-$75m per year.

“According to people who regularly handled the bills, the North Korean fakes are so good and are updated with such regularity that the best way to tell that they are fakes is their superior quality. "The joke was, they were better than the Bureau of Federal Engraving produces," says David Asher, a former Treasury department official who was in charge of leading the fight against the criminal activities of the North Korean state. Asher mentions the high quality of the paper and the precision of the printing process, including the sharp relief of the clock hands on the tower on the back of the bill, as among the few reliable giveaways that a bill with Ben Franklin's face on it was printed in North Korea. According to Asher, the biggest victims of the supernote are the Chinese, who have found that between 2-4 per cent of the $100 bills circulating in some regions of the country are fake - a de facto tax on Chinese money changers by North Korean forgers.

“Trying to trace the supernotes to their source is a difficult task, owing to the fact that North Korea is a highly-militarised totalitarian country ruled by the dictator Kim Jong-Il. Recent reports from North Korea analysts suggest that Kim was recently treated for pancreatic cancer: the Korean leader looked thin and grey in footage of his recent meeting with former US President Bill Clinton, who arrived in Pyongyang on 4 August to pick up two American journalists who were incarcerated in a North Korean labour camp for crossing the border earlier this year. In June, Kim announced his intention to hand over to his 26-year-old son, Kim Jong-Un - the third Kim to ass-ume the central role in the political cult. Recent interviews by researchers, including this author, with South Korean intelligence officials and North Korean defectors, have resulted in what appears to be a more-or-less accurate picture of the mechanics of the century's greatest forgery operation - one of the officially-sanctioned large-scale criminal activities that have earned North Korea the nickname "the Sopranos state".

“The printing of supernotes is overseen by an organisation called Office 39, which runs state-sponsored criminal activities and is housed in a plain, barracks-like building on Changgwant Street in Pyongyang (the proceeds of these operations are managed by Office 38, which is located in the same building). Estimates are that illegal exports from North Korea, including counterfeit money, methamphetamine, fake pharmaceuticals and weapons amount to $500m per year - a sum that equals or exceeds the value of the country's legitimate exports.

“The supernote has a place of honour in North Korea's criminal economy. The main printing plant is housed at 62 Printing House, an address that suggests that it is located in Pyongyang city; the building is actually located in Pyongsung. According to a North Korean defector who worked for the central committee of the Communist Party, the workers who produce the supernote get superior food rations that include 600 grams of rice a day as well as "family food". The presses used to produce the supernote come from a company called De la rue Giori in Switzerland, with additional equipment from Japan, paper from Hong Kong and ink from France. Because their identity cards list them as citizens of Pyongyang, they are allowed to travel to the capital.

“A South Korean analyst claimes that there are two other plants inside North Korea where fake currency is produced - the Song Shin printing factory, which is under the control of the North Korean army reconnoitering corps, and a second plant using Austrian printing machinery that is under the control of the Communist Party Central Committee. While the counterfeiting operations exist to make money, the analyst explained, they are also motivated by a healthy dose of anti-Americanism as well as by North Korea's state philosophy of juche, or self-reliance. "Juche means that North Korea can and should produce for itself anything that the rest of the world can produce," the analyst explained. "If other nations have missiles, then North Korea should have missiles. If America produces dollars, which are the world's reserve currency, North Korea must produce its own dollars." While Office 39 personnel who help distribute supernotes were asked to leave the North Korean embassy in Beijing two years ago, the South Korean analyst says, they are still active in Germany, in Zagreb, Croatia and the Middle East.

Official North Korean publications firmly reject the suggestion that their country is involved in producing supernotes. In an article published in 2006 by the North Korean weekly Tongil Sinbo, a government spokesman insisted: "Even while noisily babbling about 'counterfeit currencies', the United States has not produced any evidence to back up what it says."

A remarkable undercover operation run by the FBI from 2003 to 2005 had provided more than enough evidence of the depth and scale of North Korea's involvement in the supernote scam, as well as providing a frightening hint of the uses to which North Korea's smuggling networks might be put. On 2 October 2, 2004, a Panamanian freighter, the Ever Unique, arrived in Newark, New Jersey, from Yantai, China, with boxes of toys, which hid a cargo of $300,000 in supernotes. Two months later, the initial shipment was followed by $3m in supernotes that arrived in Newark, and another $700,000 that arrived in the port of Long Beach, California.

All three shipments were part of one of the most mind-blowing FBI undercover operations in recent history, which would escalate from contraband cigarettes to supernotes, to requests for automatic weapons, mortars, and surface-to-air missiles, and result in the arrest of 87 people in the United States. The sting began with the successful infiltration of a 400lb agent named Jack Garcia into the Gambino crime family in New York under the name Jack Falcone. Two FBI agents named Lou Calvarese and Tom Zyckowski, were working an unrelated case whose goal was to expose Chinese smuggling networks that might be able to move weapons into the United States.

The three agents became involved with an elderly and proper-seeming Chinese-American couple named Bill and Mary Liu, who claimed to be able to obtain anything they wanted from connections in China. Posing as an overweight Mafioso, Garcia claimed to be involved in the drug business with Columbians who wanted weapons in exchange for cocaine. "We told the Lius we had a dirty customs official at the docks who'd let that container go in," Garcia said. "We would then remove the container and bring it to a neutral location."  Continued    Source: Abul Hashem Khan, Dr.

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