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Must Read: New Details Leaked on North Korea’s Counterfeiting

oh-1.jpgSay it with me: thank goodness Christopher Hill got the North Koreans promise never, ever to counterfeit our currency ever again — cross my heart and hope to be executed before a crowd of bused-in schoolchildren!

A North Korean general who is a confidant of the country’s leader, Kim Jong-il, has been identified by U.S. and foreign intelligence agencies as a key figure in the covert production and distribution of high-quality counterfeit $100 bills called supernotes, according to documents and interviews with intelligence officials. North Korean Gen. O Kuk-ryol, who was recently promoted to the country’s powerful National Defense Commission, and several of his family members are said to be in charge of producing the fake $100 bills ….

A foreign-government report obtained by The Washington Times from a diplomatic source in Washington said Gen. O has emerged in recent months as one of the most powerful military figures in the North Korean regime and the person in charge of arranging the succession of Mr. Kim by his third son, Kim Jong-un.

The information about the general in the report was confirmed by a senior U.S. intelligence official as well as by other current and former officials with knowledge of North Korean activities. They asked not to be named because of the sensitivity of the issue. Although North Korea has been linked to counterfeiting for many years, the report is unusually detailed in its account of how North Korea is using illegal activities to raise hard currency for use by the regime and Mr. Kim.  [Washington Times, Bill Gertz]

Damn that Barack Obama and his neocon cabal!   Haven’t they heard that these alleged “supernotes” are actually printed by the CIA at a secret location in suburban Washington, DC?  Sure, when all was revealed, a few of you doubters probably thought that somewhere in Krautland, a clock was missing its cuckoo, but there’s not a shred of recent evidence of North Korean counterfeiting — not a shred, I tell you!

The most recent evidence of North Korean trafficking in supernotes surfaced in Pusan, South Korea, in November when police seized about $1 million in supernotes. According to the report, the case “shows that Pyongyang is using South Korea to circulate or launder supernotes.”

But I don’t suppose they can offer any specifics, like places, names of suspects, or confirmation from people willing to go on the record.

The report narrowed the source of supernote printing to a plant called the Pyongsong Trademark Printing Factory. The plant is said to be under the control of the operations department of the Korean Workers Party, which is headed by Gen. O. Supernote circulation has increased in recent months, the report said, in part to offset revenue shortfalls created by international sanctions against North Korea.

David Asher, former State Department coordinator for tracking North Korean illicit activities, said in a speech in February that the Banco Delta Asia case involving North Korean counterfeiting was “the tip of the iceberg” in Pyongyang’s global moneymaking operations. Mr. Asher said undercover FBI agents in Macao documented the activity, including counterfeiting, that involved “hundreds of millions of dollars” until the bank was sanctioned. “Banco Delta Asia was washing massive amounts of money,” he said, noting that more steps need to be taken to halt Pyongyang’s illicit activities and arms trafficking.

According to the report, North Korea’s hard currency income from trafficking in counterfeit supernotes and drugs is used to buy luxury goods for Mr. Kim and to develop conventional arms and weapons of mass destruction. Bob Hamer, a retired FBI agent who worked undercover as part of an operation designed to expose illegal North Korean activities, including supernote distribution, said Pyongyang’s supernote production remains a “major problem.”

Gen. O’s son, O Se-won, works with his father as one of two key overseas officials involved in North Korean counterfeiting, the report said. In addition to O Se-won, another relative of Gen. O, identified as Lee Il-nam, was a councilor at the North Korean Embassy in Ethiopia and operated as a supernotes courier, making visits from Pyongyang, to Beijing to Ethiopia and back from May 2003 to September 2004, according to the report.

The report says North Korea uses front companies and shell companies overseas to facilitate the illicit trafficking in supernotes. The use of fake companies increased after the Treasury Department barred U.S. companies from working with Banco Delta Asia. To further hide the transactions from international financial authorities, the North Korean party office used a financial front company, set up in China in 2006, to make payments as part of the purchases, the report says.

North Korea also set up a front company in the British Virgin Islands in the mid-2000s to take advantage of lax banking regulations and tax laws there, it says, and other branches of the front company were established for financial support activities in China, Russia and Southeast Asia. One front company bought luxury yachts, Mercedes-Benz cars and personal helicopters for Mr. Kim and his family, the report said.

I must say this is disconcerting.  Why, Mr. Hill and Mr. Geithner had showed such good faith.  They’d returned that $25 million in North Korean deposits from Banco Delta and made almost no mention of these unpleasant matters for nearly two years.  So you mean to say that problem wasn’t solved through quiet diplomacy and the exchange of solemn assurances among gentlemen?

General O himself has long been a confidant of Kim Jong Il, and has even been talked about as a potential successor or junta leader:

One leading candidate for a new leader would be O Kuk-ryol, a 75-year-old general and former army chief of staff who has ranked second behind Kim in the country’s powerful Central Military Commission. “O Kuk-ryol is loved by Kim and is seen as a very reliable person who also knows South Korea well,” the report said.  [Reuters, Dec. 19, 2006]

“Of Kim Jong-Il’s confidants, O Kuk-Ryol is regarded as the most powerful.”  It added that the relationship between Kim and the 75-year-old four-star general dates back to his childhood and Kim completely trusted him. “Differently from other commanders, O is invested with rights to command his unit at his own discretion without interference from the party’s political bureau,” the report said. [AFP, Dec. 19, 2006]

Oh previously commanded one of the regime’s most trusted units near the capital in his position as head of the Workers’ Party Operational Department.  In February of this year, O was appointed to the number two post in the National Defense Commission.  Since then, our friend GI Korea has followed General O’s career carefully, noting his enhanced authority at the expense of the Workers’ Party officialdom.  O recently emerged as a possible rival of Jang Son-Thaek in the recent succession-related machinations, and O appears to have emerged in a more powerful position:

As the Korean newspaper Chosun Ilbo put it, General O “has in effect emerged as the No. 2 man in charge of North Korea’s supreme power next to Kim Jong Il.”  The assessment of Korea’s Joongang Ilbo daily is that NDC’s “power has been expanded to become the de facto general administration.”

Bruce Bechtol, a professor at the U.S. Marine Corps Command and Staff College at Quantico, told FOX News the changes signal whom Kim trusts, with a regime change on the horizon.  “This may mean that Kim Jong Il trusts the military more, or perhaps he trusts his longtime friend O Kuk Ryol more with clandestine activities than anyone in the party,” he said.  [Fox News]

Related:   This new report is spectacularly bad timing for one thinly sourced piece of “journalism” in particular:

According to a former U.S. diplomat in East Asia who asked not to be named discussing sensitive intelligence, during the Bush years Washington investigated the oft-heard counterfeiting accusations, and found that the notes in question had actually been produced privately by former Chinese military officials, in China. “The Treasury Department couldn’t find a single shred of hard evidence pointing to North Korean production of counterfeit money,” the American says.  [Newsweek, Takashi Yokota, hat tip: Curtis]

That’s the only support Yokota offers for that assertion, and he makes no effort whatsoever to discuss evidence to the contrary or cite any other sources.  In what sense is this objective journalism?  The problem with making an assertion that sweeping based on entirely on the word of one unnamed source is that readers have no idea who that source is, what biases he may hold, or what basis exists for his assertion.  For example, I can name one “former U.S. diplomat” who negotiated with the North Koreans on our behalf, then retired from the Foreign Service and went into business raising investment capital for themAppearance of impropriety, anyone?

Yokota’s piece is filled with selective citations of data and half-truths leading to a predestined conclusion.  For example, the assertion of North Korea’s 1.5% annual economic growth is used to show the futility of sanctions that weren’t imposed until one 17-month period at the tail end of that trend.  And if you’ve just shed about 2 million expendable citizens in a famine that has transformed your second largest city into the world’s largest cemetery, some relative economic recovery from that ought to be put in context.

The author isn’t completely wrong, of course.  Certainly the starvation of ordinary North Koreans indicates nothing about the economic health of a small oligarchy that willfully starves them, and clearly, the regime has stolen enough money from the food budget to pay for nuke tests, missiles, and gargantuan hotels it can’t fill.  But the record is as clear as anything can be about North Korea that Treasury sanctions hurt Kim Jong Il’s palace economy. If that’s true, then so is the converse:  sanctioning the regime isn’t going to do much harm to North Korea’s expendables, who’ve been fending for themselves for years.