Supernotes Scandal to Hit Bank of China; NK Gov’t in Talks with U.S. on Counterfeiting

Via the Chosun Ilbo:

The U.S. is preparing to seize more than US$2.67 million from three frozen bank accounts with Chiyu Banking, a subsidiary of Bank of China Hong Kong. The South China Morning Post reported the funds are believed to be the first known link between a Hong Kong bank and North Korea’s underground trade in “supernotes,” or high-quality fake US$100 bills. The accounts belong to an unemployed mainland Chinese woman named Kwok Hiu Ha.

The Bank of China is a parastatal. That doesn’t necessarily mean that the Beijing authorities know everything that BoC is up to, but it does mean that sanctions against China’s largest bank could hit China’s economy very, very hard. Speculation: China’s cooperative attitude may explain why Treasury is still only naming BoC subsidiaries.

North Korea is apparently feeling the pain, too. After some initial bluster and yet another declaration that it would walk out of the six-nation facade, the North Koreans are sending reps to hear a U.S. briefing on the latter’s anti-counterfeiting measures. Since appeasement has achieved nothing, we may soon see if a firmer policy will have more success. Declarations of success still seem premature, as U.S. Ambassador Alexander Vershbow reminds us:

“There have been some signals in the last few weeks indirectly indicating that North Korea is beginning to acknowledge that there is a problem and they need to take steps to address the issues,” Mr. Vershbow told the JoongAng Ilbo and JoongAng Daily on Wednesday. The U.S. envoy to Seoul has been a strong critic of the North in his four months on the job here, and in turn has joined more senior U.S. officials in Pyongyang’s rogues’ gallery. Pyongyang media outlets took special exception to the label of “criminal regime” that the ambassador used recently in referring to the government there.

Mr. Vershbow declined to use the words again. “Looking back at that episode, my main concern is that it may have diverted attention from the real issue that I wanted to address “• illicit activities by the North Korean regime,” he said. Conceding that the substance of the issue may have been obscured by his rhetoric, he added, “Since that time, I have left it to academics and journalists to describe North Korea. I think that it is better understood by North Korea that the issues will not go away.”

That language represents a climbdown by Vershow in rhetoric, though not in substance. An emotional letdown perhaps, but the firmness of the policy position appears to be undiminished