Monday, March 19, 2007

A Funny Story About Funny Money: Debunking the North Korean Supernote Myth

H/T to Simon World for the Asia Sentinel link

Incorrigible skeptic that I am, I am willing to give credence to the detailed Frankfurter Allgemeine report asserting that the $100 supernotes that North Korea is reputedly running off to finance Kim Jung Il’s mad schemes are more likely blowback from some CIA-run off-the-books funding operation, than they are the fearsome economic poison of those master counterfeiters at Pyongyang’s Printing Plant No. 62:

The Allgemeine piece is written by Klaus Bender, a well-known financial journalist who spent ten years researching the “security printing” (currency, stock certificates, passports, etc.) business and wrote a book about it (Moneymakers: The Secret World of Banknote Printing, 2006, J. Wiley-VCH).

Bender describes the Supernotes—which have been circulating since 1989 and have kept pace with 19 ever-more sophisticated redesigns of US currency, including 1/42,000 of an inch microprinting--as follows:

Even experts on currency printing have been unable, using visual inspection and touch-testing - the most important tests of authenticity for average citizens - to differentiate the counterfeit 100-Dollar-Notes from the genuine ones. With respect, investigators therefore baptized the forged notes as Supernotes.

Compare and contrast the Asia Sentinel’s description of its experiments in passing North Korean funny paper acquired in Dandong.

Pyongyang’s pitiful productions apparently can’t get past the cursory scrutiny of any experienced examiner:

First at a bank:

A counterfeit-bill detecting machine similar to ones used in casinos and about the size of a large wallet was produced and the bills inserted one at a time. The real $100 slid through effortlessly but the supernote stopped three fourths of the way through and a small red light began blinking.

...then a mom and pop money changing outfit:

When given both bills it took the couple about two minutes to confidently select the phony bill – “bad color!” ‑ and advise that it be taken to the nearest bank for confiscation.

...and finally Western Union:

In Wanchai, a Western Union clerk, equally used to handling massive amounts of foreign currency, immediately picked out the phony bill. Asked why, she said it just didn’t quite feel right.

Here’s what I think:

First, the North Korean government lacks the logistical and technical wherewithal and immense financial resources (the press alone costs $50 million, for crying out loud, and that doesn’t cover the cost of the custom papermaking plant or the cost of making or accessing the sophisticated and tightly controlled security inks) to track US currency through its multiple redesigns and make high quality supernotes.

Second, the great thing about counterfeit money is that you don’t have to print it. You can buy it at a discount. If you use $1 of legit forex to buy $2 of funny money, you’re doubling your money. That’s the best return on their US$ holdings that the North Koreans are likely to find on this planet.

Third, probably organizations or individuals within some country with reasonably close links to the North Koreans, a flourishing, highly organized criminal infrastructure, and kinda dirty banks is probably selling supernotes to the North Koreans. I think Russia is more likely than China.

Fourth, the North Koreans have no compunctions about abusing the world financial system with counterfeit money, either by buying it or making it. They might have some crappy printing press turning out crappy $100 bills like the ones Asia Sentinel got their hands on. Or their Chinese currency printer is doing some off the books printing for them. But these notes are a minor, easily detected element in the local cash trade in China, North Korea, and environs.

Fifth, I have no problem with the idea floated in the Allgemeine that the CIA is printing the notes to finance off the book operations.

In fact, the most bizarre element of the true Supernotes may be the most revealing. This high quality forged currency, with the special inks, the microprinting, the itty-bitty polyester threads, etc. is easily detectable with the automatic currency testing machines used by the major banks.

Strangely, although the counterfeiters have mastered the technology of the infrared sensitive security inks used on the new Supernotes, the notes are produced in such way that automated currency test systems recognize them immediately as forgeries. In America, the Supernotes have little chance of going undetected.

Funny about that.

Also note that the counterfeiters are neglecting the $50 bill—which could be passed more readily in general circulation and would cause significant distress to John Q. Taxpayer if it was being confiscated right and left.

Also suspicious is the fact that the 50-Dollar Supernote, which is even more finely crafted that the 100-Dollar Supernote, is not being circulated by the forgers, even though this denomination is far more widely used by the general public and often goes untested.

But if I were the CIA and trying to justify to myself undermining the world financial system--the same world financial system we’re supposed to be protecting with all this skullduggery--with counterfeit supernotes, I’d shrug off some of the moral burden by coming up with what Ollie North would call a “really neat idea”:

These notes can only circulate on a small scale in the cash economy of guys and gals the CIA is supporting, bribing, paying off, or stinging. It’s mattress money. When it’s deposited in a major bank, gazing! it’s confiscated—and the depositor either eats the loss... unless a bad guy bank/government accepts the notes, probably at a deep discount, thereby draining said freedom-hating institution of genuine, fungible forex...

unless it puts the supernotes in a safe...remembers Gresham’s law...

...and sells the funny paper at a discount when the cash-strapped North Koreans come to town.

And to throw people off the scent as to where the Supernotes are coming from, I would state that the money is being printed in whatever part of the world is the most detestable and least accessible to independent investigators.

Bear in mind that these notes have been around since 1989 and the U.S. government used to claim that they were being printed in Iran, and then in the Bekaa valley in Lebanon (where Hizbollah and those Syrian stinkers hold sway) in the middle of a war zone, less than one hundred miles from the Israeli border.

It seems that the location of this phantom plant will migrate to wherever the political needs of the U.S. government demand. Maybe the next stop is China.


David said...

In the last 20 years technology advances in the printing industry has advanced to a point where medium to small production plant has the ability to produce these supernotes.

New offset presses produce high quality consistant ink coverage and thus makes Micro printing no longer safe. These presses are readily available in China and 2nd hand equipement could potentially flow to North Korea.

The only hicks comes in the form of paper quality, water mark and ink colour. But if NK is willing to overlook a small inperfection in paper consistancy as stated in the article then the "superbills" can be made to fool the gerenal public.

China Hand said...

I'm not an expert forger, and I will defer to Bender. He states that the Supernotes are printed on an intaglio (raised ink) press, like the real ones, not an offset press. And then there's the matter of the optical inks. If you haven't yet, I suggest you check out the Allgemeine article. It's an interesting and persuasive read.

David said...

I never said the fake would be undetectable only made to resemble a real bill.

FYI intaglio printing require the preproduction of a series of dies for each colour and that alone is prohibitive for low cost production that's why I suggested replacing it with sheet fed offset that will produce generally the same degree of detail minus the raised print. The texture issue is much like the paper consistancy issue. ie. need to be overlooked...

I have mentioned that the ink would be a problem but new techniques such as Mass Spec colour analysis will result in a very close match when viewed with the naked eye.

To make a superbill that exactly matches every requirement of the real bill is close impossible or cost prohibitive but a look alike under normal lighting conditions is certainly possible.

Hey if people are passing off Laser copies or injet reproduction as the real thing(hence you copier recognize cash and automatically makes it b/w copies), a much better offset reproduction could fare just as well or better.

Making a good fake bill is not impossible, the real troubles comes in trying to distribute the phony cash without being caught which is why having a bank at your disposal makes it much more likely.

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