U.S. Lawmakers Give Close Look at Alleged North Korean Counterfeiting

U.S. officials gave lawmakers a close look Tuesday at what they described as a sophisticated North Korean program to produce top quality counterfeit U.S. currency.

Michael Merritt, an official with the Secret Service, which investigates counterfeiting offenses, told a Senate panel that North Korea is producing and distributing high-quality counterfeit U.S. $100 bills, so-called supernotes.

"This family of counterfeit notes is continually evolving as we discover better, more deceptive versions of the supernote," Merritt told a Senate Homeland Security and Governmental Affairs subcommittee. The fake currency ranges from older versions of the 100s to the latest counterfeit-resistant banknotes, he said.

The alleged counterfeiting program has become a sticking point in stalled six-nation efforts to rid North Korea of its nuclear weapons program. Pyongyang refuses to resume talks until the United States lifts financial restrictions imposed over alleged counterfeiting and other illicit financial activity. Washington says the nuclear talks should be resumed because the sanctions are unrelated to them.

In his testimony, Merritt offered a detailed look at the supernotes' sophisticated production. He said they are printed with the same typographic methods the U.S. Bureau of Engraving uses. The notes also are printed on paper that is of similar composition to genuine U.S. currency and contains security features such as special fibers, threads and watermarks, he said.

Merritt said that since the supernote was detected in the Philippines more than 16 years ago, the Secret Service has seized about $50 million worth of them around the world.

That amount, he said, was low in comparison with other seizures and unlikely to hurt the U.S. economy. For example, officials have seized more than $380 million in counterfeit currency made in Colombia during the 16 years the Secret Service has investigated the supernote, he said.

The U.S. $100 banknote is the most widely circulated bill outside the United States.

"The high quality of these notes, and not the quantity circulated," Merritt said, "is the primary cause of concern for the Secret Service."

Peter Prahar, director of the Asia office in the State Department's bureau of international narcotics and law enforcement, said it is "likely but not certain" that Pyongyang also derives money from other criminal activity. He mentioned North Korean links to counterfeit cigarettes, trade in endangered animal species and drug production and trafficking. Confirming information, he said, is often difficult because of North Korea's secretive nature.

Prahar testified that since 1976, at least 50 arrests or drug seizures involving North Korean officials have been made in more than 20 countries.

Tuesday's hearing on North Korea coincides with "North Korean Freedom Week." On Thursday, lawmakers are scheduled to hear from Jay Lefkowitz, the U.S. envoy on North Korean human rights, and from the mother of a Japanese girl abducted by North Korea.