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The North Korean Supernote Problem
Posted by Stephanie Cho on Wed, May 04, 2016 @ 07:33 AM
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Ever since the signing of an armistice in 1953 that put a stop to the fighting in the Korean War, North Korea and its activities has
more or less been a mystery to the world. What little is known about the country is inherently grim: the county is internationally
considered to be one of the worst offenders when it comes to human rights and continually tops the list of the Worlds Most
Isolated Countries.
Even lesser known than human rights atrocities is exactly how North Korea funds its economy. Although North Korea participates in
legal economic activities, such as selling natural resources, analysts agree that the level of these legal activities is nowhere near
enough to sustain a country the size of North Korea. Indeed, there has been evidence that North Korea has been profiting from the
illegal drug trade for several decades.
Eventually, in a search to find more sources of income, North Korea figured out something that counterfeiters around the world have
already figured out: manufacturing counterfeit money is much more profitable and less risky than producing and selling drugs.
And thanks to the fact that North Korea has physically segregated itself from the rest of the world, they directed their efforts to
counterfeit money production - without the rest of the world catching on and got good, really good at making counterfeit money. So
much so that when North Korean counterfeit bills slipped into foreign circulation, no one was the wiser; and when the world finally
did catch on, they were dubbed as supernotes because they were so good that they were virtually indistinguishable from real
money to all but the most sophisticated of counterfeit detection equipment.
And that is a major problem.
Although North Korea is blocked off from the rest of the world, it does participate in minimal trade with neighboring countries, such
as Russia and China, to support itself.

The Need for Money, through Legal and Illegal Means

Being closed off from the world at the 38th parallel means that North Korea is essentially at the mercy of its natural resources to
fuel its population and fund its economy and in the era of globalization, being cut off from the rest of the world spells disaster for
a countrys economic stability and prowess. Nonetheless, North Korea has remained isolated from the rest of the world by finding
ways to financially support itself, ultimately through the participation in illicit activities.
The original plan for the countrys economy had a name. It was called juche, or self-reliance. The idea was that all
North Korean problems should be solved by North Koreans. Every North Korean knows the concept of juche inside
and out. The country takes self-reliance very seriously. And if self-reliance requires drug-dealing and the smuggling
of counterfeit goods, then so be it.
North Korea is known to fund its economy, at least partially, through legal channels. Coal and magnesium reserves exist in North
Koreas mountains the country rents out this land to China so that they can harvest these minerals from the mountainsides. Profits
from exporting fish provide a steady, small stream of income to the economy. Unsurprisingly, North Korea participates in a
backwards, archaic program of renting out its citizens to Russia and South Korea as cheap labor. And believe it or not, North Korea
has a minor but profitable monument industry that constructs large-scale monuments for dictators all over the world.
In 2009, it was estimated that North Korea brought in a total of $2 billion through legal means.
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In 2009, it was estimated that North Korea brought in a total of $2 billion through legal means.
In terms of illegal activities, North Korea is a very willing participant, especially when it comes to obtaining profits, even when doing
so goes against established laws in the country. In the 1980s, North Korea was actually a major producer of the most popular drug at
the time: opium. The North Korean government has since switched gears to methamphetamine production, the worlds current drug
of choice.
North Korea is so dependent on illicit sources of income that it is incredibly protective of its income streams, such as the drug trade,
even going to far as to prevent its own citizens from getting a piece of that income. Take North Korean defector, Ma Young Ae, for
example. She used to work for North Koreas internal police force and was tasked to take down drug smugglers; in her words:
That sounds like pretty normal law enforcement, except for one difference. She was supposed to stop small-time
Korean drug dealers in order to protect the biggest drug dealer in the country: the North Korean government.
It is important to learn why and how heavily North Korea seems to rely on illicit sources of income, particularly counterfeit money
production, to understand why the country put so much effort to produce counterfeit US bills that were so well-made they were
nicknamed supernotes.

Why North Korea turned to Counterfeit Money Production

In 1976, North Korea defaulted on its foreign debt, leaving the country badly in need of funds, which makes it easy to see why the
country began to mass-production of opium in during the 1980s. North Korean defectors claim that plans for counterfeit money
production also began around this time:
North Korean defectors say Kin Jong-Il personally issued an order in the late 1970s that all the countrys covert
operations be conducted using counterfeit US cash . . . [because it] would have the dual benefit of funding North
Koreas operations and engaging in economic warfare against the United States.
Although the latter benefit is speculation, state-level counterfeiting is a kind of slow-motion violence committed against an enemy,
and has been tried many times before: The British printed fake colonial money to undermine colonial currency during the
Revolutionary War and the Germans forced a group of expert artists and printers in a concentration camp to produce fake U.S.
dollars and British pounds during World War II. It would not be surprising if currency manipulation was one of North Koreas
reasons for venturing into counterfeit money production.
[Supernotes] can be viewed as an act of economic warfare, but Pyongyangs motive is probably more mundane: the
regime is broke.
North Koreas strategy when it comes to counterfeit money production is this: they produce counterfeit money, sell it for a fraction of
the value on the face of the bill in exchange for real money, and use the real money to fund its economy. They wouldnt actually use
the counterfeit money themselves they would find buyers of counterfeit money instead.
To see how their counterfeit money scheme works, consider Ma, the defector mentioned above. While she was tracking down nonsanctioned drug dealers in China, she was given counterfeit $100 bills as a stipend. Of course, the problem was that she couldnt
freely spend these counterfeit $100 bills after all who would just accept a brand-new $100 dollar bill from a North Korean? But
the purpose wasnt to spend these counterfeit bills herself, they were to be exchanged for real dollars:
The Chinese would give the North Koreas sixty real U.S. dollars for every fake $100 bill.

And herein lays the reason North Korea began and continues to produce counterfeit money: theyve figured out how to produce
high-quality counterfeit American $100 and $50 bills that are so convincing that they could move through the global financial system
largely undetected exactly the type of bills that are in high-demand by rogue nations, criminal syndicates, and the like, who were
willing to pay large sums of real money for this counterfeit money.
It is estimated that North Korea has been profiting $500 million-$1 billion per year since theyve been counterfeiting money;
conservative estimates place this figure in the $15 billion-$25 billion range.
The question remains: Exactly how is a broke country producing such high-quality counterfeit U.S. bills?
North Korea isnt good at much, but it has very effectively industrialized the printing of the U.S. hundred dollar bill.
The rogue states work alone has caused Congress to consider suspending printing of the Benjamin.

The Most Notorious Counterfeit Money in the World: The Supernote

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The Most Notorious Counterfeit Money in the World: The Supernote

It may be hard to believe that a country that has defaulted on its loans has the means to print millions upon millions of neatly
undetectable fake U.S. $100 bills and get away with it. But once you realize that its a countrys government thats behind the
counterfeits, it becomes clearer why North Korea has the ability to produce supernotes.
The supernote, also referred to as the superdollar and the superbill, is defined as a counterfeit U.S. currency that is so well-made
that it is difficult to distinguish from the real thing. It is technically used to describe any high-caliber counterfeit bill, but it is most
closely associated to the description of North Koreas counterfeit bills.

The word super in supernotes actually refers to the sophistication of the equipment the North Koreans use to produce counterfeit
money as opposed to a description of the skill-level of North Korean counterfeiters. (In terms of skill, Peruvians are currently the
worlds best counterfeiters.)
These ultra-counterfeits are light-years beyond the weak facsimiles produced by most forgers, who use desktop
printers. As an anti-counterfeiting investigator with Europol once put it, Superdollars are just U.S. dollars not made
by the U.S. government.
As a country, North Korea has considerably more clout and accessibility when it comes to purchasing equipment and machinery not
available to private citizens: The regime apparently possess the same kind of intaglio printing press (or presses) used by the US
Bureau of Engraving and Printing. And just how did North Korea manage to get their hands on such a press? The leading theory is
that just before the Berlin Wall collapsed in 1989, an East German factory that was known for producing fake passports and other
official documents smuggled its machines into North Korea.
Additionally, North Korea has access to the additional materials it needs to print counterfeit U.S. bills: The high-tech paper is just
about the same as whats used to make authentic dollars, and the North Koreans buy their ink from the same Swiss firm that
supplies the U.S. government with ink for greenbacks.
Experts say that real money is incredibly hard to produce for two reasons intaglio printing and specialized linen paper both of
which are unattainable by regular citizens. There are, of course, a number of security features in real money, but the difficulty
involved in copying the paper and the printing technique is generally enough to deter most counterfeiters.
North Korea has both.
In essence, North Korean counterfeits are super because they:
Are printed using the same intaglio printing presses the US Bureau of Engraving and Printing uses
Use the same ink that is used on real U.S. currency
Use the same type of linen paper used for real U.S. currency
Incorporates the same security features found on U.S. currency, such as security fibers, security threads, and watermarks
Because supernotes from North Korea are created using the same machinery and materials that are used by the U.S government to
create real currency, they are virtually indistinguishable from real bills using just the naked eye:
With few exceptions, only Federal Reserve banks equipped with the fanciest detection gear can identify these fakes.

Supernote Consequences
Most counterfeit non-supernote bills, which is what most counterfeit money are, is easily detectable, even with the naked eye.
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Most counterfeit non-supernote bills, which is what most counterfeit money are, is easily detectable, even with the naked eye.
Although the U.S. government had been aware that North Korea was involved in the counterfeit money production trade, it wasnt
until 1996 that the US Congress started to express their alarm at the existence of a high-quality counterfeit $100 bill that is so good
that it escapes detection by all but the most sophisticated detection equipment.
What alarmed officials wasnt the amount of new counterfeit bills showing up, but their exceptional quality.
This expression of alarm almost a decade later after discovery could be due to the fact that early versions of the superbills lacked
the magnetic ink used in genuine bills, but later versions of the counterfeits corrected this.
In response, the U.S. Treasury set a plan in motion to update U.S. currency with more sophisticated security features; this new
design was released into circulation in 1998. However, as the U.S. soon found out, this was not enough to deter counterfeiters: new
versions of these counterfeits continue to emerge.
On top of expertly copying the newly redesigned bills, North Korea even figured out a way to get more of their counterfeits into
circulation: The Treasury Department said that sources show that senior officials in Banco Delta Asia are working with [North
Korean] officials to accept large deposits of cash, including counterfeit US currency, and agreeing to place that currency into
circulation.
The US Treasury once again updated US currency security features and released redesigned bills once again in 2003.
By 2006, authorities counted 19 variations of the superbill, with each version being an improvement of the previous version; many
more variations are hypothesized to exist today.

The Future of North Korean Counterfeiting

North Korea is known neither for quality craftsmanship nor the ability to bring projects to completion; the tallest structure in North
Korea a hotel has been under construction since 1987. However, when it comes to counterfeit money production, North Korea
has figured out a way to surpass any competition and make the profits from counterfeit currency production a staple in their
economy.
North Korea has gotten so good at counterfeiting money that there have been reports that they have begun to produce counterfeit
yuan, the currency of China.
Last November, the city of Shaoxing reported that fake new 100-yuan bills that originated in North Korea were found to be
circulating. On March 28 of this year, the city of Dalian confirmed that counterfeit yuan found there was manufactured in North
Korea.
Although some officials consider North Korea to be the first country to counterfeit another states currency since Hitlers Germany,
an act that can be described as no less than economic warfare, as a whole, the U.S. government probably does not have any plan in
place to tackle the North Korea supernote problem anytime soon. It is the general understanding that although costly for smallbusiness owners who unknowingly accept a bunch of forgeries, counterfeits probably wont bring a crisis of faith in our paper money
anytime soon.
While it is a relief to hear that counterfeit currency will likely not affect the overall strength of U.S. currency, it is quite unnerving to
hear that the government considers the cost of counterfeit money to small businesses as a nonstarter.
On the consumer level, these isnt much to be done about supernotes . . . most consumers dont catch supernotes
when they receive them, and they may unwittingly pass them on into circulation. Businesses likewise have little
defense against the supernote, and since $100 U.S. bills are legal tender, a business cannot refuse to accept them to
avoid counterfeit bills.
For businesses, particularly retail businesses, cash is just a fact of life, even in the digital age. There have been arguments for
getting rid of cash altogether, due to criminals reliance on this form of payment, but as it stands right now, getting rid of cash is
simply not an option:
Cash is, and always has been, such an uncontested part of everyday life that we rarely stop to consider its toll on society as the currency of crime .
. . Thats not to suggest we could get rid of paper money tomorrow; we still dont have a substitute thats equally convenient, universally accepted
and adequately secure.

In the past, businesses were readily able to detect counterfeit money, despite the lack of sophisticated security features on old bills,
due to the fact that the only people counterfeiting money were ordinary citizens and they did not have access to the equipment
and materials to recreate viable counterfeits. However, in this day and age, with entire countries behind counterfeiting operations,
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and materials to recreate viable counterfeits. However, in this day and age, with entire countries behind counterfeiting operations,
detecting counterfeits has become much, much more difficult.
Supernotes are extremely frustrating for businesses which handle American currency, especially since these bills
cannot be detected using most basic anit-counterfeiting methods, such as specialized pens or the old retail trick of
rubbing a nail along the portrait to check for the distinctive raised print of a real American bank note.
On a positive note, however, there have been reports of decreasing counterfeiting activity by the North Koreans, but this positivity
should be taken with a grain of salt. As Professor Lee of Tufts University puts it, My conclusion is that theyve probably tempered it,
scaled it down a bit, and gotten better at hiding it. It was, for many decades, a major source of income for themIm not convinced
theyre out of the game.
The discovery of North Korean-made counterfeit yuan the past year a currency that North Korea was not previously known to be
producing should be taken as an indication that North Korea has no plans on stopping counterfeit currency production anytime
soon.

Topics: counterfeit money, counterfeit bills, supernotes

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