Register Today for Investigating on the Internet – May 18-19 2016 RVACFES Seminar!
On an overcast October evening in 2005, Sean Garland, the president of the Irish Workers’ Party, was dining with colleagues in a Belfast restaurant when officers from the Police Service of Northern Ireland burst through the door and seized him. The silver-haired 71-year-old faced potential extradition to the US over his alleged involvement in one of the most successful counterfeiting rings in history.
American prosecutors accused Garland, a senior Irish Republican Army veteran, of distributing large quantities of high-quality counterfeit bills produced by North Korea known as “supernotes” — fake American $100 and $50 bills that were so convincing they could move through the global financial system largely undetected. The arrest marked a crescendo in a long fight by US authorities to stem the flow of North Korean supernotes, a campaign that spanned over 130 countries and involved the undercover infiltration of trafficking circles, a sham wedding ceremony on a New Jersey yacht that lured smugglers into a trap, and the discovery of $66,900 in counterfeit bills hidden inside menstrual pads stored in a locker at Moscow’s Kazan Railway Station. Within months of Garland’s detention, US officials slapped sanctions on a small bank in Macau that was suspected of laundering North Korean funds, and arrested dozens of smuggling suspects in enforcement actions dubbed Operation Smoking Dragon and Operation Royal Charm. North Korean supernotes, which had circulated widely for years, seemed to fade away. Now some observers are openly wondering whether the battle might actually be over.
No fresh discoveries of North Korean supernotes have been made public in the past five years. Only three cases have been reported since 2008, and none of those discoveries involved the country’s officials, according to data compiled by Sheena Chestnut Greitens, a non-resident senior fellow at the Brookings Institution who tracks supernotes closely. North Korea, the so-called Hermit Kingdom, is notoriously opaque. Statements about the country’s inner workings inherently involve a degree of guesswork. But some analysts who carefully watch North Korea said the country appears to have significantly scaled back its US currency counterfeiting operations — or maybe even stopped altogether. “I don’t think they’re currently involved in counterfeiting anymore,” stated Michael Madden, a contributor to 38 North, a North Korea analysis website maintained by the Paul H. Nitze School of Advanced International Studies at Johns Hopkins University. The supernotes are “not something people are seeing,” said Katharine H. S. Moon, political science professor and North Korea expert at Wellesley College. The country may be lying low in the wake of law enforcement and regulatory moves against the supernote distribution and laundering network. If so, that campaign could be seen as a big win for the Secret Service, the American agency tasked with battling counterfeiters. “It’s very possible that the series of US law enforcement actions made the risks and costs too high to North Korea to keep counterfeiting,” Greitens said. North Korea began producing fake dollars as early as the late 1970s, distributing them through underground operatives, criminal syndicates, casinos — and, allegedly, men like Garland, who US prosecutors said crisscrossed the globe acquiring phony cash from North Korean operatives and selling it for a profit. Estimates of the country’s earnings from counterfeit dollars vary widely, from as little as $1.25 million annually to as much as $250 million, although experts have put the most credible assessments between $15 million and $25 million a year. To be sure, some analysts find it hard to believe that North Korea has really given up on counterfeiting: a long history of illicit activity, combined with a persistent need for hard currency, suggest otherwise. North Korea has been accused of engaging in a mind-boggling array of illicit moneymaking schemes — from manufacturing imitation Viagra to large-scale insurance fraud; from trafficking heroin to smuggling endangered animal parts in official diplomatic pouches. In the early 2000s, the country was estimated to be supplying as much as 30 percent of the Japan’s imports of methamphetamine, according to congressional testimony by William Newcomb, an economic analyst who worked for both the State and Treasury departments.
“Think about how criminal syndicates behave,” said Sung-Yoon Lee, a North Korea specialist at Tufts University. “When there’s a bust, they go underground for a while.” Abandoning currency counterfeiting would be a big change for North Korea. So big, in fact, that experts mention another possibility for the apparent lack of activity: North Korea’s legendary skills at printing the best knock-off dollars in the world might have improved to the point where no one can spot the fakes. “The first possibility is that they got out of the game,” Greitens said. “The second is that they got even better at it, and we just haven’t caught them yet.” In 1989, a bank teller at the Central Bank of the Philippines in Manila noticed something odd about a particular $100 bill, and set it aside. The note ended up in the hands of the US Secret Service, which codenamed it C-14342 and entered it into the agency’s vast library of counterfeit dollars. Similar bills started popping up elsewhere. The new fakes were so accurate that investigators started calling them supernotes. What alarmed officials wasn’t the amount of new counterfeit bills showing up, but their exceptional quality. The standard anti-forgery devices used by most banks couldn’t detect any flaws. The supernotes were made from the same difficult-to-create, three-quarters cotton, one-quarter linen fiber paper used in real dollars. They were produced on the same heavy, expensive, restricted intaglio printing presses used by the US Bureau of Engraving and Printing. They carried the same red and blue security fibers, security stripe, and watermark. As the ’90s progressed, signs increasingly pointed toward North Korea. South Korean Intelligence corroborated information on North Korean counterfeiting prior to 1998, according to a Congressional Research Service report. North Korea had defaulted on its foreign debt in 1976, leaving the country badly in need of funds, just as a new leader was on the rise.
The ascent of Kim Jong-il, then emerging as heir apparent to his father, Kim Il-sung, tracked closely with the country’s move into illicit methods of raising income. North Korean defectors say Kim Jong-il personally issued an order in the late 1970s that all of the country’s covert operations be conducted using counterfeit US cash, according to Illicit: North Korea’s Evolving Operations to Earn Hard Currency, a report authored by Greitens. Doing so, she wrote, “would have the dual benefit of funding North Korea’s operations and engaging in economic warfare against the United States.” The idea that North Korea could simply print US currency without anyone being able to tell the difference set alarm bells ringing in Washington, DC. Speaking at a hearing of the House Committee on Banking and Financial Services dedicated to foreign counterfeiting in 1996, US Congressman Spencer Bachus (R-Al.) expressed 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.” “Secret Service indicated to my staff that they believed such currency may have been used to support terrorist activities against the United States,” he continued. “That is a very disturbing prospect.” “The Secret Service has been unequivocal that the North Korean supernotes are the best in the world,” Greitens wrote in her report.
Supernotes started appearing in Ireland in the early 1990s, where they proliferated to the point that some Irish banks began refusing to exchange $100 bills. By that time, Garland was already a living legend of the Irish Republican Army. An ardent Marxist, Garland was a leader in the Official Irish Republican Army, a paramilitary group that splintered off from the original IRA. After helping to negotiate a ceasefire in 1972, Garland became president of the Workers’ Party of Ireland, the political party associated with the OIRA. But the party struggled for votes and was deeply in debt by the late 1980s, prompting Garland to appeal to the Soviet Union for help, according to a 1992 report in the British newspaper the Independent. Garland asked Soviet leaders for a million Irish pounds and for the training of “five reliable and trustworthy party members” to “strengthen the security” of the Workers’ Party. The requests were never met. By 1993, the “Garland organization” was selling high-quality counterfeit currency to a man named Hugh Todd, a dual citizen of Ireland and South Africa who later agreed to cooperate with investigators, according to details laid out in an affidavit filed in the High Court in Dublin by Brenda J. Johnson, assistant US attorney for the District of Columbia.
The affidavit describes a transaction in April 1998 when Garland, who prosecutors said went by the pseudonym “the Man with the Hat,” arrived at Todd’s hotel room in Moscow’s Radisson Hotel. Todd opened the door for Garland, who entered and poured $80,000-worth of counterfeit dollars from a leather bag onto the bed, the document says. Todd paid Garland $30,000 in real money for the fake bills, according to the affidavit. In June 1999, Garland visited Moscow again. This time he was being watched by Russia’s Ministry of Internal Affairs at the request of the Secret Service, according to the affidavit, which was filed in November 2008 to support a pending US extradition request for Garland from Ireland. Outside the Metropole Hotel, across the street from Moscow’s famous Bolshoi Theater, Garland and his wife were observed getting into a sedan with diplomatic license plates registered to the North Korean embassy, the document says. The couple were taken to the embassy, where they remained for about two hours. In July 2000, a Russian-born UK resident named David Levin, who went by the alias “Russian Dave,” agreed to help investigators arrange the delivery of $70,000 worth of supernotes in Moscow within a week, according to Johnson’s affidavit. A few days later, authorities retrieved a black nylon sports bag that had been left in a temporary luggage compartment at Moscow’s Kazan Railway Station. When Russian officials opened the bag, the affidavit says, they found $66,900 worth of counterfeit currency wrapped inside two packages of Always brand menstrual pads.
From at least 1997 to the summer of 2000, Garland and a group of associates conspired to buy, sell, and exchange counterfeit currency in Ireland, the UK, Russia, Poland, Belarus, Denmark, the Czech Republic and Germany, according an indictment filed against Garland and six others in the US District Court for the District of Columbia in September 2004. In 2005, Garland made a rare visit to Northern Ireland to give the keynote address at the Workers’ Party annual meeting in Belfast. During a meal before the event, police officers seized him.