Op-Ed: "Kim the Counterfeiter"

Press Release

"Kim the Counterfeiter"

The following opinion editorial, written by Representative Royce, appeared in the Wall Street Journal on Saturday, March 10th:

Drinks flowed as North Korea's top negotiator and his American counterpart
met in New York this week in celebration of Pyongyang's promise to give up
its nuclear weapons. It was hard to believe that just five months ago North
Korea actually exploded a nuclear weapon, for which it was roundly
condemned. But that condemnation is gone today -- as is any frank discussion
of the criminal nature of the regime, including its highly sophisticated
operation to counterfeit U.S. currency.

Troubling signs indicate that the Bush administration is prepared to push
aside North Korea's illicit activities, "resolving" issues surrounding
Macau-based Banco Delta Asia, which was found to be complicit in the
counterfeit operation. Regardless of the outcome surrounding Banco Delta
Asia, active vigilance against North Korea's robust and global illicit
activities is essential. Confronting North Korea on its illicit activities,
as a study I will release on Monday shows, makes the denuclearization of the
Korean Peninsula more likely, not less.

Remarkably, North Korea is the first country since Hitler's Germany proven
to counterfeit another's currency. And in a little-noticed report sent to
Congress last September, the Treasury Department found that the forgeries,
high-quality "Supernotes," are "being produced and distributed with the full
consent and control of the North Korean government." This includes both $100
and $50 bills, from the older series to the newer "big head" notes.
Approximately $50 million of them have been seized from circulation since
1989.

Estimates on the amount of revenue generated from Pyongyang counterfeits
range from $15 million to $25 million per year, but the actual amount may be
considerably higher. As one government analyst put it, "We have no idea how
much they're counterfeiting, because it's so good." Left unchecked, these
counterfeits could eventually weaken confidence in the U.S. dollar, with
global consequences. Alarmingly, some countries -- such as Ireland, Taiwan
and Peru -- have temporarily refused accepting our $100 bills.

North Korea's counterfeiting network is global, employing a diplomatic
presence in more than 60 countries. An IRA splinter group leader has even
been arrested for distributing these bogus bills. Including drug trafficking
and other illicit activities, the criminal sector is responsible for 35% to
40% of North Korea's exports.

For Kim Jong Il, crime does pay. And given its ties to international
criminal organizations, Pyongyang has access to a vast smuggling network
that could allow it to move almost anything in or out of the country,
including weapons of mass destruction.

Realizing this, the administration stood up the Illicit Activities
Initiative in 2003. Its task was to attack the criminal lifeblood of the
regime -- which it did. The designation of Banco Delta Asia as a "willing
pawn" of the North Korean government in September 2005 led banks throughout
the region to sever contacts with the country, shaking Pyongyang and leading
the regime back to the negotiating table.

When North Korea rejoined the six-party talks, its representative wanted to
discuss one thing: money. Pressure -- not appeasement -- worked. But in a
concession to Pyongyang, the U.S. committed to "resolve the issues
concerning Banco Delta Asia" within 30 days of the Feb. 13 agreement.

It is unclear what this will mean exactly -- but now that a deal has been
made, U.S. officials who once pressed the case against Pyongyang's
counterfeiting are talking about the "broader interest." They are lately
referring to the North Koreans as "only depositors" at Banco Delta Asia, as
if Kim Jong Il was attracted by its interest rates. The Illicit Activities
Initiative has now become enmeshed in the State Department's bureaucracy,
losing the coordination, energy, and access to top officials it previously
enjoyed -- and losing steam.

Some may believe that tolerating North Korean counterfeiting is a small
price to pay for disarming Pyongyang of its nuclear weapons. This discounts
the potential impact on the world's economy. It also sends the unhelpful
signal to the North Koreans that as long as they make promises on their
nuclear weapons, the U.S. will bend on its laws.

Ending North Korea's nuclear weapons program must be our primary objective.
However, the aggressive enforcement of our laws enhances rather than
conflicts with the diplomatic effort to do so. Putting a stop to Pyongyang's
counterfeit operation and other criminal activities would sever a key
subsidy for North Korea's weapons of mass destruction program and frustrate
Kim Jong Il's payments to his inner circle. It would also condition
Pyongyang into respecting international norms.

Can we really expect a regime that counterfeits our currency to abide by a
nuclear weapons agreement? Only when North Korea ends its criminal behavior
are prospects for peace and security in Northeast Asia real. Let's help
Pyongyang go straight.

Mr. Royce is a member of the House Foreign Affairs and Financial Services
Committee

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