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Weapons of Mass Destruction (WMD)

Narcotics, Counterfeiting Help Fund North Korea, U.S. Says

26 April 2006

Senate hearing discusses Pyongyang's criminal operations

By Todd Bullock
Washington File Staff Writer

Washington – The North Korean government is funding its regime though criminal activities such as trafficking narcotics and counterfeiting U.S. currency and cigarettes, say top U.S. officials.

U.S. officials get their information on North Korean criminal activity from police and press reports, defector statements, embassy and intelligence reporting of various governments and the findings of trademark-holder investigations, according to Peter Prahar, director of the Office of Africa, Asia and Europe Programs for the State Department's Bureau of International Narcotics and Law Enforcement Affairs.

Prahar testified April 26 at a hearing before a subcommittee of the Senate Homeland Security and Governmental Affairs Committee along with Michael Merritt, deputy assistant director of the Office of Investigations in the U.S. Secret Service.


Foreign law enforcement investigations clearly have established that North Korean diplomats, military officers and other government officials have been involved in the smuggling of narcotics, Prahar said.

In many of these cases, state-owned assets, particularly ships and military patrol vessels have been used to facilitate and support international drug trafficking ventures, he said.

Due to the authoritarian, centralized nature of the North Korean state, Prahar said, it is difficult to imagine that the importation of the required precursor chemicals or the manufacture and shipment of illicit narcotics and counterfeit goods could occur for many years without state support and sponsorship.

North Korea's drug trafficking operations have expanded to providing drugs to trafficking organizations in East Asia, according to Prahar.  Methamphetamine and amphetamine-type stimulants increasingly are associated with North Korea, he said.

Organized crime syndicates provide the mechanisms for North Korea to distribute its illicit goods to target markets like Japan, Prahar said.  "North Korean state trading companies frequently play a role in this relationship, with North Korea having transformed itself into a 'wholesaler' of illicit products."

Since the 1990s, he said, Japanese authorities disrupted a series of attempts by Japanese criminal organizations that were working closely with North Koreans to smuggle illicit stimulants into Japan.

Prahar also cited a period between 1997-2000 when Japan found North Korean methamphetamine strapped to navigational buoys in Japanese territorial waters.  He said that 43 percent of all methamphetamine seized in Japan during 1999 had some connection with North Korea.

North Korea narcotics frequently have been discovered in Taiwan as well, he added.


According to investigations for major U.S., British and Japanese cigarette companies, North Korea may have as many as 12 factories that manufacture and traffic counterfeit cigarettes, Prahar said.  He estimated that North Korean factories have the capacity to produce billions of packs of counterfeit cigarettes annually, some of which enter the U.S. market.

Prahar said some of these factories appear to be owned and operated by North Korean military and security organizations, while other groups appear to pay North Korea for a "safe haven" and access to transportation infrastructure to conduct their criminal activities.

"The quality and quantity of the counterfeit cigarettes produced in North Korea are evidence that a substantial investment has been made in equipment -- an investment that would not be made if the owners were not assured that their investment would be immune from disruption and seizure by the authorities," Prahar said.

To counter North Korea's illicit activities, U.S. law enforcement groups share information with a number of U.S. agencies, as well as with allies and friends, to encourage arrests and seizures of North Korean criminals, he said.

"Under the current arrangement, there are interagency working groups dealing with each element of North Korean criminality, including smuggling, narcotics trafficking and counterfeiting as well as abuse of diplomatic privileges," Prahar said.


According to Merritt, the United States Secret Service has made definitive connections between North Korea and the production of exceptionally well executed counterfeit U.S. $50 and $100 currency notes known as "Supernotes."

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

"Our investigation has revealed that the Supernote continues to be produced and distributed from sources in North Korea," he said.

According to Merritt, Supernotes can damage an economy because they create monetary losses and damage the integrity of the U.S. dollar.

He cited examples in Taiwan in 2004 and Peru in 2005 where many financial institutions and merchants refused to accept any $100 notes after the discovery of small caches of Supernotes.

To counter the distribution of Supernotes, Merritt said, Secret Service agents around the world are working closely with their foreign counterparts to identify and arrest distributors, as well as deny North Korea the supplies and equipment to manufacture the counterfeit currency.

Additionally, the Secret Service provides detailed training to financial institutions and law enforcement personnel around the world on the detection of counterfeit currency, he said.

In the past year, the Secret Service has provided 138 seminars in 23 countries, training approximately 7,800 financial institution and law enforcement personnel, Merritt said.

For additional information, see The U.S. and the Korean Peninsula.

The prepared remarks of Prahar and Merritt are available on the Senate subcommittee's Web site.

(The Washington File is a product of the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

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