Friday, January 25, 2008

Spooked-up greenbacks?

Someone is counterfeiting American $100 bills.

Of course, crooks have been creating fake bucks ever since the government started to create real ones. But the $100 "supernotes" (or "superdollars") which keep turning up in cargo holds pass all the usual tests of authenticity:
The counterfeits were nearly flawless. They featured the same high-tech color-shifting ink as genuine American bills and were printed on paper with the same precise composition of fibers. The engraved images were, if anything, finer than those produced by the United States Bureau of Engraving and Printing. Only when subjected to sophisticated forensic analysis could the bills be confirmed as imitations.
The Treasury Department believes that the culprit is not a criminal or a syndicate -- but a state. To be specific: North Korea.
“The North Koreans have denied that they are engaged in the distribution and manufacture of counterfeits, but the evidence is overwhelming that they are,” Daniel Glaser, deputy assistant secretary for terrorist financing and financial crimes in the Treasury Department, told me recently. “There’s no question of North Korea’s involvement.”
Although previous suspects included Iran and Syria, North Korea has long stood at the center of official accusations, thanks to a defector's claims -- and to the discovery of supernotes in the luggage of North Korean diplomats. Some aver that dictator Kim Jong-Il could not keep his nation afloat without the phony notes. (Of course, defectors have often proven unreliable.)

But this spellbinding story in Germany's Frankfurter Allgemeine Sonntagszeitung suggests that the culprit may in fact be the American intelligence community.

(To read the rest, click "Permalink" below)

The FAS piece -- written by Klaus Bender, author of Moneymakers: The Secret World of Banknote Printing -- notes the astounding technical difficulties involved with such an operation.
The banknote paper used for the Supernotes is produced on a so-called Fourdrinier papermaking machine and consists of 75 percent cotton and 25 percent linen. Only the Americans make their currency in this manner.

On the Supernotes, neither super-thin polyester security film with the microprint "USA 100" nor the graduated watermarks are missing. For this, the counterfeiters would require at least one papermaking machine. In addition, a chemical and physical analysis of the paper proves that the cotton used in the Supernotes originated in America's Southern States. To be sure, this cotton is freely available on the open market.
That's just the beginning. The notes are printed using an intaglio press manufactured for the Federal Reserve by the German firm KBA Giori.
These special printing machines are not available on the open market. Even the resale of such a machine is reported to Interpol as a matter of routine.
The top-secret color-changing ink used on $100 bills is manufactured by a Swiss firm; other inks are produced in secret facilities in the United States.
Another peculiarity concerning dollar notes that emerged starting in 1996 is that every variation implemented by the Fed in the printing of the dollar has been immediately replicated by the counterfeiters. At present, no less than 19 different plates for the Supernotes have been identified, and they are absolutely perfect. Micro-printing sized at only 1/42,000 of an inch are hidden on the new notes, and under a magnifying glass the Supernotes show no deviation from the original. Where ever did the counterfeiters find such specialists?
After poking holes in the evidence against North Korea (which produces its own poor-quality notes on inferior equipment from the 1970s), the FAS piece segues into the realm of rumor. Fortunately, the speculation comes clearly labeled as such:
A rumor has circulated for years among representatives of the security printing industry and counterfeiting investigators that it is the American CIA that prints the Supernotes at a secret printing facility. It is in this facility, thought to be in a city north of Washington D.C., where the printing presses needed to produce the Supernotes is said to be located.

The CIA could use the Supernotes to fund covert operations in international crisis zones, and such funds would not be subject to any control by the American Congress.
This same "rumor" has now found its way into a McClatchy newspaper, the Kansas City Star:
Klaus Bender...said the phony $100 bill is “not a fake anymore. It’s an illegal parallel print of a genuine note.” He claims that the supernotes are of such high quality and are updated so frequently that they could be produced only by a U.S. government agency such as the CIA.

As unsubstantiated as the allegation is, there is a precedent. An expert on the CIA, journalist Tim Weiner, has written how the agency tried to undermine the Soviet Union’s economy by counterfeiting its currency.
I would also cite as a precedent the Nazis' notorious Operation Bernhard.

Here's an astounding detail: The superdollars contain a deliberate "tell" -- a giveaway.
Whoever is making them seemed to deliberately add minuscule extra strokes, as if trying to flag the phony bills, the Swiss noted. For example, at the very tip of the steeple of Philadelphia’s Independence Hall, the counterfeit bills have a line along the left vertical edge that is not on the real bills.
A detail of that sort would not occur by accident, especially not on bills which pass muster on a microscopic level.

American spooks have been known to engage in (or at least turn a blind eye toward) some very nefarious activities. Surely, though, there are limits? Surely the CIA would understand the damage these supernotes could inflict on the American economy?

I still would not discount the theory of a non-American state actor. Any culpable foreign service would have to be capable of...

1. Covertly acquiring the specialized intaglio printer.

2. Creating paper to spec, using cotton imported from the American south.

3. Maintaining agents-in-place within the facilities where the ink is manufactured. Other agents would need to have access to the plates for each new bill design, since the counterfeits automatically keep up with changes in the real notes.

Each reader must make an individual judgment as to which foreign nations -- if any -- could accomplish these tasks.

This DU poster adds a fascinating bit of speculation:
I was even wondering myself if the kid gloves treatment that was afforded to money launderer Thomas Kontogiannis who was tied into Duke Cunningham, Brent Wilkes, and the intelligence agencies might have known more about this than he ought to and that was why he was "allowed" to travel to Europe after being sentenced for his crimes here under the "guidance" of some unnamed governmental agency unbeknownst to the sentencing judge.

5 comments:

Anonymous said...

I was going to mention the counterfeiting of rubles we'd done, but I see it made the cut for this post after the jump.

Frankly, with most of US currency out of the country, and likely totaling into the trillions of dollars, a couple billion here and there wouldn't add much to the titanic sum of USDs already sloshing around outside the country (pace Everett Dirksen).

...sofla

R.L. said...

There may be much more out there but so far only about 50 million has shown up.This is far to small for it to be state run.Has to be CIA.

Anonymous said...

If I was given to conspiracies, could a flood of this identifiable fake/real money be a way to force US into abolishing currency, so that all funds are electronic and easier to trace/steal? Just a thought.

Anonymous said...

Ah, Wilkes-Cunningham rears its massive, ugly head in yet another quagmire. Is there anything untouched by that godawful mess?

Anonymous said...

Thank-you for the very interesting post and links.

The following is pure speculation, since I have no information beyond what you've supplied or linked to, but I think it at least takes into account what I see as the key points:

P1. The supernotes use genuine paper and inks, they're printed by very expensive machinery, and they have watermarks, coloured micro fibers, and embedded strips like the real notes do.

P2. The supernotes have been updated 19 times,
tracking changes in design of the real bills.

P3. There exists an (at least) equally good $50 supernote which is not being circulated.

P4. Only $50 million of supernotes has been
seized since 1989.

P5. Supernotes lack the microscopic ink splotches that presumably arise from conditions of mass production.

P6. Supernotes have "tells", minute changes from the design of the real notes which can be readily seen once one knows their specific location, but which are otherwise difficult to detect.

My conclusions (in full realization that many others are possible):

C1. The printers of supernotes are NOT doing so primarily to make money by passing supernotes off as real notes: the supernotes are massive overkill. P1-P3 indicate far more effort is going into producing the bills than is necessary to have them accepted as real, and that opportunities to spend less and profit more by skipping design updates or passing less-frequently tested $50 bills are not being taken. P4 and P5 provide alternative lines of evidence that large numbers of bills (in the currency-destabilizing range, say) are not being printed.

C2. The printers of supernotes want to be able to both easily detect and irrefutably expose batches of bills as supernotes, presumably at their convenience. Given the capabilities demonstrated by P1-P3, I can't see any other conclusion to be drawn from P6.

C3. The simplest (in some ways) explanation for P1-P3 is that the same people and facilities are responsible, knowingly or not, for printing supernotes as for printing real notes. Those in the know simply add tells to copies of whatever plates are currently in use, and arrange for those modified plates to be used for small runs (whose pretext could be that a shipment of genuine bills in a certain range of serial numbers was misprinted or accidentally destroyed, and must be reprinted); the tracking of design changes is then just a side-effect.

C4. The supernotes are not being produced simply to allow tracking of money, since serial numbers already allow that.

C5. If C3 is true, it's extremely unlikely to be a rogue inside operation, given how long it has persisted. Therefore it is officially sanctioned at some level high enough within
the Bureau of Printing and Engraving or the Federal Reserve to forestall outside investigation.

I think C2 is key to understanding the purpose of supernotes. Suppose you are a government agency trying to take down (in whatever sense) a targeted individual or organization. Further suppose you are constrained to doing so via public charges that will stick in a court, whether judicial or of public opinion. Finally, suppose you cannot make charges about something the target has actually done; perhaps you are institutionally pure of heart and stymied by lack of real evidence, or perhaps you can't afford that the real reasons for the targeting be made public, perhaps because those reasons are illegitimate.
Then supernotes are a handy tool:

- arrange for the target to acquire, one way or another, an appropriate quantity of supernotes, perhaps by paying them (through a cut-out, of course) for goods or services. Because of P1-P3, it's unlikely the target will recognize them as counterfeit.

- it doesn't matter whether the target did anything wrong in exchange for the payment(s), only that it eventually ends up with a bundle of supernotes and starts to spend them.

- at your convenience, charge the target (formally or via the media) with passing counterfeit bills.

It's easy to demonstrate the truth of the charges (because of P6), and if the target has supernotes in sufficient quantity, any defence of ignorance becomes weak: P4 implies that the chances of any bundle of money having more than a couple of supernotes by chance is tiny.

Or perhaps you set up a Brewster-Jennings-style "honey trap", aimed at luring whomever might seek out counterfeiters for fast cash. How can other counterfeiters compete when you have such a high quality product. And you can easily prove they are counterfeits, since you know the tells.

As a given tell becomes known, perhaps due to public charges that you've made, you can print new supernotes with new tells. The lack of old
tells on these bills can be used to "prove" they are genuine, until such a time as you find convenient.

You can probably imagine other sting operations, legitimate or not, that involve being able to reveal irrefutably, and at just the right time, that a pile of very genuine looking money sitting on a table, in a safe or in a briefcase is in fact "counterfeit".

And of course the agency responsible for supernotes need not be the only one putting them to use, and need not know that they aren't.

This falls apart if the Fed / BPE
become widely suspected of printing the supernotes themselves, because then how will any charges of "counterfeit" still stick? So it makes sense to sporadically feed Interpol with reports of unknown expert counterfeiters and seizures of supernotes from villains of the day.