Today, on Changgwang Street in Pyongyang, the capital of North Korea, there is a barricaded compound of government buildings. Judging from satellite photos, these are unremarkable, rectangular structures that suggest no special purpose. Yet according to a North Korean specialist based in Seoul whom I spoke with recently, and who has interviewed many high-ranking North Korean defectors, including Hwang Jang Yop and Kim Duk Hong, these buildings are the home of Office 39, a government bureau devoted to raising hard currency for Kim Jong Il. (The specialist was granted anonymity because of the sensitivity of relations between North and South Korea.)

While the operatives of Office 39 may well direct legitimate enterprises, including the export of exotic mushrooms, ginseng and seaweed, a substantial portion of the office’s revenue comes from its involvement in illicit activities: drug manufacturing and trafficking, sales of missile technology, counterfeit cigarettes and counterfeit $50 and $100 bills. According to Ken Gause, director of the Foreign Leadership Studies Program at the CNA Corporation, a policy group in Virginia that consults on national-security issues, the activities of Office 39 overlap with those of two other offices that occupy buildings in the same complex. The first, Office 38, manages the money acquired by Office 39, he said, while the second, Office 35, handles kidnappings, assassinations and other such activities.

All three divisions employ the same narrow coterie of elites, and all answer directly to Kim Jong Il, who lives in a villa less than a mile away. The history of the operations of Offices 39, 38 and 35, Gause told me, closely follows Kim Jong Il’s own rise to power through the party apparatus. In the early 70’s, after helping his father purge the ranks of the Korean Workers’ Party of competing factions, Kim Jong Il assumed control of North Korea’s covert operations, mostly involving South Korean targets.

In the mid-70’s, according to defector accounts related to me by the North Korean specialist, Kim Jong Il issued a directive to members of the Central Committee of the Korean Workers’ Party instructing that expenses for covert operations against South Korea be paid for by producing and using counterfeit dollars. Officials in charge of the operation supposedly brought back $1 bills from abroad, bleached the ink and then used the blank paper to print fairly sophisticated counterfeit $100 bills — though nothing close in quality to a supernote. Many of these notes were later used by North Korean agents implicated in attacks on South Korean targets, like the operatives arrested for the bombings of a South Korean government delegation in Rangoon in 1983 and a Korean Airlines jet in 1987.

According to the same defector accounts, Kim Jong Il endorsed counterfeiting not only as a way of paying for covert operations but also as a means of waging economic warfare against the United States, “a way to fight America, and screw up the American economic system,” as the North Korean specialist paraphrased it to me.

In a similar vein, according to Sheena Chestnut, a specialist on North Korea’s illicit activities who has also interviewed several key defectors, counterfeiting was seen as an expression of the guiding idea of the regime: the concept of juche. Often loosely translated as “self-reliance” or “sovereignty,” the idea of juche entails an aggressive repudiation of other nations’ sovereignty — a reaction to the many centuries in which Korea capitulated to its larger, more powerful neighbors. “It appears that counterfeiting actually contributed to the domestic legitimacy of the North Korean regime,” Chestnut told me. “It could be justified under the juche ideology and allowed the regime to advertise its anticapitalist, anti-American credentials.”

By 1984, as North Korea’s planned economy began to fall apart, Kim Jong Il, who by that time was effectively running much of the government, issued another directive, according to the North Korean specialist, who told me he has obtained a copy of the document. It explained that “producing and using counterfeit U.S. dollars” was a means, in part, for “overcoming economic crisis.” The economic crisis was twofold: not only the worsening conditions among the general population but also a growing financial discontent among the regime’s elite, who had come to expect certain perquisites of power. Counterfeiting offered the promise of raising hard currency to buy the elite the luxury items that they had come to expect: foreign-made cars, trips for their children, fine wine and cognac.