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"In the eyes of the North Koreans, he would have literally been a spy engaging in some kind of espionage activity ... I wouldn't go there (if I were him)," Kim Hyeon, 86, told Reuters. "Our members were working, fighting and engaging in espionage alongside Newman because he was an adviser."Source

What does the "would have been" part imply here?

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It means that, to the North Koreans, it is likely that he is a spy. A spy who have been engaged in some kind of espionage activity.

To understand "would have been", you can simply understand it the same way you understand "have been", but with a lower degree of possibility.

If that is still unclear, try reading "he would have been..." as if it was written "it was likely for him to have been...".

  • Addendum (January 2016): Though I don't like my own answer much, reading it again right now, I don't think it's exactly wrong, because would have been has at least two possible interpretations: counterfactual (something that didn't really happen), and a less likely expression for "have been" (roughly speaking); and yet sometimes the two senses are sort of mixed together, like this one. -- A minor fix I did to the answer was just changing he is likely to it was likely for him – Damkerng T. Jan 17 '16 at 16:05

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