From the Super Mario Wiki
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Spy Land resembles a contemporary city, although it is home to to many Secret Agents and Spies. Super Spy Headquarters is an underground complex located beneath Spy Land, where James Blonde and Secret Agent N both work. Koopfinger's hideout is also located in a building in downtown Spy Land.
When Koopfinger arrives in Spy Land, he turns James Blonde to stone, and proceeds to rob Fort Hard Knox, Spy Land's treasury. Although they are not able to foil the robbery, Mario and Luigi go after Koopfinger, who eventually calls in a Birdo to take them to his hideout. After Mario and Luigi banish Koopfinger from Spy Land, James Blonde is able to turn back to normal.