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This page is graphically intense with long load times due to photos. However, the photos and narratives by the men who served at Osan Air Base makes the wait well worthwhile. The opinions expressed are those of the author and in no way represents any official statement of Osan AB or the USAF. 
RETURN TO MAIN TABLE OF CONTENTS NORTH KOREAN "SUPERNOTE" COUNTERFEIT FURORCounterfeit "Supernotes" Furor Continues (Jan-Feb 2006) The row over the North's "supernotes" continues. Years of U.S. investigations, involving 14 federal agencies, have found that the illicit activities are now generating more than half a billion U.S. dollars for Pyongyang. North Korea is counterfeiting not only the greenback but also the Japanese yen, and well as producing heroin, methamphetamines, fake pharmaceuticals such as Viagra and Marlboro and other cigarettes brands. The regime was even counterfeiting tax stamps attached to American cigarette packs. "You name it, they are pretty much in it," David Asher, former State Department official who was deeply involved in the North Korean investigations, told National Press Radio on 18 Jan 2006.The U.S. is seeking the help of other countries, especially China, in combating the problem, but the government there is not likely to help if it sees the U.S. goal as being the demise of Kim Jong-il's regime. The North continued to condemn the US and state that they would not attend the six-party talks unless the sanctions were lifted. However, the US continued to state that the two issues -- counterfeiting and nuclear disarmament -- were not linked. The battle in the US is between hardliners who are seeking to use the sanctions as means to collapse the Kim regime and the moderate elements who seek to use the issue only as leverage at the negotiating table during the six-party talks.  Supernote $100 Dollar Bill On 19 Feb, it was reported that the eldest son of North Korean leader Kim Jong-il was responsible for spreading fake U.S. dollars through Macau, prompting Washington to slap sanctions on the communist country, a South Korean official said. The U.S. crackdown has not only intensified friction between the two former battlefield foes but also diminished chances for Kim's oldest son, Jong-nam, to succeed his father in a power struggle with his two younger brothers, the intelligence official said, speaking on condition of anonymity. (< a href=http://english.yna.co.kr/Engnews/20060219/430100000020060219083049E0.html>Yonhap News.) US Briefing to South (Jan-Feb 2006) On 6 Jan it was announced a Secret Service delegation were to visit Seoul to explain to the Roh administration in detail their findings dealing with the North's counterfeiting operations. The Seoul government had requested Washington to pass on specific details of its information on North Korea's alleged counterfeiting activities -- an equivalent statement to "I believe you, but..." The act by Seoul to not disturb their relationship with the North has put further strain on the US-ROK relationship. (See US and ROK at Odds over North Korean Counterfeiting for background.) Amidst the ROK skepticism, a three-month investigation by China of accusations that North Korea used a Macau bank to launder gains from currency forgery has confirmed the suspicions according to Korean diplomatic sources on 11 Jan. They said South Korea's Deputy Foreign Minister Song Min-soon and his Chinese counterpart Wu Dawei have already met in Beijing to discuss the issue. Both are their country's chief delegate in six-party talks on North Korea's nuclear program, which Pyongyang is boycotting because of U.S. sanctions over the counterfeiting charge. China, the ROK and Japan agree that the counterfeiting issue is a separate issue from the six-party talks. Wu also met with his North Korean counterpart Kim Kye-gwan to inform him in person that China believes Pyongyang cannot escape culpability for its illegal actions. (Source: Chosun Ilbo.) On 23 Jan, the visiting U.S. delegation met with Ministry of Foreign Affairs and Trade (MOFAT), the Ministry of Finance and Economy (MOFE) and the Korea Financial Intelligence Unit (FIU) officials to discuss the counterfeiting issue. A U.S. investigation team headed by the Treasury Department's deputy assistant secretary for terrorist financing and financial crimes, Daniel Glaser, presented Korean officials with its evidence that North Korea is engaged in counterfeiting U.S. dollars. The team was met by Kim Sook, the director-general of the North American affairs bureau in the Foreign Ministry. South Korean officials said the evidence offered by the U.S. team was "pretty convincing." "Both U.S. and Macau authorities are still investigating the issue, and it seems no significant results will be out for several days," a government official said. "Seoul has already stopped raising questions about accusations that the North is involved in illegal financial activities. To our knowledge, the Chinese investigation has confirmed that the North is engaged in wrongdoings." (Source: Chosun Ilbo.) However, the ROK continued to vacillate. Seoul told Pyongyang that it was "deeply concerned" about the U.S. charges, but insists that it needs more evidence that the North is behind the $100 "supernotes" before taking any action. Korean officials called the meetings "a simple briefing" on measures the United States has taken to combat the counterfeiting, but refused to discuss the information provided by the U.S. officials. One denied that Washington had provided further evidence of North Korean complicity or attempted to persuade Seoul to support U.S. attempts to combat it. Referring to Korean officials, a diplomatic source in Seoul said, "I think they had seen enough even before the briefing, but time is needed to figure out how to address the issue while proceeding with the nuclear talks. That is why a clear positioning by Seoul won't take place." (Source: Joongang Ilbo.) The U.S. Embassy in Korea on 22 Feb 2006 reiterated that Washington had provided the South Korean government with evidence that North Korea forged U.S. dollars and provided it with specimens of the so-called supernotes made by Pyongyang during the briefing. The evidence was presented to South Korean officials by U.S. Treasury investigators. An embassy spokesman said the U.S. government showed Korean officials "superior-quality counterfeit 2001 and 2003 series US$100 notes (supernotes) that our investigations have concluded were manufactured" in North Korea. The spokesman said U.S. investigators concluded that $140,000 uncovered by South Korean police last year were part of a batch made by Pyongyang in 2001. (Source: Chosun Ilbo.) Seoul Denies US Asked for Help -- US Says It Did (Jan 2006) Korea denied on 24 Jan that it has been asked to join Washington in penalizing North Korea in connection with the communist country's alleged currency counterfeiting and other illicit financial activities -- while the US Embassy stated in releases that the ROK had been asked TWICE. A South Korean government official denied Glaser asked anything of the government, in blunt contradiction to the US embassy press release, which twice said the U.S. asked Seoul to join in efforts to combat the North's illegal activities. The fact that the embassy took the rare step of distributing its own statement and bypassing the host government smacks of fears in Washington that the South Korean government would present a substantially different version from the U.S.' own. (Source: Chosun Ilbo.) Foreign Minister Ban Ki-moon told reporters on 23 Jan the Korean government needs to take no further steps. "The nation's financial regulations provide appropriate legal means to conduct investigations and take necessary steps when illegal money laundering or suspected transactions by those connected with terrorist activities occur," a ministry official said. (Source: Chosun Ilbo.) The statements were followed by Roh coming out saying that the ROK would NOT abandon its policy of rapprochement with the North -- and rejected the US plan to isolate and bring about the collapse of the North. (NOTE: In addition, Roh stated that he would push for the return of war-time control from the US WITHIN the year ... an impossibility as stated by ROK officials. However, he is alienating the US in a very direct manner -- supporting openly the North while US troops are stationed in the ROK for its defense from the North.) The American team "has neither officially nor unofficially urged our Government to take specific steps," South Korean Foreign Ministry spokesman Choo Kyu-ho said. The US stood by the statement released by its embassy. "We stand by the press release issued yesterday and we have nothing further to add," embassy spokesman Robert Ogburn said. In essence, the US will continue its plan of action, while the Korea is free to pursue its path -- though the US is visibly miffed. (NOTE: The ROK has taken the action of providing "observers" to the interdiction training for WMD to be held in Australia instead of actively participating.)  Funny Money ROK Walks Tightrope (Feb 2006) According to the Voice of America on 2 Feb 2006 ("South Korean Spy Agency Finds "No Evidence" North Korea is Counterfeiting US Dollars") a ROK lawmaker quoted intelligence officials as saying they had no evidence DPRK had recently counterfeited US dollars. ROK lawmakers received a closed-door briefing from ROK intelligence officials on 2 Feb. Afterwards, legislator Im Jong-in said the RO Korean intelligence agency had been unable to substantiate Washington's allegation that Pyongyang is currently counterfeiting US currency. The NIS has been walking a tightrope as it had previously admitted under the Kim Dae-jung administration that it was monitoring the counterfeiting of monies from the North. The latest position is a turnabout from the previous administration's stance prior to the 2000 summit. On 13 Feb 2006 it was revealed that the South Korean government concealed the fact that U.S. investigators told it US$140,000 in counterfeit dollars found in Seoul's Namdaemun market April 2005 was made in North Korea, it emerged. Police at the time arrested three people who tried to exchange 1,400 so-called supernotes at a local money changer. They allegedly bought the supernotes from a broker in Shenyang, China. At the time, it was confirmed in the press that the counterfeits were from the North. (NOTE: The 1,369 counterfeit bills are held in storage at the Seoul District Prosecutors' Office.)Then the ROK Ambassador to the US supports the evidence of the US. The ambassador stated that aid would be linked to the outcome of the nuclear talks, but local news sources state that he was speaking his own opinion and not that of the government. Many mixed and confused signals as the ROK walks the tightrope -- and basically caught in a blind alley without any options. On 22 Feb, the Embassy reiterated that the US government showed Korean officials "superior-quality counterfeit 2001 and 2003 series US$100 notes (supernotes) that our investigations have concluded were manufactured" in North Korea. The spokesman said U.S. investigators concluded that $140,000 uncovered by South Korean police last year were part of a batch made by Pyongyang in 2001. This contradicts recent statements by South Korean officials, who have said Seoul has no evidence of North Korean counterfeiting after 1998. South Korean authorities have been reluctant to support U.S. accusations on the sensitive issue. U.S. officials say that North Korea has recently engaged in counterfeiting - and South Korea has seen evidence of it. (Source: Chosun Ilbo.) North Korean in Macao Arrested (Feb 2006) A local Internet news site, Daily NK, reported on 28 Jan that a top aide to North Korean leader Kim Jong-il was arrested in Macao earlier this month. Citing Japanese diplomatic sources, the news site claimed Kang Sang-choon, a secretary of the Workers' Party of Korea and chief of staff to Kim, was detained in connection to circulation of forged U.S. dollars and money laundering. DailyNK, which specializes in news related to the reclusive communist country, also said the arrest may have taken place on Jan. 11 and that South Korean and Japanese intelligence services are in the process of verifying the information. Regarding the allegations, a source at the National Intelligence Service, South Korea's spy agency, said it received information on the matter. The official, however, said the agency is not in a position to offer a confirmation at this time. Experts here said Kang is not involved in his country's policy-making process. On 8 Feb 2006, it was reported that Kang Sang Choon (66), Kim Jong Il's chief of staff and secretary of the Worker's Party of North Korea, was arrested by Chinese police in Jan 2006 for illegally transferring real estate ownership in Macau. Kang was released the following day. According to a number of sources familiar with North Korea, shortly before Kim Jong Il visited China (from January 10 to 18), Kang was arrested by the police after it was revealed that he had illegally transferred ownership of a patch of land he owned there three or four years before. The South Korean government has recently confirmed this fact. Kang was known to have been arrested during Kim's visit to China, which led to various suspicions on the background of his arrest. (Source: Donga Ilbo.) New $100 notes in 2007 (Feb 2006) The United States will roll out newly designed US$100 notes next year to enhance security of American currency, the Treasury Department said in its 2007 budget report. The department issued new $10 bills last year, new $50 notes in 2004, and new $20 notes in 2003. A review of the new currency program found that the Bureau of Engraving and Printing (BEP) was "successful in meeting its production and timeline goals for the rollout of the new $20 notes," the report said. "BEP also will continue to work with the Advanced Counterfeit Deterrent Steering Committee to assess the impact of new currency on counterfeiting performance measures across government." (Source: Yonhap News.) Counterfeits Appear in US (Feb 2006) The "supernotes" have supposedly now shown up in America. The Secret Service confirmed there have been "sporadic activities" in which counterfeit US$100 bills were discovered at the casinos -- "no more than two or three notes a month." It has been only in the last six months that these fake dollars were spotted at casinos and entertainment venues of the city. However, not 100 percent certain, a Secret Service agent said their characteristics were similar to those that were traced to the communist state. However, Jerry Markling, chief of enforcement at the Gaming Control Board in Las Vegas, denied news reports that counterfeit U.S. dollars made in North Korea were in circulation at the city's casinos. Known as "supernotes," the counterfeit $100 bills are said to appear so genuine that they are not identified by currency detectors. However, the agent said this was not the case. "Lot of them are not coming into the casinos. The bill validators are not taking them," he said. Counterfeit Supernotes Less than Estimated (Feb 2006) A diplomatic source in Seoul said on 8 Feb that Washington estimates the amount of North Korean-produced counterfeit U.S. currency in circulation at about $50-60 million. He said, evidently taking it for granted that the fake banknotes were produced in North Korea, that the sophistication of the so-called "supernotes" is enough in itself to conclude that the counterfeiting is supported by the North Korean government. An intelligence official here said that North Korea has been faced with a shortage of foreign exchange after U.S. financial sanctions were imposed on some of its trading companies and one bank the government uses in Macao, and has stepped up activities to bring in more foreign currency. The release of this info by Seoul -- instead of the US -- might be an "out" for the North to stop its operations of counterfeiting as it is still "small." The Mainichi Daily News on 9 Feb 2006 reported that the DPRK said it would join international efforts to fight money laundering amid accusations that it is directly involved in financial crimes. A spokesman from the Foreign Ministry made the announcement, denying allegations that the country has engaged in counterfeiting and money laundering -- an issue that has deadlocked the Six Party Talks. It is apparently the first time the DPRK has publicly voiced its willingness to cooperate with international efforts to crack down on such crimes. There were unverified reports that Kim Jong-il told Chinese Premier Hu during a recent visit that the financial sanctions could topple his regime. Immediately following this announcement, there was an unconfirmed report that the US and North Korea would hold a bilateral meeting to discuss the financial and nuclear standoff issues in New York. However, the US remained skeptical of the North's statement that it wanted to hold talks on cooperating to stop counterfeiting. In Seoul, U.S. ambassador Alexander Vershbow said North Korea should hand over all equipment used in making the fake dollars, including the plates, to prove it will stop counterfeiting. Then it was announced that the US would meet with the North Koreans in New York over the counterfeiting issue. However, from the onset, the US stated there would be NO concessions during the talks. Counterfeit Supernotes Increase in South Korea and GNP Attacks Government over Inaction (Feb 2006) In South Korea, an increasing number of bogus $100 bills are being discovered. There were 189 found here in 2001, 286 in 2002, 544 in 2003 and 667 in 2004. And in 2005 through September, 1,900 fake bills were found in Korea. The 2005 figures include the $140,000 in counterfeit "supernotes" found in Seoul's Namdaemun market in April 2005. Police at the time arrested three people who tried to exchange the "supernotes" at a local money changer. They allegedly bought the "supernotes" from a broker in Shenyang, China. (NOTE: 1,369 counterfeit "supernote" bills are held in storage at the Seoul District Prosecutors' Office.) Kim Moon-soo, a member of the conservative opposition Grand National Party, on 23 Feb in the National Assembly produced a U.S. $100 note dated 2003 that he said was counterfeit and had been bought from a North Korean intelligence official in Dandong, China, earlier this year. He said the North Korean was working in a cover job as an official at the North's Shinheung Trading Company. Mr. Kim said he paid $70 for the $100 note, which he said had not yet been examined by government officials in Korea. Another GNP lawmaker, Kim Jae-won, joined the attack. He produced satellite photographs of the Workers' Party supply center in central Pyongyang where, he said, the notes were probably being produced. He said that Kwangmyongsong Trading, which manages the private assets of North Korea's leader, Kim Jong-il, distributes the notes. Mr. Kim also produced a specimen, saying he had gotten it in the North Korea-China border region in mid-January through two South Korean middlemen. N.Korean Officials Caught Smuggling Currency into Mongolia (Feb 2006) According to the Yomiuri Shimbun on 22 Feb, North Korean diplomats were caught attempting to smuggle US$1 million and 200 million yen into Mongolia on Tuesday, the Mongolian press reported. Reports said the North Koreans told Mongolian authorities they were planning to put the money in a Mongolian bank account. The paper said that it was unclear whether the money was counterfeit or not, and what measures the Mongolian authorities will take. It said the incident revived concerns about North Korean involvement in money laundering. (Source: Chosun Ilbo.) Seizure of Bank Accounts in Hong Kong Supposedly Linked to Money Laundering (Feb-Mar 2006) Bank accounts linked to trade in North Korean counterfeit U.S. bank notes surfaced for the first time in Hong Kong. U.S. authorities planned to seize more than US$2.67 million from three frozen bank accounts with Chiyu Banking, a subsidiary of Bank of China Hong Kong. The South China Morning Post reported the funds were believed to be the first known link between a Hong Kong bank and North Korea's underground trade in high-quality fake US$100 bills. The accounts belong to an unemployed mainland Chinese woman named Kwok Hiu Ha who moved to Hong Kong. The U.S. Department of Justice had the money frozen a year ago following undercover work by a private investigator probing a counterfeit cigarette operation. (Source: Chosun Ilbo.) On 6 Mar, the Hong Kong South China Morning Post reported yesterday that Hong Kong police found and confiscated supernotes (counterfeit U.S. $100 bills) printed in North Korea. According to the newspaper, Hong Kong police nabbed a middle-aged Chinese American businessman who tried to pass through Hong Kong from Macao last month with a "substantial" amount of forged U.S. $100 bills. The exact amount was not made public. But the man arrested by the police protested that he received those counterfeit bills unwittingly in a complicated commercial transaction in Macao and was released. (Source: Donga Ilbo.) Japanese Banks and KEB Fall In Line -- and then China (Feb-Mar 2006) Japan's two largest banks, Bank of Tokyo-Mitsubishi and Mizuho Corporate Bank, have voluntarily ceased all transactions with Banco Delta Asia, the Macau-based bank the U.S. has fingered as North Korea's main money-laundering channel, the Mainichi Shimbun reported on 2 Feb 2006. The paper predicted the move to fall in line with U.S. sanctions, though ostensibly the banks' own decision, will affect tentative diplomatic relations between Tokyo and Pyongyang. (Source: Chosun Ilbo.) On 1 Feb, Korea Exchange Bank (KEB) also followed suit and severed ties with Banco Delta Asia. (Source: Chosun Ilbo.) At first, reports said that KEB was the only bank having dealings with the bank. However, soon thereafter Shinhan Bank and the National Federation of Fisheries Cooperatives followed Korea Exchange Bank in suspending financial transactions with the Macau-based Banco Delta Asia Bank. As a side note, the money flow to North Korea has been severely restricted as Japan has scrutinized the banks used by North Korean supporters. As a result, Japan has seen a sharp increase in the number of postal remittances to North Korea in recent years according to Japan Post documents. Such remittances came to 1,560 in fiscal 2004 that ended March 31, 2005, up sharply from 383 in fiscal 2002 and 506 in fiscal 2003. (Source: Crisscross News.) In addtion, in March Japan started to check money transfers using the mail system. Macau's Banco Delta Asia, named in Sep 2005 by the U.S. Treasury Department as a "willing pawn" for the North Korean government, announced on 15 Feb that it had closed all accounts of North Korean and related entities. According to a statement issued by U.S. law firm Heller Ehrman, which represents the bank, it is also "implementing new, enhanced anti-money laundering policies and procedures." It requested the US lift sanctions against the bank. The bank has been under the control of the Macau government after the North Korean use of the bank for money laundering became an international issue under Section 311 of the USA PATRIOT Act because it represents an unacceptable risk of money laundering and other financial crimes. Treasury's Financial Crimes Enforcement Network (FinCEN) adopted a rule that prohibitted U.S. financial institutions from directly or indirectly establishing, maintaining, administering or managing any correspondent account in the United States for or on behalf of Banco Delta Asia -- and "encouraged" other nations' financial institutions to do so also. The announcement touched off a two-day, HK$300 million run of withdrawals by depositors of the bank. Stung by US government charges of money laundering, Banco Delta Asia's board of directors stepped aside in favor of a team of government appointees in Sep 2005. With assets of $9.8 billion, it is one of the smallest banks in the territory. The People's Bank of China on 18 March issued a directive to financial institutions there to increase vigilance against fake US$100 bills they says are being smuggled into China. The PBOC did not specify how the notes made their way to China or where they came from. But Chinese experts say the move was made with North Korea in mind, which the U.S. has accused of being behind production of the supernotes. The PBOC said criminal organizations launder their money by a range of means and also asked bank staff to upgrade detection methods for fakes. Banks are advised to keep meticulous records of dollar transaction and the identities of people involved. The Chinese central bank asked branches to be on the alert for any abnormalities in dollar statistics such as imports of greenbacks and report any dubious dollar trade, fakes or suspected money laundering immediately. (SITE NOTE: In Jul 2006, the Bank of China froze North Korean assets in its Macao branch -- but other reports stated that the funds may have already been transferred to Singapore as a "safe haven.")  Funny Money Bush to Launch Fresh Sanctions (Apr 2006) On 28 Jan the Chosun Ilbo reported that the US was readying fresh sanctions against North Korea over the regime's alleged financial crimes that will be significantly more severe than the ones already in place. Authorities completed a rough draft of an executive order that would stop any financial firms involved in transactions with North Korea from conducting business in the U.S. That will mean all banks, brokerage houses and insurance firms and refers not only to illegal transactions but to any financial deals with the North. Once the regulations are finalized, "the message to financial institutions operating in the U.S. will be that the time has come for them to choose between the U.S. or North Korea," he added. (SITE NOTE: This could be disastrous to the growing business connections between the ROK and North Korea -- especially in the Kaesong area.) Observers will be watching closely if the draft takes effect since it is far more sweeping than the sanctions already in place. Under the draft order, almost all finance companies would be effectively prohibited from doing business with North Korea. That would also affect international financial institutions outside the U.S. and thus deal a heavy blow to North Korea's overseas trade. Financial institutions would have a choice whether they are with or against the U.S., but given the importance of their U.S. interests, it would in effect force most major international firms to stop dealing with the North. Given that Pyongyang is already boycotting six-party talks aimed at dismantling its nuclear program over the earlier measures, the plan could be the death knell for the negotiations. (Source: Chosun Ilbo.) On 11 April 2006, the Chosun Ilbo reported that the US has announced new measures to stop the DPRK's flow of money from alleged illicit activities by banning US citizens and companies from using DPRK vessels. It goes into effect on May 8. The legislation applies to all US citizens and permanent residents anywhere in the world, as well as all companies and organizations based in the US including their subsidiaries. Penalties for breaking the new law are stiff: up to 10 years in prison, and fines of up to US$250,000 for an individual or up to $1 million for a company. The JoongAng Ilbo on 11 Apr 2006 reported that after publishing a directive in April prohibiting US entities from owning, leasing, operating or insuring any DPRK ship, the US government asked Seoul to take similar measures. An official here said that no ROK companies or individuals have any such connections with DPRK ships, even in inter-Korean trade or when shipping aid goods. Even so, acceding to such a request would send a signal to the DPRK that Seoul would probably consider counterproductive to its reconciliation policies toward the DPRK. That assessment seemed to be borne out by the official's comment that Seoul has told Washington it would "take note" of the US request, but that no action would be taken "in light of the current situation." Russia not given evidence on N. Korea's counterfeiting (May 2006) On 7 May it was reported that Russian Ambassador to South Korea Gleb Ivashentosov said that his country has no substantial evidence or information on North Korea's counterfeiting alleged by the United States. He stressed that the U.S. should provide concrete evidence for the allegations since Washington raised the suspicions. (SITE NOTE: It is rather strange that a Russian diplomat should make this announcement AFTER China has made its own investigation and allegedly come to the same conclusion. The ROK newspaper reporting continues to allude to the US "evidence" as "circumstantial" -- and not concrete.) Bank of China Freeze DPRK Accounts over Counterfeiting Chinese Currency (July 2006) It was reported on 24 Jul North Korea is suspected of having printed fake Chinese currency, which prompted the Bank of China (BOC) to freeze all of its North Korean accounts in an apparent retaliation. Quoting a number of unidentified U.S. officials, Rep. Park Jin of the GNP said the freezing of North Korean accounts at the BOC is tantamount to virtual imposition of sanctions by Beijing on the North. The GNP lawmaker claimed Washington may have been aware of the Chinese bank's move as early as late last year when its Treasury Department imposed sanctions on a Macau bank suspected of circulating counterfeit U.S. dollars printed in the North. The ROK Unification Ministry claims no knowledge of any such action by China. He later claimed Beijing may be working with Washington to crack down on Pyongyang's alleged counterfeiting of Chinese yuan. Following U.S. dollars, North Korea is also counterfeiting China's currency, the yuan. The claim, if found true, is expected to further complicate the stalled negotiations over North Korea's nuclear weapons program as the United States has been looking to China to convince the North to return to the multilateral talks. (Source: Yonhap News.) Singapore: N. Korea's New Money Haven Recently, a source in Washington D.C. said, "With the American administration raising its pressure on North Korea's funds in Macao, North Korea attempted to change its bank to Singapore, and the new haven is known as a small bank referred to as O Bank." On August 3, a U.S. government official also said in an interview with Dong-A Ilbo, "O Bank is a problem bank. This bank is on the list of banks related to North Korea, which the U.S. government keeps a close eye on." With the U.S. tracing its funds, North Korea tried to disperse them, and by the official's statement it was officially confirmed that Singapore, an international finance city, has become one of the safe havens." There are also speculations that North Korean Foreign Minister Baek Nam Soon's two visits to Singapore around the time of the ASEAN Regional Forum (ARF) that was held in Kuala Lumpur, Malaysia, had a connection to the funds. (Source: Donga Ilbo.) Vietnamese Close Down North's Bank Accounts (Aug 2006) Vietnamese banks have closed down North Korean accounts over the past few weeks, most likely forcing Pyongyang to move its money to its last remaining haven, Russia. Peter Beck, head of the International Crisis Group's Seoul office, said Nigel Cowie, general manager of North Korea's Daedong Credit Bank in Pyongyang, e-mailed him in mid-Aug and said Vietnamese banks had shut down Daedong's and other North Korea-held accounts. Daedong expected such a move by Vietnam after U.S. Treasury Undersecretary Stuart Levey visited Hanoi in early July, and had moved its funds elsewhere, but did not say where the money was moved to. Mr. Beck said it's most likely Russia. (Source: Joongang Ilbo.) The move comes ahead of Vietnam's anticipated entry of the World Trade Organisation later this year and follows the signing of bilateral trade agreement with Washington in May. New Sanctions Expected (Sep 2006) Ranking South Korean officials in Washington told the Yonhap News Agency that the Bush administration was expected to announce a package of economic sanctions on the North after the planned summit between U.S. President George W. Bush and South Korean President Roh Moo-hyun on Sept. 14 in the U.S. capital. However, the new sanctions are expected to center on sales of missiles and weapons of mass destruction following the UN sanctions. The US is looking at reimposing the economic sanctions the US lifted in 1995 and 2000 including a travel ban, a broad trade ban and restrictions on investment and remittances in response to North Korea's missile test on July 5. (Source: Korea Times.) On 16 Oct the Korea Times reported that the DPRK has opened at least three bank accounts since its account at the Banco Delta Asia (BDA) was frozen in September last year., the reported yesterday. A report by the ROK National Intelligence Service (NIS) said that the three banks are Sberbank of Russia, Vietcombank of Vietnam and Golomt Bank of Mongolia. Stuart Levey, the U.S. Treasury Department's undersecretary for terrorism and financial intelligence is trying to close the account in Vietnam, the report said. As of the end of August, Asian and European banks, including the Bank of China and the United Overseas Bank of Singapore, suspended the DPRK's accounts. (See this article "Vietnamese Close Down North's Bank Accounts (Aug 2006)" for a conflicting report.) Lifting Sanctions Denied (Nov 2006) After the North's nuclear test of 9 Oct, there was a concerted effort to bring the North back to the six-party talks. At first the North agreed without preconditions as it was faced with the UN sanctions. However, a day later the North stated it was returning to the six-party talks on the basis that talks would include the lifting of financial sanctions as well. The US stated that there could be financial talks on the "sideline" as part of the talks, but denied rumors that it was lifting sanctions. Instead, there was an announcement in Nov that the US had "new evidence" on the use of the Macao bank for money laundering by the North. The US stated that it would discuss the sanctions with the DPRK, but it again stressed that the sanctions were part of the US law enforcement issue and not tied to nuclear issues. The position of the US remains the unchanged. China Lifts Bank Sanctions on DPRK (Nov 2006) The Kyodo News Service reported on 21 Nov that the PRC lifted its freeze on about half of DPRK accounts in the Macao bank that had allegedly been used in money-laundering operations. The PRC lifted the freeze on less than $12 million of the DPRK's holdings "with the understanding of the United States," the report said. The partial lifting of the ban is likely to give a positive boost to the Six Party Talks, observers say. The report quoted an unidentified DPRK official as saying, "That is seen as the U.S. accepting some of our demands." The unfrozen accounts are believed to be those unrelated to the alleged financial crimes, and ones suspected of being linked to the illegal activities are still under restrictions, the report said. The action was done with US approval as a show of good faith in smoothing the way to the resumption of six-party talks in Dec 2006. U.S. Offers Compromise Over N.Korea's Dollar Forgeries (Dec 2006) The U.S.said the question of North Korea's frozen accounts in the Macau-based Banco Delta Asia could be resolved early if North Korea punished counterfeiters of U.S. dollars and destroyed their equipment. Washington and Pyongyang formed a working group in the U.S. Embassy in Beijing to discuss the issue of North Korea's frozen bank accounts in Banco Delta Asia (BDA) in Macao. Four members of the North Korean delegation, including president of the North's Foreign Trade Bank of Korea O Kwang Chol, arrived in Beijing to take part in the working group discussion. (SITE NOTE: In effect, the US was offering a face-saving move that eliminated the North admitting government involvement. In addition, there was a move to call $12 million of monies from the Hyundai Corporation as being "legal" after transferred to a small holding company and then to the Banco Delta Asia. To outsiders this move is rather strange as the US investigation was based on its "proof" that the monies were part of money laundering.) The two sides had their first working group meeting on the U.S. financial sanctions at the U.S. Embassy in Beijing on 19 Dec 2006. Sources in Beijing said Daniel Glaser, the U.S. Treasury Department's deputy assistant secretary for terrorist financing and financial crimes, explained law enforcement procedures to the North Korean group chief Oh Gwang-chul and proposed the solution. The reasons the U.S. was more willing to resolve the matter by this route, pundits said, are that the Treasury had as good as wrapped up its investigation and that Washington felt it needed to make visible progress. Progress in the working group depended on North Korea's willingness to hold those responsible for making the so-called supernotes to account. During the discussion, the U.S. suggested the financial reports done by its Treasury Department to North Korea. The report said the North's bank accounts in BDA have been used to launder money, distribute counterfeit U.S. dollars, and trade weapons. With the report, Washington asked Pyongyang to try to prevent such illegal acts from recurring, but Pyongyang is said to have refused to acknowledge most of the claims. There was clearly a turning point in Washington's attitude. Ever since it froze the accounts, the U.S. was adamant that the North Korean regime must be held to account for the forgeries and rejected any face-saving solution whereby the North would punish nominal culprits as if they had acted independently -- the very option it proposed. Sources in Beijing noted that Pyongyang too had changed its tune. They said the fact that the North did not insist on China's official Diaoyutai Guesthouse, which is "neutral territory", as a negotiating venue and agreed to meet at the U.S. mission sent a positive signal. They also say North Korea's choice of Oh, a financial expert, to head its delegation showed it was willing to make substantial progress. North Korea's delegation in a March meeting on the problem in New York was headed by the Foreign Ministry's U.S. chief Li Gun. A diplomatic source in Beijing said the two sides were unlikely to resolve the entire problem in the first meeting, but added it was "safe to say that the atmosphere was not bad" at this early stage. (Source: Chosun Ilbo.) At Diaoyutai in Beijing, one-on-one talks between the U.S. and North Korea and talks among envoys from the six countries of the nuclear talks were held separately to discuss the issue of the denuclearization of North Korea. A diplomat in Beijing said, "North Korea's voice among the envoys has toned down at the talks on Tuesday compared to the strong stance it showed during its keynote speech on 18 Dec. During the speech, the North suggested "disarmament talks" -- meaning nuclear disarmament of both North Korea and US. This was immediately rejected by the US. Several diplomats in Beijing stated that although the communist country maintained prerequisites which it demands for denuclearization, such as lifting financial sanctions against the North and dropping the U.S. hostile policy toward Pyongyang, it didn't even mention some of its previous demands and refrained from using strong words. South Korea also held bilateral talks with the North at Diaoyutai on 19 Dec and supposedly "persuaded" Pyongyang to accept programs to implement the denuclearization and related measures altogether. Many anticipate that North Korea will use the working group discussions as the counteracting card until it induces more economic aids including the supply of light-water reactor, even if it comes to a point in the future where North Korea has to back up a step. (Source: Donga Ilbo.) A diplomatic source in Beijing said the two sides are unlikely to resolve the entire problem in the first meeting, but added it was "safe to say that the atmosphere was not bad" at this early stage. If North Korea welcomes the change in U.S. attitude and cooperates in resolving the problem, the U.S. may agree to lift the sanctions on North Korea's foreign currency supplies and the two sides can make headway on dismantling the North's nuclear program. It remains to be seen if the North will take the bait since it claimed in Tuesday's meeting to have been just another victim of the dollar forgeries. Pundits predict it will take time before Washington's new attitude is delivered to the North Korean leadership and it gives instructions how to respond. (Source: Chosun Ilbo.) Suddenly the talks hit a snag. The New York Times on 21 Dec reported that talks between the US and DPRK hit a significant obstacle, as diplomats said the two sides sharply disagreed over whether relaxing an American-led crackdown on the Pyongyang regime's financial transactions should be part of any deal to roll back its nuclear program. Assistant Secretary of State Christopher Hill said today that North Korean negotiators were determined to link the two issues, and that the United States is equally determined not to. The chief envoy of Japan described the situation as "severe" and said that he saw "no prospects for an agreement." Six Party Talks Breakthrough (Feb 2007) On 13 Feb, the Washington Post reported that in a landmark international accord, the DPRK promised to close down and seal its lone nuclear reactor within 60 days in return for 50,000 tons of fuel oil as a first step in abandoning all nuclear weapons and research programs. The DPRK also reaffirmed a commitment to disable the reactor in an undefined next phase of denuclearization and to discuss with the United States and other nations its plutonium fuel reserves and other nuclear programs that "would be abandoned" as part of the process. In return for taking those further steps, the accord said, the DPRK would receive additional "economic, energy and humanitarian assistance up to the equivalent of 1 million tons of heavy fuel oil."Assistant Secretary of State Christopher R. Hill, the chief U.S. nuclear negotiator, qualified the first-step accord as "a very solid step forward." For its part, the United States reiterated an earlier promise to discuss normalizing relations with the Pyongyang government, a longstanding goal of North Korea. Without committing Washington to any decisions, the accord said the discussions would included removing DPRK from the list of state sponsors of terrorism and stopping application of the U.S. Trading with the Enemy Act to North Korea's business enterprises. Separately, Hill said, the United States pledged to the DPRK and to the PRC, as chairman of the six-party process, that it will resolve within 30 days a dispute over U.S. charges that the Banco Delta Asia in Macau has been laundering illicit money from the DPRK. This represented a concession from Washington, which previously had insisted the banking dispute was a matter of law-enforcement that should be treated separately from the nuclear diplomacy. SEE THE BANCO DELTA ASIA MONEY TRANSFER FIASCO FOR THE ON-GOING TROUBLES THE NORTH POSED UNTIL JULY 2007 OVER THE TRANSFER OF FUNDS. BANCO DELTA ASIA MONEY TRANSFER FIASCO2007January 2007Financial Talks Halted (Jan 2007) The financial talks were supposed to have been resumed in New York on 22 Jan, but no firm date had been nailed down. The financial dispute was the main stumbling block that deadlocked Dec 2006's six-nation talks on North Korea's nuclear programs. In turn, the DPRK announced that Washington never showed them any evidence that the North was counterfeiting. (Source: Korea Herald.)Financial talks held from 30-31 Jan ended without producing any substantial agreement. Deputy Assistant Treasury Secretary Daniel Glaser, who headed the U.S. delegation to the talks in Beijing, told reporters that upon concluding the talks the two countries agreed to meet again at a yet undecided date. Mr. Glaser told reporters that two U.S. experts on counterfeit banknotes were in his delegation and had presented what Washington believed was evidence of North Korean culpability in counterfeiting. After the United States accused North Korea of money laundering and forgery of $100 bills, Banco Delta Asia in Macao froze $24 million in North Korean assets there. The financial dispute further paralyzed the already moribund nuclear disarmament talks. Glaser was quick to add, however, that the U.S. was able to obtain "very helpful" information from North Korea and that it wants to move forward on resolving the issue of North Korea's frozen accounts at the Macao-based Banco Delta Asia bank. He added that U.S. concerns that the Macao bank was being used for money laundering purposes had "been vindicated" by the financial discussions. Glaser said he thinks the U.S. is now in a position, after very lengthy investigations, to start bringing some resolution to the Macao bank matter. (Source: KBS News.) An ominous note was heard. A source with close ties to the North Korean government reportedly told the Reuters news service yesterday that if the United States did not end its financial pressure on North Korea, Pyongyang would announce at the six-party talks that it would conduct another nuclear test. Reuters did not identify the source, but said he spoke after being briefed by North Korean officials on the financial negotiations. (Source: Joongang Ilbo.) February 2007North Korea Enacts Law Against Money Laundering (Feb 2007) Korea Times reported on 20 Feb that the National Intelligence Service (NIS) on Tuesday confirmed that the DPRK recently enacted a law that prohibits money laundering. The standing committee of the DPRK's Supreme People's Assembly adopted the legislation last October to ban financial transactions involving illegal earnings, the agency said in a press release. The enactment apparently aimed at settling the US financial sanctions on a bank in Macau that was blacklisted by Washington in September 2005 for its suspicious role in helping the DPRK conduct illicit financial activities, it said.US Investigation of Banko Delta Draws to Close (Feb 2007) International Herald Tribune on 26 Feb reported that a delegation of U.S. officials at a meeting in the Chinese territory of Macao told local government and banking authorities that an investigation into allegations against Macao-based Banco Delta Asia was drawing to a close. Daniel Glaser, the deputy assistant secretary handling terrorist financing and financial crimes at the Treasury Department, did not indicate what the investigation had discovered. But he said the time-consuming review of some 300,000 documents from Banco Delta Asia had "confirmed our suspicions" about the activities of the bank. This indicated that at least some of the $25 million would remain frozen. Discussions with DPRK officials and the work of U.S. investigators since then had reached the point "where we can begin to take steps to resolve the Banco Delta Asia matter," said Glazer. No details on what "steps" were mentioned. March 2007U.S. Treasury to Wash Its Hands of N.Korea's Bank (Mar 2007) The U.S. Treasury Department will apparently cut the Macau-based Banco Delta Asia off from the U.S. financial system on 15 Mar. The Macau bank has been under suspicion of being a money-laundering channel for North Korea. Washington blacklisted the bank in September 2005 on suspicions of being a front for the North's illicit financial activities, such as counterfeiting and money laundering. North Korea had stayed away from the international negotiations over its nuclear weapons program for over a year, calling the financial sanctions a pillar of U.S. hostility toward it. The Treasury will announce final results of its investigation of North Korea's US$24 million accounts with the BDA 18 months after it froze them in 2005.A diplomatic source in Washington said on 12 Mar that the U.S. government will entrust Macanese financial authorities with the task of dealing with the matter. Macanese authorities will not be affected by the U.S. government's opinion and have discretion whether to liquidate or put up the bank for sale. In any case, all of North Korea's $24 million will likely be unfrozen and be given back to the country, the source said. An official at South Korea's Foreign Ministry said on 12 Mar that the bank was likely to be liquidated as the result of an official U.S. designation of it as a "money laundering concern" and that North Korea would get its money back in the process. "I believe the owner of BDA would have to take responsibility for what he or she may be found responsible for based on the outcome of the investigation," said the official who asked not to be identified. "I think (the issue of) how much money will be released to North Korea is now in the hands of the Macau government," the official added. But he added the U.S. will continue its investigation of North Korean funds related to illicit activities like the suspected transfer of weapons of mass destruction and related technology according to the UN Security Council Resolution 1718. The U.S. move, however, is not going to acquit North Korea of the charges against it though Pyongyang will eventually get its money back, officials here and in Seoul said. "The investigation has only confirmed the ongoing illicit activity at BDA, including the bank's willingness to facilitate illicit transactions on behalf of their North Korean-related clients," Millerwise was quoted as saying. In addition to resolving the financial dispute, the Feb. 13 agreement also called on the U.S. to begin a process to restore the North's reputation in the international arena by removing it from Washington's list of terror-sponsoring states and ending its application of the Trading with the Enemy Act on the communist state. Tom Casey, a spokesman for the State Department, however, said removing the designation of North Korea as a state-sponsor of terrorism is a process that will require a lot of time and careful reviews. (Source: Chosun Ilbo.and Hankyoreh News.) (SITE NOTE: The International Herald Tribune reported on 12 Mar that the investigation ordered by the Macao government of a bank accused by the United States of helping the DPRK launder the proceeds of illicit activities has found no evidence of criminal misconduct by any bank employees. In letters that were sent to the U.S. Treasury Department and made available by the department, the American lawyers of Banco Delta Asia said that a review of all the bank's accounts related to the DPRK failed to turn up anything other than lax record-keeping. Joseph McLaughlin, of the law firm Heller Ehrman, in San Francisco, wrote to Treasury officials last October that the Macao government "has not yet found evidence of money laundering" and was "not currently planning to bring any criminal proceedings for money laundering." Thus the fox said as he counted the chickens. An in-house inquiry was useless -- and only a Chinese government inquiry would have sufficed. As a result, this inquiry to the U.S. was irrelevant.The Wall Street Journal reported on 13 Mar that the Treasury Department planned to order all U.S. banks to sever ties with the BDA alleged to have laundered money for the DPRK government, despite the outcome of the investigation by a San-Francisco based law firm which cleared the bank of any wrongdoing "other than lax bookkeeping." This move could seriously rattle ongoing Six Party efforts to resolve the Korean crisis. New York Times on 14 Mar reported that the US Treasury Department was expected to move formally to bar American banks from engaging in transactions with a bank in Macao linked to the DPRK, clearing the way for the DPRK to regain possession of money frozen since 2005. American and Chinese authorities pored over more than 300,000 documents describing the transactions with the DPRK, including accounts of 20 DPRK banks, 11 trading companies, 9 citizens and 8 Macao-based companies that did business with the DPRK. The Treasury announcement would probably mean that the bank could do only a modest amount of business, without the benefit of dollar transactions. But also that the PRC would be in a position to return some of the funds to the DPRK that are not linked to counterfeiting, drugs, nuclear arms or other illicit activities. For example, some of the funds belong to a DPRK unit of British American Tobacco, and those funds are expected to be returned to the company, which is owned by British interests. When the DPRK nuclear deal was announced last month, no mention was made of returning funds from the bank, but American officials now say that the return of those funds was a major incentive for the DPRK to reach an accord. A Rift Opens Between the U.S. and China (Mar 2007) The U.S. Department of Treasury plans to send Daniel Glaser, deputy assistant secretary of the Treasury Department who handles financial sanctions against North Korea, to Macao on March 22 and present concrete material evidence on BDA’s illegal activities to the Macao government. He intends to persuade the Chinese and Macao governments which expressed deep regrets about the U.S. decision to impose sanctions, that they are justified. State Department spokesman Sean McCormack emphasized in a briefing on March 15 that “We need to get all kinds of accumulated information through forensics and analysis in order for the Macao government to make a decision.” It seems that the forensics to be presented will be the research results on ‘supernotes,’ ultra-precise 100-dollar bill forgeries, and data on how BDA closely worked with North Korea’s Danchon Commercial Bank, which has been involved in WMD deals such as missiles. Even though Danchon bank was listed as a company which was involved in WMD sales by the U.S. in June 2005, BDA worked with Danchon Bank up to three days before the sanctions were imposed in September 2005. In case the U.S. presents the aforementioned contents case by case, the Macao authorities, which want to release 24 million dollars in North Korean accounts and save BDA, cannot help but feel pressed. BDA is small and ranks fourth from the bottom in the local financial circles, and the Macao authorities are concerned about the aftermath of a liquidation of the bank on its financial system. The U.S. insists the fate of the assets is the decision of tiny Macao, which is self-governing but ultimately ruled by Beijing. It is almost certain, however, that the matter is subject to negotiation between Beijing and Washington, given the sensitive nature of the six-party talks. The period of local court oversight on Banco Delta Asia will expire at the end of this month, and observers said Macao authorities will likely extend the deadline to gain more time to resolve the frozen assets dilemma. If control over the North Korean account is partially removed, dealing with the rest of the money could be a nuisance after the BDA’s liquidation. The reason why the Chinese government rebelled against the U.S. Treasury Department’s announcement can be understood in that context. However, diplomatic sources analyze that China’s behavior and what they have in mind are different. That means that the U.S. and China have already come to an agreement in a broad context on that issue. That Assistant Secretary Christopher Hill said confidently in Beijing on March 17, “Frankly speaking, I think the issue of the BDA has been addressed. It will not have any negative impact on the six-way talks,” supports such analysis. China is not happy with the fact that the U.S. has closed the issue by handing it off to the Macao Authorities, but is satisfied with the resolution of a big barrier to the six-party talks. Nonetheless, the reason why China has expressed strong regret is that they have to be conscious of North Korea and they want to receive more concessions from the U.S. (Source: Donga Ilbo.) BDA says Not Guilty (Mar 2007) Delta Asia Financial’s chairman, Stanley Au, rejected the U.S. Treasury Department’s conclusion that his bank gave its North Korean clients access to the banking system with little supervision and facilitated financial transactions involving the North’s trade in counterfeit U.S. dollars. “We have sent evidence to prove our innocence to the U.S. government several times,” said Mr. Au, whose family founded Banco Delta Asia in 1935. He said that after the U.S. Treasury Department designated the bank as a money launderer in September 2005, the firm hired Ernst & Young, an internationally accredited accounting company, at great expense to strengthen its defenses against money laundering. The U.S. Treasury Department concluded an 18-month probe into Banco Delta Asia this week, saying the firm would be cut off from U.S. banks. The decision opens the way for the unfreezing of $25 million in North Korean assets, which Pyongyang has been demanding as a precondition for continued six-party nuclear talks. Mr. Au said he hopes the United States will reverse its decision to cut all financial ties between American banks and his company. Mr. Au said he is taking steps to counter the U.S. decision in court. Also yesterday, a Chinese Foreign Ministry spokesperson expressed “regret at the United States insisting on using U.S. domestic law to apply a ruling” on foreign soil. (Source: Joongang Ilbo.) BDA Funds Issue Resolved (Mar 2007) Yonhap News reported on 20 Mar that the frozen funds are to be transferred to "an account held by North Korea's Foreign Trade Bank at the Bank of China in Beijing," U.S. Deputy Assistant Secretary of Treasury Daniel Glaser told reporters in the Chinese capital. "We believe this resolves the issue of the DPRK-related frozen funds," Glaser said as he read a statement issued here Monday, which referred to North Korea by its official name, the Democratic People's Republic of Korea. The U.S. announcement came hours before the Macao Monetary Authority issued a statement indicating it will release all $25 million of the North's frozen funds. "As regards the treatment of the North Korea-related accounts, the process will be in accordance with the instructions of the account holders," the statement said. But the Macao authority stopped short of giving a time frame of when the funds will be released. The resolution of the financial issue set the stage for discussion on what must be done next to denuclearize the North. The North's top nuclear negotiator, Kim Kye-gwan, reacted cautiously, saying at the opening of the fresh round of international negotiations that his country will have to confirm the actual release of the money before halting its nuclear activities at Yongbyon. (Source: Yonnhap News.) No Progress in N.Korea Deal 10 Days From Deadline (Apr 2007) The governments of South Korea and China admitted on 4 Apr that a much-hailed process whereby North Korea was to shut down its nuclear facilities by April 13 has hit a snag. Under the Feb. 13 six-nation agreement, the North was to shut down the facilities in return for an initial shipment of energy aid, but as of April 4, no progress had been made. The process floundered on the refusal of international banks to handle some US$25 million of North Korea's money the U.S. has unfrozen in a Macau bank. The six nations have yet to find a way to get the money to the North. Among the steps envisaged under the Feb. 13 agreement during the first 60 days, only two have been implemented over the last 50 days: five working groups were set up to discuss issues like normalization of Pyongyang-Washington relations, and another, fruitless round of the six-party talks convened. Last month, North Korea's chief negotiator Kim Kye-gwan visited the United States, and Mohamed ElBaradei, director general of the International Atomic Energy Agency, visited North Korea. That looked like rapid progress in efforts to resolve the matter, but in essence nothing has changed. According to the South Korean government, chances are practically zero that North Korea will implement in the remaining 10 days all the remaining steps -- shut down and seal the Yongbyon nuclear facilities, admit an IAEA inspection team, and discuss all nuclear programs subject to dismantlement. Nor has the problem of transferring the BDA money been resolved, although the U.S. is desperately trying to find a solution through contacts with China and North Korea. But since Washington itself designated the money as illegal earnings, banks refuse to touch it. And North Korea says it does not want to withdraw the money in cash. Some experts worry that if the delay is protracted, the consensus behind the hard-won Feb 13 agreement might fade away. Others say the situation can only benefit North Korea. Chun Seong-whun, a senior research fellow at the Korea Institute for National Unification, said, "Now the BDA issue has become a matter the U.S. must find a solution to, while North Korea has been able to breathe more easily because of the resumption of aid from South Korea. The North is probably just watching and working out its future strategy." (See Fertilizer Aid from ROK Resumes (Mar 2007) for synopsis of aid that the ROK will shuttle into the North -- with or without a nuclear agreement.) Washington Times on 5 Apr reported that diplomats involved in Six Party Talks were discussing an extension of a mid-April deadline for Pyongyang to shut down its main reactor, citing the hold up to the resolution of the financial dispute between Washington and PRC banks. A U.S. delegation led by Daniel Glaser, the Treasury's deputy assistant secretary for terrorist financing and financial crimes, has been negotiating the transfer with Chinese and DPRK officials in Beijing for 10 days. Privately, diplomats indicated that discussing an extension of the deadline is logical and even necessary at this point, given the unexpected complications of the $25 million transfer. N. Korea Likely to Withdraw BDA Funds in Cash (Apr 2007) North Korea will probably have to withdraw US$25 million of unfrozen funds from the Macau-based Banco Delta Asia in cash. A South Korean government official on Sunday said the North wanted the money transferred to an overseas bank account, "but realistically there are too many difficulties. Both the U.S. and China are of the opinion that everything should be discussed between Macau authorities and North Korea." A diplomatic source said despite a visit to China by U.S. Deputy Assistant Treasury Secretary Daniel Glaser, Washington and Beijing have failed to find a solution in the way North Korea wants. "To my understanding, the U.S. and China instead reviewed ways for North Korea to open a new separate account at BDA and withdraw the money, and have suggested this to North Korea." The source said the practical way would be allowing North Korea to withdraw the money after providing details about the account holder, or do so after opening an integrated account at BDA. In a recent meeting in New York, the U.S. chief nuclear negotiator Christopher Hill put the suggestion to the deputy chief of North Korea's UN mission Kim Myong-gil. But it is unclear whether North Korea will accept. Chun Yung-woo, South Korea's top negotiator at the six-party nuclear talks, recently said the North apparently wants to open an overseas bank account to withdraw the money in cash. But sources say even if Pyongyang accepts the suggestion, it would still take a considerable amount of time because North Korea has to undergo procedures like identifying the account holder before it can withdraw the money. (NOTE: The DPRK has balked at identifying the account holder in the past and on 13 Apr it was revealed the North wanted to use the name of a DEAD account holder for withdrawal.) North Korea has held off shutting down its nuclear facilities in Yongbyon, which it is supposed to do by April 14 under the Feb. 13 six-nation agreement, until it has the money in hand. The U.S. has in theory freed the funds, which it says are illegal, but international banks refuse to touch them. (Source: Chosun Ilbo.) Uncertainty remains over BDA funds (Apr 2007) The United States is claiming that the financial dispute that has stalled North Korea's implementation of the Feb. 13 Beijing Agreement has been fully resolved, and there is now no obstacle to the North acting on its promise to shut down its nuclear programs. But sources familiar with the so-called "technical issues" that have held up the transfer of funds from the BDA are not so confident. They have told The Korea Herald that while actual details are still scarce, getting the funds out of the BDA and out of Macau may not be quite as simple as Washington apparently considers it to be. Questions remain, they say, about how North Korean customers of the BDA can actually transfer their balances out of the bank if the BDA remains cut off from the global financial system. "The BDA's own U.S. dollar correspondent bank accounts were closed in 2005, which means they can't make dollar transfers or do foreign exchange deals with any other banks to convert dollars to other currencies," one source told The Korea Herald on condition on anonymity. "As a consequence," the source said, "other banks around the world will be equally reluctant to receive transfers from the BDA while they remain blacklisted - just like the case of the Bank of China refusing to accept the funds." The only possible alternative being offered at this point, some observers say, is to withdraw the money in cash and carry it away in suitcases. But they point out this is certainly not a normal or even desirable way of doing business. (Source: Korea Herald.) ROK officials were quoted as saying in the JoongAng Ilbo daily newspaper that the money would be released through a Hong Kong bank. Korean sources said on 12 Apr that North Korea had completed the paperwork to have Macao's Banco Delta Asia release the funds, which were frozen in 2005 after Washington claimed they were linked to money laundering and counterfeiting. The source said the release may be delayed as the bank decides whether to accept a document allowing a third person to access the funds on behalf of a dead North Korean account holder. BDA Funds to be used by DPRK as it pleases (Apr 2007) The Washington Times said on 13 Apri that the Bush administration reversed a six-year-old North Korea policy based on deep mistrust and said it would now rely on Pyongyang's "good faith" to ensure that funds released from a Macao bank are not misused. Washington had wanted the money to be placed in a bank in a third country, where it could be monitored to ensure it was used only for humanitarian purposes. But with a deadline looming on 14 Apr for North Korea to shut down its nuclear reactor at Yongbyon, the Americans had been unable to find a bank willing to handle the money. With the financial issue now resolved, U.S. officials said, they expect North Korea to move swiftly to shut down the reactor. "The bottom line is, authorized account holders as of now will be able to access the funds in those accounts," State Department spokesman Sean McCormack told reporters, citing assurances from the Macao government. A spokeswoman for the Monetary Authority of Macao, Wendy Au, was quoted by Japan's Kyodo news agency as saying, "The account holders or authorized parties can go to the bank and withdraw or deal with their deposits." Mr. McCormack said the North Koreans had promised "to spend the money for the betterment of the North Korean people," and not for the personal benefit of its officials. Some newspapers criticized the US for giving up its "principles" in diplomacy in order to get a quick-fix to the stalled 13 Feb agreement. "In particular, it reversed some of its earlier comments, like, 'There is no compensation for evil behavior,' or the comment of 'no dialogue with evil,'" said Bruce Cumings, professor at the University of Chicago N. Korea Likely to Withdraw BDA Funds in Cash (Apr 2007) North Korea will probably have to withdraw US$25 million of unfrozen funds from the Macau-based Banco Delta Asia in cash. A South Korean government official on Sunday said the North wanted the money transferred to an overseas bank account, "but realistically there are too many difficulties. Both the U.S. and China are of the opinion that everything should be discussed between Macau authorities and North Korea." A diplomatic source said despite a visit to China by U.S. Deputy Assistant Treasury Secretary Daniel Glaser, Washington and Beijing have failed to find a solution in the way North Korea wants. "To my understanding, the U.S. and China instead reviewed ways for North Korea to open a new separate account at BDA and withdraw the money, and have suggested this to North Korea." The source said the practical way would be allowing North Korea to withdraw the money after providing details about the account holder, or do so after opening an integrated account at BDA. In a recent meeting in New York, the U.S. chief nuclear negotiator Christopher Hill put the suggestion to the deputy chief of North Korea's UN mission Kim Myong-gil. But it is unclear whether North Korea will accept. Chun Yung-woo, South Korea's top negotiator at the six-party nuclear talks, recently said the North apparently wants to open an overseas bank account to withdraw the money in cash. But sources say even if Pyongyang accepts the suggestion, it would still take a considerable amount of time because North Korea has to undergo procedures like identifying the account holder before it can withdraw the money. (NOTE: The DPRK has balked at identifying the account holder in the past and on 13 Apr it was revealed the North wanted to use the name of a DEAD account holder for withdrawal.) North Korea has held off shutting down its nuclear facilities in Yongbyon, which it is supposed to do by April 14 under the Feb. 13 six-nation agreement, until it has the money in hand. The U.S. has in theory freed the funds, which it says are illegal, but international banks refuse to touch them. (Source: Chosun Ilbo.) Uncertainty remains over BDA funds (Apr 2007) The United States is claiming that the financial dispute that has stalled North Korea's implementation of the Feb. 13 Beijing Agreement has been fully resolved, and there is now no obstacle to the North acting on its promise to shut down its nuclear programs. But sources familiar with the so-called "technical issues" that have held up the transfer of funds from the BDA are not so confident. They have told The Korea Herald that while actual details are still scarce, getting the funds out of the BDA and out of Macau may not be quite as simple as Washington apparently considers it to be. Questions remain, they say, about how North Korean customers of the BDA can actually transfer their balances out of the bank if the BDA remains cut off from the global financial system. "The BDA's own U.S. dollar correspondent bank accounts were closed in 2005, which means they can't make dollar transfers or do foreign exchange deals with any other banks to convert dollars to other currencies," one source told The Korea Herald on condition on anonymity. "As a consequence," the source said, "other banks around the world will be equally reluctant to receive transfers from the BDA while they remain blacklisted - just like the case of the Bank of China refusing to accept the funds." The only possible alternative being offered at this point, some observers say, is to withdraw the money in cash and carry it away in suitcases. But they point out this is certainly not a normal or even desirable way of doing business. (Source: Korea Herald.) ROK officials were quoted as saying in the JoongAng Ilbo daily newspaper that the money would be released through a Hong Kong bank. Korean sources said on 12 Apr that North Korea had completed the paperwork to have Macao's Banco Delta Asia release the funds, which were frozen in 2005 after Washington claimed they were linked to money laundering and counterfeiting. The source said the release may be delayed as the bank decides whether to accept a document allowing a third person to access the funds on behalf of a dead North Korean account holder. BDA Funds to be used by DPRK as it pleases (Apr 2007) The Washington Times said on 13 Apri that the Bush administration reversed a six-year-old North Korea policy based on deep mistrust and said it would now rely on Pyongyang's "good faith" to ensure that funds released from a Macao bank are not misused. Washington had wanted the money to be placed in a bank in a third country, where it could be monitored to ensure it was used only for humanitarian purposes. But with a deadline looming on 14 Apr for North Korea to shut down its nuclear reactor at Yongbyon, the Americans had been unable to find a bank willing to handle the money. With the financial issue now resolved, U.S. officials said, they expect North Korea to move swiftly to shut down the reactor. "The bottom line is, authorized account holders as of now will be able to access the funds in those accounts," State Department spokesman Sean McCormack told reporters, citing assurances from the Macao government. A spokeswoman for the Monetary Authority of Macao, Wendy Au, was quoted by Japan's Kyodo news agency as saying, "The account holders or authorized parties can go to the bank and withdraw or deal with their deposits." Mr. McCormack said the North Koreans had promised "to spend the money for the betterment of the North Korean people," and not for the personal benefit of its officials. Some newspapers criticized the US for giving up its "principles" in diplomacy in order to get a quick-fix to the stalled 13 Feb agreement. "In particular, it reversed some of its earlier comments, like, 'There is no compensation for evil behavior,' or the comment of 'no dialogue with evil,'" said Bruce Cumings, professor at the University of Chicago Funds Remain Untouched (Apr 2007) North Korea left untouched US$25 million unfrozen in a Macau bank and offered no statement Monday after missing a Saturday deadline to shut down its nuclear facilities under a Feb. 13 six-nation agreement. Experts differ about the reason for Pyongyang's reticence. Some pundits expect the North to demand a foreign currency transaction account, which it is effectively denied under U.S. financial sanctions. Some state that Pyongyang will withdraw the money once it can be sure the U.S. will take no action against any third-country bank that receives the funds. Some speculate the North is trying to ascertain whether it can now safely withdraw or transfer the money, despite the fact that the U.S. Treasury Department on March 14 determined some of the funds were illegal and BDA a money-laundering channel. Meanwhile, the battered BDA on 16 Apr filed a lawsuit against the U.S. designation as a money launderer. In a statement, BDA's legal advisor, the New York law firm Heller Ehrman LLP, said the Treasury's accusation "lacked specific facts" and "was politically motivated because it was based on disputes between the United States and North Korea." A senior source in Macao said North Korea submitted the documents necessary to withdraw the money in mid-April and can take back the funds anytime. But Macanese authorities, with the understanding of the North, have been calling on the U.S. to lift all sanctions on the bank. Funds Still Unclaimed (Apr 2007) U.S. officials this week said they still believe Pyongyang is engaged in these activities and that North Korea's BDA accounts contain tainted funds. The bank has challenged the U.S. ruling as politically motivated and lacking evidence. "The Chinese wanted the Treasury Department to pledge that they would not sanction any bank that took this money ($25 million) but Treasury wasn't willing to do that. Our law won't allow us to do that, to give that kind of 'get out of jail free card,'" Green told a briefing at the Center for Strategic and International Studies where he is a senior adviser. Since then, Pyongyang has sought to transfer the funds to other banks "because they want to reopen their international financial transactions, their ability to move money," he added. The impact of the Treasury Department's action against BDA goes far beyond the $25 million because by raising concerns about North Korean accounts, U.S. officials have forced all banks to question whether, by dealing with Pyongyang, they could compromise their integrity and become liable to sanctions. As a result, U.S. officials say they have severely limited Pyongyang's ability to do business as part of a strategy designed to pressure Pyongyang into abandoning its nuclear weapons program. Washington has gone to great lengths to explain to the North Koreans the process for releasing the funds and that the only way it can clear its reputation is by halting illicit activities and establishing a financial system that complies with international standards, U.S. officials say. This was the main focus of six meetings that the White House's top Asia expert, Victor Cha, had with North Korean negotiator Kim Gae Gwan when Cha was in Pyongyang for three and a half days recently. (Source: Yahoo.com: Reuters.) Funds Remain Untouched (Apr 2007) North Korea left untouched US$25 million unfrozen in a Macau bank and offered no statement Monday after missing a Saturday deadline to shut down its nuclear facilities under a Feb. 13 six-nation agreement. Experts differ about the reason for Pyongyang's reticence. Some pundits expect the North to demand a foreign currency transaction account, which it is effectively denied under U.S. financial sanctions. Some state that Pyongyang will withdraw the money once it can be sure the U.S. will take no action against any third-country bank that receives the funds. Some speculate the North is trying to ascertain whether it can now safely withdraw or transfer the money, despite the fact that the U.S. Treasury Department on March 14 determined some of the funds were illegal and BDA a money-laundering channel. Meanwhile, the battered BDA on 16 Apr filed a lawsuit against the U.S. designation as a money launderer. In a statement, BDA's legal advisor, the New York law firm Heller Ehrman LLP, said the Treasury's accusation "lacked specific facts" and "was politically motivated because it was based on disputes between the United States and North Korea." A senior source in Macao said North Korea submitted the documents necessary to withdraw the money in mid-April and can take back the funds anytime. But Macanese authorities, with the understanding of the North, have been calling on the U.S. to lift all sanctions on the bank. Funds Still Unclaimed (Apr 2007) U.S. officials this week said they still believe Pyongyang is engaged in these activities and that North Korea's BDA accounts contain tainted funds. The bank has challenged the U.S. ruling as politically motivated and lacking evidence. "The Chinese wanted the Treasury Department to pledge that they would not sanction any bank that took this money ($25 million) but Treasury wasn't willing to do that. Our law won't allow us to do that, to give that kind of 'get out of jail free card,'" Green told a briefing at the Center for Strategic and International Studies where he is a senior adviser. Since then, Pyongyang has sought to transfer the funds to other banks "because they want to reopen their international financial transactions, their ability to move money," he added. The impact of the Treasury Department's action against BDA goes far beyond the $25 million because by raising concerns about North Korean accounts, U.S. officials have forced all banks to question whether, by dealing with Pyongyang, they could compromise their integrity and become liable to sanctions. As a result, U.S. officials say they have severely limited Pyongyang's ability to do business as part of a strategy designed to pressure Pyongyang into abandoning its nuclear weapons program. Washington has gone to great lengths to explain to the North Koreans the process for releasing the funds and that the only way it can clear its reputation is by halting illicit activities and establishing a financial system that complies with international standards, U.S. officials say. This was the main focus of six meetings that the White House's top Asia expert, Victor Cha, had with North Korean negotiator Kim Gae Gwan when Cha was in Pyongyang for three and a half days recently. (Source: Yahoo.com: Reuters.) DPRK officials Visit BDA (Apr 2007) On 24 Apr UPI reported that DPRK officials had visited the Banco Delta Asia, seeking ways to transfer their deposits, worth $25 million, to other banks in Asia. DPRK officials, mostly from Zhuhai, the PRC's special economic area bordering Macao, have traveled to the former Portuguese enclave to meet BDA officials to resolve the financial issue, they said. If the DPR Koreans successfully move the controversial funds to other banks, they say they will carry through with their nuclear obligations under the Feb. 13 agreement as promised. It would take more than a month for the transfer of all 52 accounts to be completed. North Chooses Russia to Hold its Money (Apr 2007) Kommersant (Russia) reported on 30 Apr that the DPRK has asked authorities in Macao to transfer the funds in its frozen accounts to financial organizations in Russia and Italy. This was announced by Chinese Deputy Foreign Minister Wu Dawei to the Japanese delegation in Beijing. According to unofficial information, Banco Delta Asia is preparing for the transfers. (SITE NOTE: Supposedly the Euros to Italy and US dollars to Russua, The mention of the Italian bank is the first wejhave heard of -- though the Russian connection is not unexpected with the DPRK initially offering Russia some "sweetheart" deals (uranium mining rights and free harbor access) for its support in the six-party talks.) EXIM Bank in Korea Possible to Handle Transfer (May 2007) Chosun Ilbo reported on 7 May that the ROK was considering letting the state-run Export-Import Bank of Korea (EXIM) handle the DPRK's recently unfrozen US$25 million from a Macau bank before they go to a third country. That would put Seoul in an awkward position since handling the funds could be seen as helping launder money from illicit activities -- the reason global banks have been squeamish about touching the money despite the lift of the freeze. The subject was discussed at a ROK cabinet level meeting. Supposedly the US has approved of this measure according to the newspaper. This seems strange as Reuters reported on 7 May that the DPRK had asked the United States allow it to open an account at a bank in New York and its funds at a Macau bank be transferred there. Quoting an unspecified source in Washington linked to relations between the United States and the DPRK, the Mainichi newspaper said the United States had rejected Pyongyang's request. DPRK Funds Story Drags on (May 2007) To stall the world, North Korea said on 7 May that it will shut down its main nuclear reactor as soon as it receives its funds frozen at a Macau bank. "The shutdown is something that can be done immediately and it won't take long," Ri Kyong-son, vice spokesman at the North's Foreign Ministry, told APTN in an interview in Pyongyang. North Korea is set to receive the funds from Banco Delta Asia after its accounts there were combined into one to facilitate a smooth transaction. The transfer was to be made to a third country to clear a major hurdle to the implementation of a key nuclear accord. The transaction was supposed to be made via Singapore, Italy or South Korea's Korea Eximbank. But like China's refusal to touch the money, the other banks are balking as they may be "tainted" for being used. Press reports on 7 May said the ROK Export-Import (EXIM) bank may serve as an intermediary in delivering US$25 million from Macau to a third country. Some said North Korea initially asked a New York bank to play that role but that was rejected by the U.S. A State Department official, speaking on condition of anonymity, did not flatly reject either of the possibilities. He said the use of a South Korean bank "could well end up being a solution," but added "at this point, I wouldn't focus too heavily on it." Asked if a New York bank remains an option, he only said there were a "lot of different options people are looking at." (Source: Hankyoreh News.) Korea Times on 6 May reported that the ROK has expressed its willingness to back the DPRK's application for membership in the International Monetary Fund (IMF) and the World Bank. The US, a major shareholder in the IMF, World Bank and ADB, played a major role in rejecting Pyongyang's repeated applications for admission. Financial Times on 7 May reported that the chairman of the family-owned BDA has argued that US officials were supportive of the bank's financial dealings with DPRK firms even after the bank reported receiving counterfeit currency. In a statement supporting BDA's recent appeal against the US Treasury ruling, the bank reported the incident to Macao police and was contacted by "agents of the United States government". The "agents" reportedly said that they would like the bank to continue to deal with the DPRK, as it was better that they conducted business with BDA rather than another financial entity that may not be so cooperative with the United States. For its part, BDA has released a report by Ernst & Young that detailed the bank's long relationship with DPRK companies "including sales of gold bullion on their behalf" but did not turn up any evidence of money laundering. Then the bombshell hit. Kommersant (Russia) on 9 May reported that banks in Russia and Italy have refused to accept transfers of DPRK money from Banco Delta Asia. The account has been unfrozen, but no bank will accept a transfer of it for fear of U.S. sanctions. Russian Deputy Foreign Minister Alexander Losyukov, head of the Russian negotiating team at the six-party negotiations, said in Beijing that there would be no problem transferring the money if the U.S. guaranteed in writing that no consequences would befall the bank accepting the funds. No such guarantees seem forthcoming. The DPRK now says it will close its nuclear facilities only when the money is freed. 'Washington Finds Bank to Relay NK Funds' (May 2007) A U.S. daily reports that the Bush administration has found a U.S. bank willing to relay North Korea's 25 million dollars held at a Macao bank after a week-long search. The Washington Times added that transferring the money from Banco Delta Asia bank could happen some time in the next few days, clearing the final hurdle for shutting down the North's main nuclear reactor. However, it said U.S. officials have yet to identify the American bank which will handle the transfer, only suggesting that it was neither a big nor well-known financial institution. Also, the daily quoted the officials as saying that U.S. Secretary of State Condoleezza Rice and Treasury Secretary Henry Paulson made the decision to allow the North Korean funds to pass through a U.S. bank. (Source: KBS News .) (SITE NOTE: Bloggers dealing with the DPRK situation are outraged. They claim the US applied sanctions to make the money "tainted" but now will provide a route for the tainted money to be released. In effect, the US is caving in to the DPRK for an agreement that the DPRK has already violated -- and appears to have no intention of keeping as long as the benefits keep flowing from the South. Unfortunately, blogs don't influence the high-stakes games going on. However, the Hawks are sensing the real situation and departing. Victor Cha, head manipulator of the Feb 13 agreement, has resigned. Christopher Hill has stated in May that if the agreement on shutting down the nuclear reactors by Dec, his job will be on the line. We think it may be sooner as he promised the world something the DPRK has never delivered. And even if it did shutdown the reactor and invite the IAEA in, the agreement was only the start of the denuclearization process -- a game the DPRK excels at playing.) Transfer of DPRK Money Sought, Wachovia Bank Considering State Department Request (May 2007) Washington Post on 17 May reported that Wachovia Corp. said that it was considering a request from the State Department to transfer money tied to the DPRK from an overseas bank blacklisted earlier this year by the Treasury Department. The State Department has scrambled to persuade banks around the world -- including U.S. banks -- to transfer the money, but financial institutions have been unwilling to shoulder the risk, because they do not want to run afoul of the Treasury Department. The failure to find a willing bank has left in limbo a deal inked in February that the Bush administration had called a breakthrough. Wachovia Corp could serve as a go-between for the transfer of North Korea's assets from Macau's Banco Delta Asia. The Washington Post on 17 May reported the bank "is considering a request from the State Department to transfer tainted money tied to North Korea from an overseas bank blacklisted earlier this year by the Treasury Department." The bank is discussing easing related regulations with the State Department. Established in 1908, Wachovia has branches in 22 states in the U.S. and was a U.S. correspondent bank for the Macau bank. Wachovia spokeswoman Christy Phillips-Brown told the Washington Post the bank is considering the transfer request. But she made it clear that the transfer must be regarded as an exception to a U.S. law, which bans any financial transactions with BDA, saying that the bank "would not agree to any request without appropriate approvals." The daily reported State Department officials have been working to get a U.S. bank to play an intermediary role in the transfer, although some Treasury and White House officials oppose the idea. (Source: Chosun Ilbo.) Meanwhile, both North Korea and the U.S. are apparently optimistic about removing obstacles to the transfer, which have delayed the North's shutdown of its nuclear facilities under a Feb. 13 agreement. U.S. top nuclear envoy Christopher Hill recently has repeatedly said that satisfactory results on the BDA issue are expected this week. North Korea also promised to start shutting down its nuclear facilities as soon as the banking issue is resolved. (SITE NOTE: The ROK also wants this resolved immediately as it has laid out $280 million for buying rice that needs to be shipped at the end of the month. Though the agreement was with "no strings attached," the Korean public has been assured that the rice aid would not be sent unless the nuclear reactors were shutdown -- which won't seem likely even with the BDA situation resolved next week. The ROK will probably ship the rice anyway -- as it intended to do from the start. The US is not happy with the ROK's rush to give aid to the DPRK without any progress in the 13 Feb agreement. In the end, the ROK was forced to take back its offer for rice aid at the end of May because of the international political pressure.) However, in late May the DongA Ilbo newspaper said on 28 May that efforts to use US banks such as Wachovia had come unstuck because of the US Patriot Act, under which the funds were originally frozen. Banks have been unwilling to do the transfer because of the legal action that the U.S. government took against the BDA, by ruling that it was involved in criminal activity under Section 311 of the U.S. Patriot Act. Banks which deal with a bank that has been found guilty of such illegal acts risk losing their access to the international financial system. North Korea has said that the denuclearization and other aspects of the six-party agreement that it has been part of can only go forward when the BDA situation is resolved. "To make the money transfer possible freely just like before has been our demand...from the beginning," a spokesperson from North Korea said. (Source: "North Korea says work to transfer bank funds under way," AFP, May 15, 2007.) The United States believes the banking dispute blocking a nuclear disarmament accord will drag on and has pressed North Korea to start shutting its reactor in return for a firm US promise of a solution. On 30 May the top U.S. negotiator on North Korea, Assistant Secretary of State Christopher Hill, met his Chinese counterpart, Wu Dawei, as efforts continued to clear a financial deadlock that North Korea has insisted be resolved before it shuts its main plutonium-producing reactor. Bush Admits U.S. 'Screwed Up' Over N.Korea's Money (Jun 2007) U.S. President George W. Bush admitted to Washington's failure to understand North Korea in dealing with a delay in the transfer of North Korea's assets from a Macau bank, saying that the U.S. "screwed it up." Japan's Kyodo News Agency on 30 May quoted sources as saying Bush expressed his discontent in a summit with visiting Japanese Prime Minister Shinzo Abe at the Camp David presidential retreat near Washington on April 27. It was the first time Bush acknowledged that Washington has made mistakes in tackling the money transfer impasse, the sources said. The U.S. had "screwed it up," acknowledging the U.S. government's failure to realize how wide-reaching the repercussions surrounding the Treasury Department sanctions would be. The $US25 million funds were frozen in September 2005 after the U.S. Treasury Department declared them illicit. The treasury has lifted this sanction on the funds but not its condemnation of the bank. As a result, no bank has been willing to transfer the funds to Pyongyang, per its demand, for fear of repercussions after touching the money, including, in a contradictory twist, possible prosecution by the U.S. under the Patriot Act. (Source: Chosun Ilbo.) (SITE NOTE: The US finally admitted what a lot of North Korea watchers knew from the start -- You can't make a deal with the North. It will either one renege on the deal -- or two add stipulations as you go along. In this case it has done both. It (1) never implemented its agreement on the 13 Feb denuclearization and (2) added that it wanted a future bank outlet so that it can continue its "laundered money" operations. This is a STATE DEPARTMENT initiative that tried to get around the Treasury Department and US anti-money laundering laws -- and they will take the fall. Christopher Hill has said that if this isn't fixed by December, he's gone. The current line is that the US patience is "limited." Even Sec of Defense Gates stated this same phrase in June during a meeting in Singapore and urged the North to start shutting down its nuclear reactor.) Hill's visit to Beijing was aimed at seeking a breakthrough after a plan to transfer the funds to North Korea via U.S. bank Wachovia Corp. fell into disarray because of little cooperation from the U.S. Treasury and Justice departments. The departments are reluctant to make an exception regarding Article 311 of the Patriot Act, which says that banks dealing with funds deemed illicit could face prosecution. In addition, the U.S. Treasury department is balking over exempting BDA from sanction, according to sources. To break the impasse, South Korea reportedly offered to consider transferring the funds via its state-run Export-Import Bank of Korea, but the proposal was rejected by both the U.S. and North Korea. Attention is focusing on how long the U.S. president's patience will persist. The Bush administration has recently shifted its focus to diplomacy in order to try to resolve the North's nuclear standoff, which it perceives as easier to solve than problems in Iraq or Iran. On June 6-8, the Group of Eight nations - which includes the six-party members U.S., Russia, and Japan - will hold a summit in Germany and are expected to adopt a resolution to urge North Korea to implement the February 13 agreement. (Source: Hankyoreh News.) There is growing concern that legitimate North Korean financial activity does exist, BDA had a right to solicit North Korean accounts and handle North Korean transactions, and Stanley Au, BDA owner, should be allowed to run his bank as long as he conforms to the laws of his jurisdiction--and the bank should not be used as a political football in Washington's dealings with Pyongyang. The US had earlier admitted that about $11 million was NOT tainted money and would have no problem being released, but this soon fell apart because of the North's insistence that it be all or nothing. Au and his American lawyers have filed petitions to the US Treasury to overturn their ruling against the BDA. David Ascher, who had been the coordinator for the Bush Administration working group on North Korea and a senior adviser in East Asian affairs in the State Department, in testimony to the U.S. House Foreign Affairs Subcommittee on Terrorism, Nonproliferation, and Trade on April 18, 2007, explained why Banco Delta was chosen to be blacklisted from the international banking system. He said, "Banco Delta was a symbolic target. We were trying to kill the chicken to scare the monkeys. And the monkeys were big Chinese banks doing business in North Korea...and we're not talking about tens of millions, we're talking hundreds of millions." (Source: David Asher's Dead End," Saturday, April 28, 2007.) To many the purpose of the action against the BDA appears not only to have been to target North Korea and its access to the international banking system, but also to send a message to China. Therefore it would appear that the action against BDA is a carefully crafted political action and that it will be necessary that there be public understanding, discussion and debate about what is behind this action in order to find a way to have the policy that gave rise to the BDA action changed. (Source: China's Proliferation to North Korea and Iran, and its role in addressing the nuclear and missile situations in both nations," Hearing, Sept 14, 2006, Nov. 2006, p. 115-116..) Russia May Help with North Korean Money Crisis (Jun 2007) On 5 Jun RIA Novosti reported that Russia could make a financial vehicle available for the transfer of the DPRK's frozen funds, if Washington guarantees that no sanctions against Russia will follow. "There is a chance we could use our facilities, if the U.S. side provides a written guarantee that they will not introduce any sanctions against our financial institutions, we may be in a position to look at the possible transfer of these funds to a Russian bank where the North Korean government has an account," Alexander Losyukov said. Interfax reported on 6 Jun that the U.S. administration had promised to provide unspecified guarantees to a Russian bank that will agree to transfer the DPRK funds from the Delta Asia bank in Macau. Russian Deputy Foreign Minister Alexander Losyukov told journalists after returning from Seoul that further negotiations are needed to determine |
