Bank Poses Obstacle in North Korea Nuclear Talks

By DONALD GREENLEES
Published: March 26, 2007

HONG KONG, March 26 ― A largely foreign-owned North Korean bank has emerged as a major obstacle to a deal that would allow six-party negotiations over North Korea’s nuclear program to move forward.

The agreement between the United States and North Korea for the release of $25 million frozen for 18 months in accounts in a Macao bank has been rejected by the Daedong Credit Bank, the largest single account holder.

In two letters sent to the Monetary Authority of Macao, the bank, based in the North Korean capital, Pyongyang, has said that it will take legal action if any of its frozen funds are moved in accordance with the agreement reached between American and North Korean nuclear disarmament negotiators.

Resolution of the issue has been a stumbling block to carrying out an agreement made on Feb. 13 that requires North Korea to shut down its nuclear programs in exchange for economic aid and diplomatic concessions.

The United States has tried to solve the impasse over the funds frozen in the Macao bank, Banco Delta Asia, by offering to have the money placed in an account in the Bank of China under the control of the North Korean government on the understanding that it would be spent on humanitarian purposes in North Korea.

A representative of the Daedong Credit Bank, which has about $7 million frozen in Banco Delta Asia, has told authorities in Macao, though, that it will not accept its funds being placed under the control of the North Korean government or being moved to the Bank of China.

Colin McAskill, who has agreed to buy Daedong Credit Bank and is representing the bank in its negotiations with the Macao authorities, warned the Monetary Authority of Macao in a letter last week that he would hold it “totally responsible” and would “take whatever steps necessary” if the Pyongyang bank’s funds were transferred without its consent.

Mr. McAskill has sought a meeting this week with the chairman of the monetary authority, Anselmo Teng, to discuss how the money should be disbursed. The monetary authority has said publicly that it would only transfer the frozen funds in accord with the wishes of the account holders, which include about 50 North Korea-linked entities and individuals.

The funds were frozen in September 2005 after the United States Treasury Department contended that they were the proceeds of illicit activities, including drug trafficking, counterfeit cigarette manufacturing and the sale of unconventional weapons. At the time, the Treasury Department said that Banco Delta Asia, a small, family-owned bank in the Chinese territory, was a primary money-laundering concern.

North Korean negotiators refused to participate in the last round of six-nation talks on nuclear disarmament in Beijing last week because of delays in the $25 million being transferred into the Chinese bank. American officials ascribed the delays to “technical banking issues.”

“Daedong’s money must be separated from the political arena,” Mr. McAskill said. “We wish to leave the money in Macao until we can make arrangements to transfer it to one of our normal correspondent banks.”

Mr. McAskill has also written the chief North Korean nuclear negotiator, Kim Kye Gwan, seeking a written commitment that the North Korean government has no claim over any of Daedong Credit Bank’s funds or assets.

Daedong contends that all $7 million it has frozen in Macao belongs to legitimate foreign businesses with joint ventures in North Korea.

A senior Treasury official, Daniel Glaser, deputy assistant secretary for terrorist financing and financial crimes, is now in Beijing trying to untangle the legal problems, The Associated Press reported from Beijing.
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