US bank-probe decision tied to North Korea's nuclear program

The US Treasury has taken steps that could ease financial sanctions against North Korea, a condition that Pyongyang has demanded in return for dismantling its nuclear weapons program.

Speaking at a press conference in Beijing Wednesday after a one-day trip to North Korea, Mohammed ElBaradei, the director general of the International Atomic Energy Agency, announced that Pyongyang has agreed to shut down a reactor it has used to produce fuel for nuclear weapons, reports The New York Times. But Mr. ElBaradei emphasized that Pyongyang would not act until the United States released North Korean assets deposited in Banco Delta Asia, a bank in the Chinese enclave of Macao.

Meanwhile, US Treasury officials Wednesday concluded an 18-month investigation of the Macanese bank, which holds about $24 million in frozen North Korean assets. They announced that they had found the bank to have facilitated money-laundering for Pyongyang, and that the US financial system would be severing all ties with it. The Associated Press reports that, despite the Treasury's strong accusations, by replacing a blanket freeze with more limited restrictions, the measure actually paves the way for the release of at least some of North Korea's funds.

[T]he [Treasury] department is expected to provide guidance to help overseas regulators identify highest-risk and lower-risk account holders. This risk assessment, in turn, could be used by Macau to release some North Korean money that has been frozen and is being held by the bank.

The decision to unfreeze the assets now lies with Chinese authorities, and US Treasury officials have signaled they may at some point lift the ban, thereby allowing the bank to resume international financial operations.

The frozen funds have long been a sticking point in negotiations. In 2005, the US Treasury charged that Banco Delta Asia was helping North Korea conduct counterfeiting, money laundering, and narcotics operations, a charge vigorously denied by the bank and the Pyongyang government. The Christian Science Monitor reports the announcement led US banks to voluntarily cease transactions with Banco Delta Asia. Lacking the ability to acquire dollars, the bank collapsed and was taken over by the Chinese government, which froze the North Korean assets.

A report released by the Congressional Research Service, an arm of the US Congress, concluded that the North Korean government was using the bank to launder money obtained through its "crime-for-profit" activities, which include trafficking in heroin and methamphetamines, as well as counterfeit US currency, pharmaceuticals, and cigarettes. Two earlier reports also accused the regime of using Macanese banks to facilitate counterfeiting and drug trafficking operations.

These reports contradict an audit by the global accounting firm Ernst & Young, which, according to a March 1 story by McClatchy, "found no evidence" that Banco Delta Asia had laundered money for North Korea. At the time, the US Treasury declined to comment on this audit.

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