As the State and Treasury departments continue to bicker over how best to use a tiny Macau bank as a pawn in North Korea's nuclear negotiations, America's reputation as a fair and incorruptible cop on the international financial beat is being tarnished.
In mid-April, the administration acknowledged the $25 million in frozen funds was a bargaining chip-and that the money would be returned to Banco Delta Asia account holders. Does this mean that they are cleared, says Brad Babson, a retired World Bank expert on East Asia and now an economic-affairs consultant. "If I were an account holder and there was found to be no evidence of wrongdoing, I would ask for a clean bill of health. ...The U.S. has not been very transparent in the end game," he says.
Treasury spokeswoman Molly Millerwise declined to respond to questions about account holders.
The diplomatic saga has been ongoing since September 2005, when the Chinese territory of Macau voluntarily froze $25 million in 52 dollar accounts at Banco Delta Asia, at Treasury's request. That action followed sanctions on BDA by the U.S., which accused it of helping North Korea circulate counterfeit U.S. dollars and participate in money laundering. The move effectively blocked North Korea from the international financial system, so Treasury agreed during six-party negotiation on February 13 to unfreeze the assets if North Korea would promise to give up its nuclear-weapons program. But April 14, the deadline for North Korea to shut down its reactor at Yongbyon, has come and gone-and nothing has happened. BDA is still searching for a suitable transfer bank in a third nation like Vietnam or Russia to deposit the $25 million, but none wants to accept money that Treasury claims is still tainted. Millerwise declined to provide an official for an interview, saying the agency had no additional comment. In an email, she said the agency has worked with Macanese authorities for 18 months, during which they turned over 300,000 related bank documents. "We said at that time we'd be willing to review and possibly lift the rule if our concerns were addressed [including ownership change]," she said in her email.
Treasury's rule against BDA, which took effect April 14, prohibits any U.S. financial institution from opening or maintaining correspondent accounts on behalf of BDA, which is also barred from accessing the U.S. financial system. "Banco Delta Asia's grossly inadequate due diligence and systematic facilitation of deceptive financial practices have run too deep for the bank to be allowed access to the U.S financial system," noted Stuart Levey, Treasury's under secretary for terrorism and financial intelligence, in a statement. BDA's sins include suppressing the identity and location of originators of transactions and arranging for funds transfer via third-parties; repeated bank transfers of large, round-figure sums both to and from accounts elsewhere that have no apparent licit purpose; and the routine use of cash couriers to move large sums of currency, usually U.S. dollars, without credible explanations of the origin or purpose for the cash transactions.
Joseph McLaughlin of Heller Ehrman, BDA's Manhattan counsel, did not return phone calls seeking comment. Press reports say the bank is challenging the no-business-with-U.S.-banks ruling, calling it "arbitrary and capricious," as well as "politically motivated," since it was based on a U.S.-North Korea dispute. After imposed sanctions, BDA was taken over by the Macau Monetary Authority, the territory's central bank. The family-owned Banco Delta Asia is one of the few independent banks in Macau, whose banking sector is dominated by institutions in mainland China and Hong Kong. For more than two decades, BDA has handled trade and financial transactions, including sales of gold bullion, for a range of North Korean government firms and entities.
Meanwhile, Macau has been busy, busy, busy. In early 2007, it passed a new law to strengthen anti-money laundering and terrorist-financing controls, including fortifying its new Financial Intelligence Unit. "The U.S. has an interest in a more transparent banking system with higher standards of supervision, so getting Macau to update its domestic law and strengthen its banking capacity and to create better money-laundering laws is a good thing," says Babson.
Babson applauds the Macau Monetary Authority, which did not respond to requests for comment, for seeking transparency in the fate of account holders. "They would rather not have a fog of uncertainty over everything," he says.
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