U.S. Bank Could Aid North Korea

The U.S. State Department has asked a major U.S. bank to accept tainted North Korean funds in a move intended to break the impasse over implementing an agreement to begin Pyongyang’s denuclearization, the Washington Post reported today (see GSN, May 10).

For the Charlotte, N.C.-based Wachovia bank to cooperate, however, would require the Treasury Department to offer waivers from a two-month-old order banning U.S. banks from doing business with the Macao-based Banco Delta Asia, where the North Korean funds are now held.

Pyongyang has demanded the release of the roughly $25 million before it will begin implementing a February deal to freeze its nuclear program.

The bank has “been asked, on a nonprofit basis, by the U.S. State Department to help them process an interbank transfer of funds held at other banks, which are the subject of negotiations with North Korea,” said Wachovia spokeswoman Christy Phillips-Brown.  “We have agreed to consider this request, and our discussions with various government officials are continuing.”

The prospect of a U.S. bank accepting North Korean funds has dismayed many Bush administration officials, according to the Post, and the Treasury Department has not participated in efforts to recruit a U.S. bank.  U.S. officials forced Banco Delta Asia to freeze the funds last year, saying the money was gained through illicit money laundering, counterfeiting and drug trade activities.

The search for a U.S. receiver has followed North Korea’s inability to find another bank willing to accept the tainted money.

“Until the U.S. Treasury lifts restrictions on operations with Banco Delta Asia, no sensible banks will deal with transfers of North Korean funds,” said Russian Deputy Foreign Minister Alexander Losyukov yesterday, explaining why no Russian bank would help.

Lead State Department envoy Christopher Hill suggested Tuesday that the Bush administration would grant the waivers to allow Wachovia to accept the funds.

“I can assure you ... we are not going to allow $25 million or even $26 million to get between us and a deal that will finally do something about nuclear weapons on the Korean peninsula,” he told the Korea Society.  “We are going after this problem until we solve this problem.”

Bank spokeswoman Phillips-Brown said the institution would try to cooperate.

Wachovia was “fully compliant” with the ban on business with Banco Delta Asia, she said, but “we take any request for assistance from our government seriously and endeavor to cooperate whenever possible.”

The bank “would not agree to any request without appropriate approvals from our regulators,” she added (Glenn Kessler, Washington Post, May 17).

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