Bradley Martin
Bloomberg
11/15/2007
U.S. Treasury Department measures targeting Iran, similar to those used against North Korea, are having a significant effect in financially isolating the country, Stuart Levey, undersecretary for terrorism and financial intelligence, said in Tokyo.
Financial institutions around the world have cut ties with Iran, leading to “a dramatic pullback in business,” Levey said on a trip through East Asia to build support for the measures.
This followed the Treasury department’s identification of state-owned banks and other entities it said were financing weapons proliferation and terrorism. The department asked U.S. banks not to deal with those institutions.
Foreign banks are cutting financial ties with Iran generally, not just with the individually targeted entities, Levy said, going “beyond legal requirements” that govern banks involved in the U.S. financial system.
“Major financial institutions around the world have decided as a matter of risk assessment that they don’t want to do business with this regime,” he said.
The United Nations and the U.S. want Iran to halt uranium enrichment that the West suspects is aimed at developing nuclear weapons.
Iran is “turning itself into a financial pariah” through deceptive financial practices that obscure the line between legitimate and illicit transactions, Levey said.
North Korean Example
Financial pariah status befell North Korea’s banking and financial system after the Treasury in 2005 accused Macau’s Banco Delta Asia S.A.R.L. of aiding North Korean money laundering and weapons proliferation.
Macau authorities froze some $24 million in North Korea- related deposits in the blacklisted bank, bankers worldwide refused to handle North Korean transactions and Kim Jong Il withdrew from negotiations on the future of his country’s nuclear weapons program.
This year the U.S. agreed to the release of the BDA funds. While that compromise brought Kim’s negotiators back to the table, it didn’t cure the country’s financial isolation, according to Felix Abt, president of Pyongyang’s European Business Association.
“It is still difficult because some international banks are reluctant to handle payments to and from any banks in the DPRK, either state or foreign-owned, fearing that they could become targets of restrictive measures in the same way that Banco Delta Asia was,” Abt said, using the initials of North Korea’s formal name, Democratic People’s Republic of Korea.
Investment Prospects
Such fears affect the prospects for investment in the country, according to consultant Tony Michell of EABC Ltd. in Seoul. “There remains a reluctance by mainstream financial players to get involved,” he said, “in case of further action by the U.S. Treasury.”
A North Korean delegation is traveling to New York next week to hear more on how the country can extricate itself from that situation. U.S. and North Korean officials will hold financial talks Nov. 19 and 20 in New York, at North Korea’s request, State Department spokesman Sean McCormack told reporters in Washington Nov. 14. The U.S. delegation will be led by Daniel Glaser, the Treasury Department’s deputy assistant secretary for terrorist financing.
Levey, when asked in Tokyo today what would be discussed at the talks, said U.S. officials would “lay out for the government of North Korea the types of conduct that are inconsistent with international standards.”
Asked three times whether North Korea was still involved in the sort of illicit conduct that his department had alleged in 2005, Levey avoided a direct answer, saying only: “The North Koreans have engaged in a variety of conduct that has made it difficult for them to integrate in the international financial system.”
