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Atlantic Eye: Investing in North Korea

Monday, April 2nd, 2007

United Press International
Marc S. Ellenbogen
4/2/2007

The most effective way to influence the future of North Korea is through economic development and incentives. The 500 million euro North Korea Investment Fund exists to economically engage the Democratic People’s Republic of Korea. While the six-party talks continue — which they should and must — Global Panel and the Prague Society will continue to grow this fund.

At the 4th Session of the North Korea Initiative in Bratislava just weeks ago, there was a consensus that growing the NKIF is a good strategy for engaging the DPRK. The NKIF will be used for entrepreneurial ventures, to provide micro loans, for knowledge transfer, healthcare and for building, energy and infrastructural projects.

The biggest task facing Pyongyang is converting one of the worlds most centrally planned and isolated economies into something remotely resembling a free market. Industrial capital stock is nearly beyond repair as a result of years of underinvestment and shortages of spare parts. Industrial and power output has declined as well. The development of former East Germany cost 1.2 trillion euros. It is calculated that the redevelopment of the DPRK will cost 5 trillion euros. Pyongyang will only allow development if it can simultaneously protect its power position.

In the 1980s companies failed to predict the collapse of the centralized Soviet system. They were wholly unprepared and certainly had few dedicated funds in place (George Soros was an exception) when the changes in Central Europe came about. The NKIF seeks to remedy this mistake by having funds in place that can be used to aid a changing North Korea at the point change takes place. The NKIF targets investors who know a return of investment is years in the future but recognize the need for such a fund.

A prerequisite for the fund’s future success is confidence-building measures. General Dieter Stockmann, the former NATO deputy commander, made comparisons to China. As the head of the bilateral German-China security talks, he noted that “we need access to human resources.” He was quick to point out that the DPRK military will play an indispensable role in the DPRK’s economic future.

Paul Beijer, Sweden’s special representative on Korean peninsula issues, noted that the Australians have experience with micro-loan projects. Others observed that Sweden, Switzerland and the European Union have separately held conferences in Pyongyang focused on economic reform. There have been both government and private — through international foundations — conferences in the DPRK.

Poverty is out of control in the DPRK. The World Food Program and the Carter Center have calculated some 50 percent of the population lives below the poverty line. Even the nascent micro-markets have virtually collapsed. The gap between the wealthiest and poorest is staggering — amongst the most dramatic on earth.

Previously, there had been a period when small and middle-sized entrepreneurs had done fairly well in North Korea. Tapping into these existing entrepreneurs must be a key goal of the NKIF. The NKIF must provide educational training for this entrepreneurial class and help it grow. Training, also of those doing the training, will be a specific area to add value.

The selection process will be difficult, and nearly impossible without a physical presence in the DPRK. North Korea is a huge market for the development of a financial infrastructure and financial services. Companies interested in participating in the future can aid in these trainings and seminars, which would give them a chance to get their foot in the door.

One expert commented that the DPRK government is highly compartmentalized and that it is extremely difficult to get the different agencies to sit together. It was suggested that a conference in Pyongyang focusing on a narrow topic — modern accounting, microfinance — might be of value. Eduard Kukan, until recently the long-serving Slovak foreign minister, cautioned that Pyongyang remains very weary of outsiders and that even good intentions could very likely be seen as interference.

Any investment must be linked to certain performance benchmarks. It must be linked to practical steps and an action plan. A critical component must be systems in place to monitor outcomes. At the moment, this is virtually impossible with the DPRK. Many who criticize the concept of engagement believe monitoring to be the weakest link. They argue one cannot make sure investments are being used solely for intended civilian economic and industrial purposes.

It is difficult to engage a country that is essentially disinterested in being engaged or only interested in doing so under very strict conditions.

Even the government in Pyongyang cannot ignore basic facts. It recognizes the problems that exist but fears losing its power base. Any solution must convince the current elite that the future is good for it. This, on the other hand, is a very difficult sell to many who wish to punish the current DPRK government.

Regardless, before the NKIF is put to use, a monitoring process should be in place. And this allows time for the fund to grow and to find its niche.

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Posted in Economic reform, Finance, Foreign direct investment, International trade, Political economy | Comments Closed

9.2 Tons of Gold Replaces North Korea’s BDA for 3 Years

Sunday, April 1st, 2007

Daily NK
Han Young Jin
4/1/2007

Singaporean newspaper “Singapore Lianhe Zaobao” reported, “Though the recent BDA issue ended in shambles, Macao and BDA did face some trials” and “With the U.S. able to strangle any county with international financial sanctions, the BDA issue rang alarm bells for illegal acts occurring throughout the world.”

The Zaobao’s online site reported on the 24th, “7~8 small scale family run banks in Macau banks are faced with the threat of closing down as BDA concluded that these banks were acting as North Korea’s ‘laundering black money.’ Macau has been caught in this political issue after being targeted as a place dealing North Korea’s money laundering.” The newspaper also analyzed that the international community had questioned China’s morals.

“All these things have occurred because BDA agreed to supplement North Korea’s gold into dollars” the Zaobao added.

It continued, “During the last 3 years, BDA has exchanged 9.2tons of North Korean gold into $120 million” and “Even last year, North Korea exported gold and silver to Thailand and exchanged $38 million.”

The site reported, “The U.S. is empowering the international financial market and as a result, no financial marketer can oppose the willpower of U.S.” and consequently financial transactions between North Korea and London have ceased. In the past, North Korea had been placing at least 1ton of gold on London markets.

The amount of trade that occurs weekly in London’s gold market equals $2000~3000 million, which in turn equates to 43% of the world’s gold trade. The newspaper pointed out that North Korea’s detachment from London’s markets means that North Korea has now been excluded from the world’s mainstream market.

In the end, even China endured finite investigations as a result of BDA and North Korea’s funds and is now acting in a cautious manner added the report.

In all, the report analyzed that North Korea’s annual production of gold to reach 6 tons.

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Posted in Finance, Fiscal & monetary policy, Gold, Illicit activities | Comments Closed

Bank Buyer Threatens N. Korea Cash Move

Tuesday, March 27th, 2007

Washington Post
William Foreman
3/27/2007

A British investor who is buying a North Korean bank said Tuesday he is trying to block the transfer of money it holds in a Macau bank in a move that might complicate a deal with the North to shut down its nuclear programs.

North Korea refused last week to return to nuclear disarmament talks until about $25 million of its funds frozen at a Macau bank is transferred to the Bank of China.

The transfer was supposed to occur last week, but was delayed for reasons that have not been fully explained.

The British investor, Colin McAskill, told The Associated Press he “would take whatever steps necessary” to stop the unauthorized transfer of $7 million of the funds held in Macau’s Banco Delta Asia. He said he has written twice to the territory’s bank regulator, the Macau Monetary Authority, without receiving a reply.

McAskill has agreed to buy North Korea’s Daedong Credit Bank, which is majority foreign-owned, and is representing it in discussions with Macau authorities.

He denied a report that he threatened legal action but said that is an option.

Asked whether the money came from legitimate ventures, McAskill said in an e-mail, “I have answered this question many times and been widely quoted as saying, Yes it is.”

The $25 million was frozen in September 2005 after the U.S. accused Banco Delta Asia of helping North Korea launder money and handle counterfeit U.S. currency.

The move enraged the North Koreans, who boycotted the nuclear talks for more than a year. They recently returned to the negotiations after the U.S. agreed to settle the banking issue. The funds were to be transferred to a North Korean-owned account at the Bank of China to be used for humanitarian purposes in North Korea.

McAskill said Daedong wants to be allowed to move the money to a temporary account at another Macau bank and later move it one of Daedong’s correspondent banks.

The U.S. has decided to cut off Banco Delta Asia from the American financial system, and McAskill said Daedong wants to move its money before that ban takes effect in mid-April, making it difficult to transfer money out of U.S. dollar accounts.

On Monday, a senior Treasury Department official held talks with Chinese officials to try untangle the dispute over North Korea’s frozen funds.

Daniel Glaser, deputy assistant secretary for terrorist financing and financial crimes, met officials from China’s Foreign Ministry to discuss the money held at Banco Delta Asia, said Glaser’s spokeswoman, Molly Millerwise.

Glaser’s meeting was “positive and cordial,” with officials focused on “solutions to the implementation matters and our common interest in addressing this issue as quickly as possible,” Millerwise said in an e-mail.

A statement from the U.S. Embassy in Beijing said Glaser met with officials from the People’s Bank of China and the China Banking Regulatory Commission, but it gave no details.

The U.S. agreed to let the money be transferred to a North Korean account at the Bank of China in Beijing, but the release was delayed by the Chinese bank’s concerns about accepting money that had been linked to counterfeiting and money-laundering.

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Posted in Banking, Daedong Credit Bank, Finance, Fiscal & monetary policy, Koryo Asia Ltd. | Comments Closed

Fake North dollars used to cash UN check in ‘95

Monday, March 26th, 2007

Joong Ang Daily
Lee Sang-il
3/26/2007

North Korean bank allegedly gave counterfeit U.S. $100 notes to a foreigner working for the United Nations Development Program when he cashed a check at a bank in Pyongyang in 1995, a diplomatic source in Washington told the JoongAng Ilbo.

A spokesman for the UN agency confirmed the suspicion, adding that the bills will be handed over to the U.S. Treasury Department for verification.

In 1995, the UNDP’s Pyongyang office issued a check to an Egyptian consultant for his services on a North Korea project.

The consultant claimed that he cashed the check at the Foreign Trade Bank in Pyongyang and that the bank gave him 35 $100 bills.

After returning home, the consultant attempted to exchange the bills for Egyptian currency, but the bills were rejected as fakes, the source said.

The Egyptian sent the bills back to the UNDP office in Pyongyang, and the UN officials confronted the Foreign Trade Bank and asked for real money, the source said. The request was turned down, and the UN agency has been holding the bogus bills for 12 years.

The revelation of the incident highlights charges by the American government that North Korea has been passing so-called “supernotes” ― fake $100 bills ― for many years. Washington’s claim that Banco Delta Asia in Macao was a conduit for the release of the notes was one reason for the freezing of $25 million in North Korean funds in September 2005.

That money is now due to be released as a precondition for progress in the six-party talks. The U.S. has cut the suspect bank’s access to the American financial system.

In an e-mail interview with the JoongAng Ilbo, David Morrison, spokesman for the United Nations Development Program, said the agency is in the process of giving the notes to the Treasury Department. Mr. Morrison said he was not aware of any other incidents.

Mr. Morrison added that the Egyptian consultant has not provided further evidence that the bills were passed by the Pyongyang bank. He also said that UNDP had used Banco Delta Asia to send money to the North to finance projects from January 2000 to December 2002. He said they chose the bank for its convenient financial services.

Asked if North Korea asked the agency to use Banco Delta Asia, Mr. Morrison said it was an independent decision. He said the UN body stopped transactions with the Macao bank when the settlement currency was changed from dollars to euros.

UNDP opened its office in Pyongyang in 1980 and has carried out public hygiene, agricultural, energy and environmental projects.

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Posted in Banking, Counterfeiting, Foreign Trade Bank, Illicit activities, UNDP | Comments Closed

Who owns the Banco Delta money?

Saturday, March 24th, 2007

Chris Gelken has an interesting insight into the Banko Delta funds…

“It was quite a rude awakening to hear on the news that my money was going to be used for charity,” the holder of an account with the Macau-based Banco Delta Asia told me on the condition that I didn’t reveal his identity.

“What needs to be understood,” he said, “is that not all the funds belong to the North Korean government, but that a substantial amount belongs to private customers.”

Bloomberg quoted Colin McAskill, chairman of the London-based fund Koryo Asia Ltd, as saying he contacted the Macau Monetary Authority warning them that the money held by private businesses based in Pyongyang did not belong to the North Korean government and must not be included in the proposed transfer to settle the 18-month dispute between the North and the U.S. Treasury.

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Posted in Banking, Koryo Asia Ltd. | Comments Closed

Banks balk at handling North’s ‘dirty’ money

Saturday, March 24th, 2007

Joong Ang Daily
Brian Lee
3/24/2007

The messy knot of North Korean funds frozen in a Macao bank is proving difficult to untangle despite Washington’s assurances that the money will be returned to Pyongyang.
As a result, the six-party nuclear talks, which recessed Thursday over the issue, remain on hold while a solution is sought. North Korea demands that it have the money in hand before sitting down again.

South Korean Foreign Minister Song Min-soon said yesterday that the problem of returning the $25 million in funds frozen in Macao’s Banco Delta Asia would be resolved next week and the talks would resume soon. Seoul’s top negotiator, Chun Young-woo, however, said on the same day that resolving the issue will be difficult.

“Next week we will resolve it and expect to move forward in implementation measures,” Mr Song said in a news conference.

Mr. Chun said that the Bank of China, despite pressure by the Chinese government, has refused to put the money into North Korean accounts but is working with Washington to find a way to relay the money to a bank in a third country.

A government official said yesterday that the Bank of China, which is listed on the Hong Kong Stock Exchange, has foreign shareholders and is not willing to risk alienating itself from the international financial community by associating itself with money branded illicit by Washington.

In September 2005, Washington declared Banco Delta Asia a prime money launderer on behalf of North Korea, a move which caused the funds to be frozen.

Furious, North Korea backed away from nuclear negotiations and demanded the money back as a precondition for substantive talks. Recently, Washington agreed to the release of the funds but it has ordered all ties between the rogue bank and the U.S. financial system cut.

Meanwhile, the U.S. State Department said that Treasury Department official Daniel Glaser will go to Beijing soon to consult with the Bank of China on the issue.

Sources said that providing written assurances to the bank from American regulators that it would not face scrutiny over relaying the money might be one way to resolve the issue.
Mr. Chun said that finding a bank willing to accept the money is the key. “North Korea has to designate a bank in a third country,” said the official. “North Korea does not want cash.”

A government official said yesterday that Pyongyang wants contact with an overseas bank and is also unwilling to have the money wired to a North Korean bank.

“Any bank will think that there could be problems with its credit rating when dealing with money stamped illicit by Washington,” the official said. “Finding a bank to receive the money will be a difficult task.”

Mr. Chun remained cautiously optimistic. While he admitted that little progress was made in the latest round of talks, he said that from a long term perspective Pyongyang has learned a lesson that would help it understand its current position of isolation in the international community. “Even if there is the political will to resolve the issue, North Korea has seen the cold reality of the international financial world,” he said.

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Posted in Arms shipment, Banking, Counterfeiting, Drug smuggling, Finance, Illicit activities | Comments Closed

U.S., N.K. resolve BDA dispute

Tuesday, March 20th, 2007

Korea Herald
3/20/2007

‘Pyongyang pledges to use funds for education, humanitarian purposes’

The United States and North Korea have resolved a dispute over $25 million in frozen North Korean funds, clearing the way for progress in dismantling the North’s nuclear programs, U.S. officials said Monday.

The U.S. nuclear envoy, Christopher Hill, said six-party talks – which resumed Monday – could now “move on to the next problem, of which there are many.”

U.S. Deputy Assistant Treasury Secretary Daniel Glaser said the funds would be transferred into a North Korean account at the Bank of China in Beijing to be used for education and humanitarian purposes. Glaser said Pyongyang had proposed the arrangement.

The funds, some of which U.S. authorities suspect may be linked to counterfeiting or money laundering by cash-starved North Korea, had held up progress in nuclear disarmament talks.

“North Korea has pledged … that these funds will be used solely for the betterment of the North Korean people,” Glaser said.

“We believe this resolves the issue of the DPRK-related frozen funds,” Glaser said using the acronym for North Korea’s formal name, the Democratic People’s Republic of Korea.

Under last month’s deal, North Korea – which conducted its first atomic test in October last year – would get badly needed energy aid and diplomatic concessions in return for shutting down its nuclear programs.

North Korea was given 60 days from the signing of the agreement to close its main nuclear reactor at Yongbyon and allow International Atomic Energy Agency (IAEA) inspectors back into the country to supervise.

In return, North Korea would initially receive 50,000 tons of heavy fuel for energy.

The impoverished state would eventually receive 1 million tons of heavy fuel or equivalent energy aid if it permanently disbanded its atomic weapons program.

Hill said he now expected the initial provisions of the February accord to be implemented on schedule.

“We look forward to that process continuing in the next 30 days, so that we will have the shutdown of the Yongbyon facility and the sealing of it and the monitoring of it by IAEA personnel,” he said.

Hill also insisted that the United States had achieved its goals in taking action against North Korea for money laundering and counterfeiting, despite allowing the $25 million to go back to Pyongyang.

“What this means is that the North Koreans understood our concerns (and were) prepared to cooperate with us to make sure the money is used appropriately,” he said.

South Korea, which has already said it will provide the initial batch of 50,000 tons of fuel oil, welcomed Monday’s development.

“Since the issue has been resolved, there will be no big obstacles… during the initial 60-day stage for disabling North Korea’s nuclear facilities,” chief South Korean envoy Chun Yung-woo told reporters.

Japan’s chief envoy, Kenichiro Sasae, expressed similar optimism but cautioned that the focus should remain on the much tougher task of permanently putting an end to North Korea’s nuclear program.

“What is important is that this is not the end… we must work by holding a broad view, a long-term view. We must not be caught up on day-to-day movement,” Sasae said.

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Posted in Arms shipment, Banking, Counterfeiting, Drug smuggling, Energy, Finance, Illicit activities, Oil | Comments Closed

Yongchun Explosion…Chinese Merchants First to Inform

Wednesday, March 14th, 2007

Daily NK
Kim Min Se
3/14/2007

It is a well known fact that goods made in China are sweeping across North Korea with Chinese merchants taking the role of distributor.

However, Chinese merchants are not only exporting goods into North Korea but are also importing goods made in North Korea such as seafood, medicinal herbs, coal and minerals back to China.

Particularly, dried shellfish sells very well in China. As more and more Chinese merchants buy dried shellfish from North Korean markets, they play a critical role in the lives of North Korean citizens as sellers who are then able to raise the price due to demand. Every year, from April~Sept, people from the North-South Pyongan, Haean collect shellfish along the shore. 10kg of rice can be bought with 1kg of shellfish meat. Consequently, citizens of other regions also come to the beaches to collect shellfish.

If Chinese merchants did not import any goods and North Korea’s finest goods were not exported to China, the cost of goods at Jangmadang would increase exponentially. This is how close the relationship between the lives of North Korean citizens and Chinese merchants have become interconnected.

Significance of information runners

Though Chinese merchants are currently contributing to market stability, it does not necessarily mean that their existence will continue to be positive to North Korean authorities.

The people first to inform news of the Yongchun explosion in April 2004 to the outside world were Chinese merchants.

At the time, after confirming the lives their family members in North Korea, Chinese merchants who heard the explosion in Dandong gathered information about the explosion details from relatives in Shinuiju and Yongchun over mobile phones. Undoubtedly, news spread instinctively. The economic development zone, Dandong, which is at the mouth of the Yalu River is merely 10km from Yongchun.

Due to this incident, Kim Jong Il banned the use of mobile phones in North Korea. Chinese merchants have played a great role in the outflow of inside North Korean issues, a problem feared by North Korean authorities that contributes to the inflow of foreign information.

Recently, Chinese merchants have been charging a 20% fee involved in remitting dollars to defectors wanting to send money to family in North Korea. For example, if a defector wishes to send $1,000 to family in North Korea, a merchant will extract $200 and transfer the remaining $800 to the family.

As long as Chinese merchants have a specific identification card, they are free to travel between the North Korean-Chinese border and hence many defectors prefer to use Chinese merchants as the intermediary. Thanks to these merchants, many people can convey money and letters to family within North Korea.

In these respects, Chinese merchants are not only selling goods but are acting as information runners transporting news of the outside world into North Korean society.

As more and more North Koreans rely on markets as a means of living and trade between China and North Korea, the North Korean market will only continue to expand. We will have to wait and see whether or not Chinese merchants will have a healing or poisonous affect on the Kim Jong Il regime from here on in.

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Posted in Agriculture, Banking, Black markets, Cell phones, China, Coal, Communications, Finance, General markets (FMR: Farmers Market), Indigenous medicine, International trade | Comments Closed

North Korea’s Defaulted Debt Gains on Weapons Talks

Wednesday, March 14th, 2007

Bloomberg
John Glover
3/14/2007

North Korea’s defaulted debt, virtually worthless five years ago, is gaining as investors bet that talks to terminate the communist nation’s nuclear weapons program may eventually end the country’s isolation.

The securities are priced at 24 cents on the dollar, according to Exotix Ltd., a London brokerage. That’s up from 18 cents last October after the government in Pyongyang said it detonated a nuclear device. The debt traded at 13 cents in 2003.

President Kim Il Sung drove the country to become the first communist state to default in the 1970s by spending as much as 30 percent of gross domestic product on its military. His son, Kim Jong-Il, continued the legacy by maintaining a 1 million- strong army in a nation where the 23 million population was wracked by famine through the 1990s and forced to eat weeds and corn stalks, according to the Central Intelligence Agency. North Korea resumes nuclear weapons talks on March 19 in Beijing.

“This is a very long-term play,” said Richard Segal, chief strategist at Argonaftis Capital Management, in a telephone interview in London. The notes “will be worth 100 one day, but you don’t know when that will be,” Segal said.

North Korea probably owed as much as $14.5 billion, including unpaid interest, at the end of 2004, according to Exotix. Kim, known by the honorific “Dear Leader,” has held supreme power since the 1994 death of his father, creating the world’s first communist dynasty.

Trading Debt

BNP Paribas SA, France’s biggest bank, in 1987 created the equivalent of $164 million of notes denominated in deutsche marks and secured by two non-performing loans made to North Korea. They are traded alongside 240 million Swiss francs ($197 million) of notes secured by the same loans.

The securities were created to make it easier to trade North Korean debt. At maturity in March 2010, holders of both securities will receive the underlying defaulted loans if the notes haven’t been repaid or restructured, according to data compiled by Bloomberg.

Investors expect South Korea to “assume its neighbor’s external debt if economic integration is sufficiently advanced,” Exotix says on its Web site. Payment may not include the overdue interest, Exotix says.

“Moves in this debt are in anticipation of talks on North Korea’s nuclear weapons program,” said Stuart Culverhouse, chief economist at Exotix in London. “The talks are the driver, and the price of the debt ultimately depends on whether any accord reached will hold.”

Food Exchange

Mohamed ElBaradei, head of the International Atomic Energy Agency, said today in Beijing after visiting Pyongyang that North Korea will allow United Nations nuclear inspectors into the country once the U.S. lifts sanctions against the country.

Under the terms of a six-nation accord brokered on Feb. 13 in Beijing, the communist state agreed to dismantle its nuclear program in exchange for food aid and energy assistance.

More than 10,000 North Koreans have escaped since the country divided in 1953, according to South Korean news service JoongAng Ilbo News. Since 2004, those caught attempting to escape face, or repatriated by China, face terms of between one and five years in jail, according to a report by Human Rights Watch on its Web page.

At a 2002 summit, North Korea admitted to kidnapping 13 Japanese in the 1970s and 1980s, and allowed five to return in October 2002. Japan says 17 people were taken and must be accounted for.

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Posted in Banking, Finance, Military | Comments Closed

Treasury Reportedly Set to Act to Free North Korean Money

Wednesday, March 14th, 2007

NY Times
Steven R. Weisman
3/14/2007

The Treasury Department is expected to move formally this week to bar American banks from engaging in transactions with a bank in Macao linked to North Korea, clearing the way for North Korea to regain possession of money at the bank frozen since 2005, a Bush administration official said Tuesday.

American officials see such a step by the Treasury, which has been expected for weeks, as a crucial part of the recent deal to disarm North Korea’s nuclear program. The deal, announced last month, requires North Korea to disarm its nuclear facilities in return for economic and energy benefits.

The Chinese government effectively froze about $25 million connected to North Korea a year and a half ago, when the Treasury Department listed Banco Delta Asia, a small family-owned bank in Macao, as a “primary money laundering concern.” As much as half of the money is expected to be returned to North Korea.

American officials charged in 2005 that the bank was helping North Korea conduct counterfeiting, narcotics trafficking and transactions related to its nuclear weapons program, a charge that North Korea and the bank denied.

The initial Treasury announcement put American banks on notice that after further investigation, the department would decide whether to bar United States banks formally from facilitating transactions with the bank.

However, the practical effect was to make all United States banks voluntarily cease transactions with Banco Delta Asia.

Without the ability to acquire dollars, Banco Delta Asia collapsed. Macao froze all its funds related to North Korea, and most of its other customers withdrew their money in a run on the bank. The bank was then taken over by the authorities in Macao, a semiautonomous province of China.

Subsequently, American and Chinese authorities pored over more than 300,000 documents describing the transactions with North Korea. These included accounts of 20 North Korean banks, 11 North Korean trading companies, 9 North Korean citizens and 8 Macao-based companies that did business with North Korea, according to bank records filed with the Treasury Department.

The Treasury announcement expected this week would formalize what is already in place. It would probably mean that the bank could do only a modest amount of business, without the benefit of dollar transactions.

But it would mean that the Chinese government would be in a position to return some of the funds to North Korea that are not linked to counterfeiting, drugs, nuclear arms or other illicit activities.

For example, some of the funds belong to a North Korean unit of British American Tobacco, American officials say, and those funds are expected to be returned to the company, which is owned by British interests.

When the North Korea nuclear deal was announced last month, no mention was made of returning funds to North Korea from the bank, but American officials now say that the return of those funds was a major incentive for North Korea to reach an accord.

The disarmament agreement was negotiated with the United States, China, South Korea, Japan and Russia as part of what were called six-party talks.

Christopher R. Hill, the assistant secretary of state for East Asian and Pacific affairs and the central envoy in the talks, said this month that North Korea was “concerned about the fact that we were able to go after an important node of their financing” but that the United States would continue to monitor its illicit activities.

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Posted in Arms shipment, Banking, British American Tobacco (BAT), Counterfeiting, Drug smuggling, Finance, Illicit activities | Comments Closed

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