Ros-Lehtinen, GOP Members Request GAO Evaluation of U.S. Efforts to Transfer Frozen Banks Funds to North Korea

Press Release

A group of House Republicans led by U.S. Rep. Ileana Ros-Lehtinen (R-FL), the Ranking Member of the House Foreign Affairs Committee, today asked the Government Accountability Office (GAO) to evaluate whether a U.S. Government effort to facilitate the transfer of $25 million to the North Korean regime is consistent with anti money laundering and counterfeit laws.

North Korea has linked transfer of the funds to fulfillment of its commitment made in the February 13th Six-Party Joint Statement in which it agreed to begin dismantling its nuclear program in exchange for economic and political concessions. The funds are currently on deposit at a bank in Macau identified by U.S. authorities as engaging in money laundering.

According to the U.S. Treasury Department, a sizable portion of the $25 million being held in North Korean accounts in Banco Delta Asia, the Macau bank, has been derived from such illicit activities as missile and arms sales to rogue regimes, drug smuggling and counterfeiting of U.S. currency. The accounts have been frozen for nearly two years.

At issue is whether official actions taken by the Department of State and the Department of the Treasury to facilitate the transfer of funds from Macau to North Korea using private banks in the U.S., Russia, China or Europe violate U.S. money laundering and counterfeiting laws. U.S. officials are now reportedly examining a role for the U.S. Federal Reserve Bank, which is not subject to U.S. laws barring commercial transactions involving illicit funds.

In September, 2005, the U.S. Treasury Department designated Banco Delta Asia as a "primary money laundering concern" under the USA Patriot Act.

"If history is any indication, I have little confidence that the North Korean regime will adhere to any agreement despite our good faith efforts to honor our side of the bargain," Ros-Lehtinen said. "For more than 50 years this regime has repeatedly broken its commitments to the international community. What gives our diplomats or their colleagues in the Six Party Talks any newfound confidence that transferring tainted money to this regime will result in an outcome different from previous failed negotiations?," she asked.

In addition to Ros-Lehtinen, the letter is signed by U.S. Reps. Christopher H. Smith (NJ), Dan Burton (IN), Edward R. Royce (CA), Mike Pence (IN) and Joseph R. Pitts (PA).

Text of the letter to the GAO:

The Honorable David M. Walker
Comptroller General of the United States
U.S. Government Accountability Office
441 G Street, N.W.
Washington, D.C. 20548

Dear Mr. Walker:

A number of us who presently serve, or who have served in the past, on the Committee on Foreign Affairs have been concerned about recent reports that U.S. government officials may have been engaged in efforts to expedite the transfer of North Korean funds held in Macau-based Banco Delta Asia. According to past U.S. Treasury Department statements, a sizable portion of the $25 million being held in North Korean accounts in the Macau bank has been derived from illicit activities - including missile and arms sales to rogue regimes, drug smuggling and counterfeiting of U.S. currency.

A September 15, 2005 press release noted in part: "The U.S. Treasury Department today designated Banco Delta Asia as a ‘primary money laundering concern' under Section 311 of the USA Patriot Act because it represents an unacceptable risk of money laundering and other financial crimes. Banco Delta Asia has been a willing pawn for the North Korean government to engage in corrupt financial activities through Macau, a region that needs significant improvement in its money laundering controls." The Treasury Department further noted in a March 19, 2007 statement released in Beijing that "the events of the past eighteen months demonstrate our lack of tolerance for illicit activity conducted in the global financial system. Financial institutions that facilitate weapons proliferation, terrorist financing, narcotics trafficking, and other illicit financial activity should be on notice of the significant consequences they face."

Daniel Glaser, the Treasury Department's Deputy Assistant Secretary for Terrorist Financing and Financial Crimes, remained in Beijing for several days in March to seek to facilitate the resolution of the Banco Delta Asia issue with Chinese authorities. Pyongyang has successfully linked transfer of the funds to fulfillment of its commitment to denuclearization made in the February 13th Six-Party Joint Statement - although the Statement makes no mention of the Banco Delta Asia funds.

There have been repeated press reports in recent weeks that Administration officials have been actively engaged in efforts to secure the transfer of these formerly frozen North Korean funds to banking institutions in China, Russia, or Western Europe. The Washington Post carried a report on May 17th that the State Department had even made a request to an American financial institution, Wachovia Bank, to transfer the funds, despite Banco Delta Asia being blacklisted earlier by the Treasury Department. Assistant Secretary of State Christopher Hill was quoted as stating at a Korea Society event that "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."

We find the above set of circumstances to be disturbing. We would note that the funds in Banco Delta Asia were frozen by Macau authorities only after the U.S. Government had cited Patriot Act concerns about both the bank's operations and, specifically, the North Korean accounts. We therefore request that GAO evaluate whether State Department and Treasury Department actions undertaken to facilitate the transfer of North Korean funds are fully consistent with the enforcement of Section 311 of the Patriot Act and with the sanctions regime imposed under UN Security Council Resolution 1718, which our Government actively supported in its vote on October 14, 2006. We would also request that GAO evaluate whether all U.S. official actions undertaken in connection with support for the transfer of North Korean funds held in Banco Delta Asia accounts are in keeping with the prohibitions regarding money laundering and counterfeiting as stipulated in the U.S. Criminal Code, Title 18, sections 1956 and 1957.

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