U.S. finds banks unwilling to accept transfer of funds

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MACAO -- The United States is scrambling to find a bank willing to accept the transfer of $25 million in North Korean funds from Macao and is offering assurances that no institution will suffer as a result of agreeing to do so, diplomats and banking officials said yesterday.

The Bush administration is trying to create a special account in an Asian bank, most likely but not necessarily in China, that would provide safeguards while allowing the money to be used only for humanitarian purposes, the officials said.

But the administration, which will not allow the money to go directly to Pyongyang, where it could be used by North Korean officials, is having difficulties finding a middleman.

Banks in the region fear they will be subject to U.S. actions similar to those taken against Macao's Banco Delta Asia (BDA), the current depository of the funds, which was effectively cut off from access to the world financial system.

Washington pressured Macao authorities to freeze the North's account in 2005, saying the money came from illicit activities such as money laundering and counterfeiting. The U.S. Treasury Department dropped its objection to the release of the funds after it barred U.S. institutions from dealing with BDA earlier this month.

U.S. officials conceded in private that they had not thought through the consequences of their decision to put the $25 million into a third-country bank, and that they had failed to foresee the impediments to the transfer.

The initial plan was to send the money to the Bank of China, but officials there expressed reluctance to accept funds that are linked to illegal activities. The delays prompted North Korea to walk out on the latest round of six-party nuclear talks just when other issues appeared to have been resolved.

A delegation headed by Daniel Glaser, the Treasury Department's top official in charge of thwarting terrorist financing and other financial crimes, held a second day of talks in Beijing yesterday discussing that and other issues with Chinese and North Korean officials.

Mr. Glaser visited Macao late last week to make sure authorities in the autonomous Chinese territory were ready to release the funds.

The top U.S. nuclear negotiator, Christopher Hill, said in Washington on Monday that he expected the transfer problems to be resolved within a couple of days.