U.S. sanctions on Banco Delta Asia (BDA) have been cited in numerous books published in the past decade, particularly those which speak of the relations between the United States and North Korea.
The various authors are astonished at these two situations: the possibility that the U.S. tried to end the life of a bank without substantiating the charges against it and the fact that it was surprising that the embargo on a small bank in Macau was employed to achieve the results that until then Washington had not been able to achieve directly.
Let’s look at the historical background, which begins at the end of the Korean War: The U.S. “has imposed an arms embargo, economic sanctions, restrictions on trade and travel, bans on dealing with North Korean companies and even a bar on U.S. citizens owning or operating ships flying North Korean flags. Most of these measures have led to some pain, but nothing seems to have stung as much as a Treasury Department attack in September 2005 on Banco Delta Asia, an obscure, family-owned bank in the Chinese gambling enclave of Macau,” wrote David Lague in The New York Times.
“In the Summer of 2002, U.S. intelligence reportedly discovered evidence to support suspicions that North Korea was engaged in procurement activities for the development of a uranium enrichment programme,” said researcher Mark S. Gaylord, author of ‘The Banco Delta Asia Affair: the USA Patriot Act and allegations of money laundering in Macau.’
“In December 2003, however, North Korea expelled International Atomic Energy Agency inspectors who had been monitoring the freeze in the production of plutonium” and “the next month Pyongyang declared its immediate withdrawal from the Treaty on the Non-proliferation of Nuclear Weapons,” states the author. And it is in this context that the United States decides to pursue new avenues against North Korea.
On 15 September 2005 the United States amazes the world by announcing that the U.S. Department of Treasury ‘designates Banco Delta Asia as a primary money laundering concern under the USA Patriot Act.’
“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,” declared Stuart Levey, the Treasury’s Under Secretary for Terrorism and Financial Intelligence. “By invoking our USA Patriot Act authorities, we are working to protect U.S. financial institutions while warning the global community of the illicit financial threat posed by Banco Delta Asia.”
Despite the efforts of the Macau Government and the bank’s new management, the United States did not rescind the order and on March 14 2007 the first accusations were finalised under Section 311 of the USA Patriot Act. ‘When the final rule takes effect in 30 days, U.S. financial institutions will be prohibited from opening or maintaining correspondent accounts for or on behalf of BDA. This action bars BDA from accessing the U.S. financial system, either directly or indirectly.’
“The real aim of the US Government in targeting BDA was not exclusively to affect a crackdown on the bank’s alleged illicit financial activities but rather largely centred to realise its foreign policy objectives,” says Minxing Zhao, a researcher at the Education University of Hong Kong. To support this theory, Zhao quotes the testimony of David Asher to the U.S. Congress in 2007: “Banco Delta Asia was a symbolic target. We were trying to kill the chicken to scare the monkeys, and the monkeys were big Chinese banks doing business with North Korea; and we are talking about tens of millions.”
All sources consulted by Macau Business agree that the Washington initiative hit all possible monkeys, not just Chinese banks. “The U.S. action had a chilling effect on foreign businesses and banks, which became unwilling to engage with North Korea even on legal business ventures for fear of being designated complicit in North Korea’s illegal activities,” according to Bruce Klingner, Senior Research Fellow, Northeast Asia Asian Studies Centre.
One thing is certain: Ten years after the ruling on BDA, the U.S. has still not presented evidence of the accusations, saying it has relied upon classified sources. John McGlynn, another researcher on the subject, explains: “The Treasury Department never faced any serious public demands to publish the evidence in support of its allegations of North Korean money laundering and counterfeiting and BDA’s financial wrongdoing. Basic fairness should require that a person or a country or a country’s government or a business such as a bank be presumed innocent until evidence of illegal activity is provided. Unfortunately, that fairness principle is not built into the U.S. law that allows the Treasury Department to impose sanctions.”
The Chinese role
It is no secret that the U.S. wanted “to kill the chicken to scare the monkeys, and the monkeys were big Chinese banks doing business with North Korea.” It is also known that this goal was achieved, with Chinese banks ever more cautious about doing business with North Korea.
What is not fully known is China’s role in this whole BDA process, as it is “widely believed that China possesses the most influential leverage on North Korean policy and behaviour.” Author Minxing Zhao goes on to explain that “by targeting Macau’s BDA, the U.S. Government had tactically “frightened the monkeys by killing the chicken without direct confrontation with the PRC,” taking advantage of the ‘One Country, Two Systems’ principle. Ronda Hauben, who also studied the case, has no doubts that “the purpose of the action against BDA appears not only to have been to target North Korea and its access to the international banking system but also to send a message to China.”
Publicly at least, China criticised the U.S. decision, but the book ‘North Korea – U.S. relations under Kim Jong Il: the quest for normalisation’ by Ramon Pardo reveals another perspective: “Beijing supported U.S. financial sanctions on Banco Delta Asia” reflected “in UN Security Council resolutions to impose sanctions on Pyongyang.” Another book – ‘Currency Interventions, Fluctuations and Economic Issues’ by Lawrence C. Hilbert – shares this revelation: “China conducted a three-month investigation into the accusations against BDA, which, according to South Korean diplomatic sources, confirmed the suspicions.”
A curious detail: BDA chairman Stanley Au attended the annual meeting of the Chinese People’s Political Consultative Conference in Beijing the day the U.S. decided to ‘bar BDA from accessing the U.S. financial system, either directly or indirectly.’
