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The South Korean government is considering letting state-run Export-Import Bank of Korea handle North Korea¡¯s recently unfrozen US$25 million to transfer it from a Macau bank to a third country. The U.S. government used to say North Korea made the money through counterfeiting and the sales of arms and narcotics and other illicit activities. Since the Banco Delta Asia was sanctioned by the U.S. for dealing with that kind of money, no bank in the world is now willing to receive the funds.
If KEXIM handles the suspicious North Korean money, the state-run South Korean bank will earn the label of being at the disposal of the government. That is fatal in the world of international finance, where political independence is essential. Handling such money could also lead to credit downgrades by global ratings agencies. There are concerns that the bank could run into problems in issuing bonds overseas. The bank also stands to become mired in a controversy over whether it violated international laws prohibiting money laundering. That just shows how handling North Korean funds can be fraught with danger.
That¡¯s why Korea Exchange Bank immediately severed ties with BDA when the Macau lender was designated a money-laundering concern. Most banks around the world have stepped up monitoring Chinese and Russian lenders that may possibly have ties with North Korean financial operations. Last September, South Korea¡¯s Woori Bank was very concerned that Washington may misunderstand that it was a money-laundering source for North Korea, after news broke that four North Korean accounts had been created at its branch in an inter-Korean industrial complex in Kaesong.
The reason why the South Korean government seeks to place this awkward burden on KEXIM is because North Korea is putting off fulfilling its six-party talks promise until the BDA problem is resolved. But it¡¯s the U.S. government that first raised the BDA problem, so the U.S. government should take steps to resolve it.
North Korea probably isn¡¯t happy about getting KEXIM involved in this picture. North Korea doesn¡¯t want a single transaction, but a permanent right to transfer funds freely. All banks around the world must go through a depository bank in New York when it comes to dollar transfers. And the U.S. Treasury Department regulates this process. If that¡¯s the case, then it would only be proper for the U.S. government to handle the matter transparently through an American bank, rather than trying to dump that responsibility on an unwilling country and an unwilling bank.
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