Cankor Report #277

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CANADA-KOREA ELECTRONIC INFORMATION SERVICE

CanKor # 277

Friday, 23 March 2007
*************************************************

The Six-Party plenary scheduled to review the progress of working 
groups fails to begin after four days of waiting. The DPRK side 
insists that the transfer of approximately 25 million dollars of 
frozen Banco Delta Asia accounts needs to be completed before talks 
can resume. While there is considerable gnashing of teeth and finger 
pointing in Washington, an optimistic Assistant Secretary Christopher 
R. Hill says it is "quite possible" that talks could start again 
within a week or two once the financial issue has been cleared up. A 
creative solution to the financial deadlock was found during bilateral 
USA-DPRK negotiations, but the current hold-up seems to be on the 
Chinese side. The affected moneys were supposed to be deposited into a 
North Korean account at the Bank of China. The delays are caused by a 
concern that accepting funds suspected to be linked to counterfeiting 
and money laundering could in turn make the Chinese bank vulnerable to 
US Treasury sanctions.

This week's CanKor FOCUS examines the solution to a conundrum: how to 
meet the DPRK's demand to regain control of its frozen assets as a way 
to make progress in the Six-Party talks, while at the same time 
allowing the US Treasury Department to maintain its judgment on money 
laundering and counterfeiting. The point of view of Daedong Credit 
Bank, the largest non-North Korean account holder of the frozen funds, 
is examined. Rounding out this issue of the CanKor Report is the 
transcript of a press conference in which Chris Hill and Deputy 
Assistant Secretary of Treasury for Terrorist Financing and Financial 
Crimes Daniel Glaser answer questions about the financial deal made 
with the DPRK before the start of the non-started Six-Party plenary.
*************************************************

Contents:

1.   NUCLEAR TALKS BREAK DOWN, NO RESTART DATE SET
     http://www.guardian.co.uk/worldlatest/story/0,,-6499509,00.html

FOCUS: The banking conundrum
2.   DAEDONG CREDIT BATTLES TO SURVIVE US EMBARGO
     http://www.iht.com/articles/2007/03/08/news/north.php

3.   MASTERFUL SOLUTION TO DPRK FROZEN ACCOUNTS
     http://english.chosun.com/w21data/html/news/200703/200703150021.html

4.   PRESS CONFERENCE WITH CHRIS HILL AND DANIEL GLASER
     http://www.state.gov/p/eap/rls/rm/2007/81860.htm
*************************************************

1.   NUCLEAR TALKS BREAK DOWN, NO RESTART DATE SET
     Bo-Mi Lim, Associated Press, 22 March 2007

[Associated Press writers Mari Yamaguchi, Audra Ang and Christopher 
Bodeen in Beijing, Jae-Soon Chang in Seoul, and Sylvia Hui in Hong 
Kong contributed to this report.]

Talks on halting North Korea's nuclear program broke down Thursday, 
throwing into doubt efforts to meet deadlines next month for UN 
inspectors to verify the closure of Pyongyang's main nuclear reactor. 
The latest round of talks never got off the ground this week because 
of a dispute over the transfer of North Korean money that had been 
frozen in Macau bank accounts. China issued a statement saying they 
would take a recess but did not give a restart date.

"The parties agreed to recess and will resume the talks at the 
earliest opportunity to continue to discuss and formulate an action 
plan for the next phase," the statement said.

Even before the statement was released chief North Korean negotiator 
Kim Kye Gwan had flown out of Beijing, after staying away from the 
talks for several days, upset that US$25 million in North Korean funds 
had remained stuck at the Banco Delta Asia in Macau, a Chinese 
territory.

"This round of talks started with the BDA problem and ended with the 
BDA problem," Japanese envoy Kenichiro Sasae said of the negotiations 
to follow up an agreement reached last month calling on Pyongyang to 
give up its nuclear ambitions in exchange for energy aid and political 
concessions. The money in the Macau bank had been frozen by a US 
investigation into money laundering and counterfeiting, but the United 
States agreed earlier this week to a North Korean proposal to release 
the money and transfer it to a Bank of China account in Beijing. Sasae 
said talks needed to resume quickly, otherwise there would be problems 
meeting a deadline set in a Feb. 13 denuclearization agreement that 
calls for UN inspectors to verify the closure of North Korea's main 
nuclear reactor at Yongbyon by April 14. "The actions in the initial 
phase must be taken within 60 days and it will be heavily affected by 
the pace of our settlement of the BDA problem," he told reporters.

But Hill told a news conference he is still optimistic the deadlines 
can still be met. "It is our strong view that we are still on schedule 
to meet all the 60-day requirements," Hill said, referring to an April 
14 deadline that calls for UN inspectors to verify the closure of 
North Korea's main nuclear reactor at Yongbyon. Hill added he still 
expected other goals requiring Pyongyang to declare all of its nuclear 
programs and for fuel and economic assistance to be sent to North 
Korea to be met by the end of the year.

Chinese negotiator Wu Dawei said that in a last-ditch effort to 
salvage the talks he called Kim late at night to persuade him to take 
part in the talks. "When I called Vice Minister Kim Kye Gwan it was 
11:15 at night ... He got out of bed after taking his sleeping pills 
to take my call," Wu said. Wu then had to convince an operator at the 
hotel of US envoy Christopher Hill to wake Hill at 1:30 a.m. to 
discuss the impasse. "I reckon Hill hadn't thought there was any work 
going on at that hour," Wu said.

The North Korean funds were to have been sent to its bank account at 
the Bank of China in Beijing but officials said that was held up 
because of the Chinese bank's worries that accepting the money would 
cause problems because the funds had been the center of criminal 
investigations. "The Bank of China has concerns (about accepting the 
money) and not all the concerns have been assuaged," Wu said.

Adding to the confusion over the matter, the Bank of China denied 
Thursday that it was told to accept the money. "I can tell you that up 
until now, we were not asked to deal with this business," Li Lihui, 
the bank's vice chairman and president, told reporters while 
announcing the bank's 2006 earnings in Hong Kong.

In Tokyo, Prime Minister Shinzo Abe criticized North Korea for not 
being constructive. "It's clear there is nothing for North Korea to 
gain from this kind of move," Abe said. "This kind of attitude is 
meaningless." North Korea will only be accepted by the international 
society if it takes concrete steps toward complying with its 
commitment to dismantle its nuclear programs, Abe said. This round of 
talks has been dogged by the bank troubles since it started on Monday.

Russian envoy Alexander Losyukov, who also left for home Thursday, was 
quoted by ITAR-Tass news agency as saying "the whole problem came from 
the American side." He said the United States failed to assure the 
Chinese side that the Bank of China could receive the funds, which 
were linked to a counterfeiting and money laundering investigation, 
without fear of facing US sanctions or a "negative attitude" from the 
banking community and the US government.

US banks were required to cut links with Banco Delta Asia as a result 
of the Treasury investigation. The North boycotted the international 
nuclear talks for more than a year over the issue. Under the Feb. 13 
deal, the North is to receive energy and economic aid and a start 
toward normalizing relations with the USA and Japan, in return for 
beginning the disarmament process. The regime would ultimately receive 
assistance equivalent to 1 million tons of heavy fuel oil if it fully 
discloses and dismantles all its nuclear programs.
*************************************************

FOCUS: The banking conundrum

*************************************************

2.   DAEDONG CREDIT BATTLES TO SURVIVE US EMBARGO
     Donald Greenlees, International Herald Tribune, 8 March 2007

Last August, Colin McAskill, a British businessman, agreed to buy a 
small bank in North Korea. On the face of it, Daedong Credit Bank was 
not a brilliant investment. The agreement that McAskill signed with 
Daedong Credit's foreign management at a hotel in Seoul came as the 
bank was caught in the grip of financial sanctions that had virtually 
cut North Korea off from the global financial system. Financial 
institutions around the world were shunning any links to North Korean 
banks, making it almost impossible to transact business.

Daedong Credit was using couriers to carry cash in amounts as high as 
$2.6 million in and out of the country because it could not make 
electronic transfers to other banks. Since September 2005, Daedong 
Credit had also been fighting to recover $7 million that had been 
frozen in a Macao bank as part of efforts by the United States to put 
a financial squeeze on North Korea over alleged illicit financial 
transactions. This was a big sum for Daedong Credit. When McAskill had 
examined the bank's books, its total assets were just $10 million.

None of this has deterred him. He said in an interview here that he 
plans to execute the sale agreement within the next two weeks and take 
full control of North Korea's only foreign-managed bank. The Hong 
Kong-based Koryo Asia, chaired by McAskill, will take control of the 
banking license and a 70 percent stake owned by British investors 
through a Virgin Islands company. The remaining 30 percent is held by 
the state-owned Daesong Bank.

"I think it's a magnificent deal," McAskill said, although he would 
not disclose the purchase price. "The bank has been running for 12 
years. It is trusted and it has been profitable since day one."

Despite McAskill's optimism, Daedong Credit's future has been under a 
cloud since the imposition of the US-orchestrated banking embargo on 
North Korea 18 months ago and the viability of the business remains 
precarious. Even amid signs of a thaw in relations between Pyongyang 
and Washington, the start of a bilateral dialogue that began in New 
York on Monday and an agreement in six-nation talks in Beijing on Feb. 
13 to start to denuclearize the Korean Peninsula, analysts say banks 
in North Korea will struggle to restore contacts with the global 
financial system.

The trigger for the financial embargo of North Korea was a declaration 
by the US Treasury Department under section 311 of the Patriot Act 
that the Macao-based Banco Delta Asia was a "primary money laundering 
concern" because of its links to a number of North Korean banks, 
individuals and companies alleged to have engaged in product and 
currency counterfeiting, drug trafficking and weapons proliferation. 
The US and Macanese authorities began separate investigations into 
Banco Delta Asia and the bank was placed under Macao government 
supervision.

Along with about 50 North Korean banks, trading companies and 
individuals, Daedong Credit had its account frozen. The total amount 
put into "suspense accounts," according to Banco Delta Asia, was about 
$25 million, with Daedong Credit accounting for the largest share. 
Since then, almost all foreign banks that had correspondent relations 
with Daedong Credit have severed contact for fear of being excluded 
from the US financial system.

Jack Pritchard, president of the Korea Economic Institute in 
Washington, said it was unlikely that the United States would send an 
explicit signal to the financial community to resume trading with 
North Korea, regardless of whether Pyongyang starts to address 
concerns about its foreign financial transactions. He said that 
although a portion of the frozen money was likely to be released soon, 
there would not be a "100 percent reversal" of the American stance on 
financial transactions with North Korea.

Daedong Credit is likely to be one of the first North Korean account 
holders in Banco Delta Asia to get its money back from the Macao 
Monetary Authority where it has been earning no interest.

In recent months, McAskill has circled the globe from his home in 
London acting under a mandate from Daedong Credit to persuade 
officials in Washington and Macao to release the account. At 66, 
McAskill has spent 28 years doing business with North Korea, including 
as a consultant to North Korean banks on debt negotiations and helping 
to operate North Korea's foreign gold sales. He said that at no stage 
in his meetings with officials from either the USA or Macao 
governments has he seen any specific reason for freezing the Daedong 
Credit money or been told of any specific allegation about its 
origins.

McAskill has produced what he calls a "dossier of proof" to establish 
the identity of all the customers whose money is frozen and the 
sources of the money. Since it was founded by the failed Hong Kong 
finance group Peregrine in 1995, Daedong Credit has filled a valuable 
niche serving Pyongyang's foreign community. It has about 200 
customers among foreign-invested joint ventures, foreign relief 
organizations and foreign individuals, according to McAskill. The 
biggest single amount frozen in Macao is $2.6 million belonging to 
British American Tobacco, which owns a cigarette plant in North Korea.

"We irrefutably established that the money was legal," McAskill said. 
"The US Treasury have been going around the world saying to banks 
'close this account, close that account' but not offering any proof of 
wrongdoing." He said his due diligence of Daedong Credit had convinced 
him that it was a "fully legal, legitimate operation" that did not 
manage state accounts or had ever been connected to illicit practices.

One of Treasury's main allegations against Banco Delta Asia is that it 
facilitated the spread of counterfeit $100 bills. But McAskill said 
Daedong Credit had put $49 million into Banco Delta Asia in 2005 and 
all that money had been forwarded to HSBC for verification. Only three 
of the $100 notes belonging to Daedong Credit were confiscated because 
they were "suspect," he said. McAskill has charged the Treasury with 
harassment after two correspondent banks -- one in Vietnam and the 
other in Mongolia -- informed Daedong Credit late last year that they 
would immediately close accounts because of pressure from the United 
States.

But it is likely to prove difficult to convince banks, spooked by the 
impact on Banco Delta Asia of the long-running Treasury investigation, 
to take the risk of dealing with a North Korean counterpart, 
regardless of the pedigree of its shareholders and board.

Last week, at a meeting in Macao, McAskill was finally told by the 
head of a government-appointed committee supervising Banco Delta Asia, 
Herculano de Sousa, that it was likely the money in Daedong Credit 
would be returned by the end of March. In the meeting, McAskill told 
de Sousa that once the funds were freed, Daedong Credit intended to 
leave the money in Banco Delta Asia and resume operating its old 
account.

Banco Delta Asia has informed the US Treasury that as part of its 
cleanup both the administrative committee and the shareholders were 
adamant that they would no longer do business with any North Korea 
entities. In doing so, the bank hopes to avoid the United States 
making good on a threat to ban Banco Delta Asia from having any 
correspondent relationships with US banks.

Still, McAskill insisted that Daedong Credit has not broken any law in 
Macao or elsewhere and there are no grounds for it to be forced to 
close its account. "I am not going to take my money back and cut and 
run," he said.
*************************************************

3.   MASTERFUL SOLUTION TO DPRK FROZEN ACCOUNTS
     Chosun Ilbo, 15 March 2007

Concluding its 18-month long investigation of North Korea's bank in 
Macau, the US Treasury Department on Wednesday announced measures 
barring US financial institutions from direct and indirect deals with 
Banco Delta Asia. The USA accuses the bank of having been a 
money-laundering channel for the North's illicit activities. The ban 
goes into effect in 30 days.

But the step paves the way for Macau authorities to unfreeze North 
Korean accounts containing US$24 million in what is rumoured to be 
North Korean leader Kim Jong Il's personal money in the bank. "Our 
investigation of BDA confirmed the bank's willingness to turn a blind 
eye to illicit activity, notably by its North Korean-related clients. 
In fact, in exchange for a fee, the bank provided its North Korean 
clients access to the banking system with little oversight or 
control," Treasury Under Secretary Stuart Levey told reporters 
Wednesday. According to the department, BDA helped North Korea handle 
funds from illicit activities like counterfeiting US dollars, 
manufacturing fake cigarettes and drug dealings. Some North Korean 
companies possibly laundered money through the bank, it said.

Despite the relatively paltry sum, the freeze of the accounts prompted 
North Korea to boycott six-party talks on its nuclear program for more 
than a year, and talks only resumed after the USA and North Korea met 
in Berlin in January and agreed to sort the matter out. The six-nation 
talks then swiftly produced an agreement in Beijing on Feb. 13 whereby 
North Korea promised to take initial steps toward disabling its 
nuclear facilities in return for energy aid from the other five.

However, the Treasury said the unfreezing of North Korean accounts is 
up to Macau authorities and declined to mention the exact amount that 
will be unfrozen. The department said it has informed Macau of the 
investigation results. As a result, Macanese authorities will probably 
unfreeze part of the money up to 12 million that apparently came from 
legal activities. Some observers believe China will unfreeze all of 
the accounts in consideration of ties with its Stalinist ally.

Meanwhile, ahead of the official announcement, a South Korean 
government official quipped the BDA case would serve as "prize 
material for students of international relations and financial 
matters." Since seeking a more conciliatory approach with North Korea, 
the USA has been wracking its brains how to handle the problem of the 
frozen $24 million. Until then, the USA heavily publicized the 
money-laundering allegations as a way to pressure the North, but since 
late last year, it has sought a way out to make progress in the 
six-party talks. The solution the USA appears to have come up with is 
to point out the unlawfulness of BDA's actions but wash its hands of 
the North Korean accounts. "It seems the USA has passed sentence but 
suspended it," said Nam Sung Wook, a North Korea specialist at Korea 
University.

Financial experts, looking at past examples, describe the solution as 
a masterful touch. Despite allowing North Korea to retrieve the money, 
the USA is not publicly budging from its designation of the bank as a 
"primary money-laundering concern." Most of the financial institutions 
in countries like Lithuania and Burma the USA designated as primary 
money-laundering concerns in the past have either gone bankrupt or 
been taken over. At the moment, the North looks highly likely to get 
all of its money even if BDA goes bankrupt, and even before that it 
will get at least half of its money back.

Experts say the solution means nobody wins. Through a long-term 
investigation, the USA looked at some 100,000 North Korean financial 
transactions. A South Korean government official said, "We understand 
that after an investigation of about 50 North Korean accounts at BDA, 
the USA has obtained a considerable amount of information on the 
North's financial deals" -- enough, it would seem, to bring the BDA 
accounts up as a bargaining chip again any time it needs. But 
Washington could also face criticism that it exaggerated the 
information in the first place, considering that it did not present 
any decisive evidence, citing confidentiality, but let North Korea 
have the money.

North Korea, for its part, will find it more difficult to carry out 
international financial transactions now allegations of counterfeiting 
and money laundering have been very publicly confirmed. But by digging 
in its heels over the BDA accounts, North Korea, once part of the 
"axis of evil", was also able to win talks about normalization of 
diplomatic ties with the USA and other benefits.
*************************************************

4.   PRESS CONFERENCE WITH CHRIS HILL AND DANIEL GLASER
     US State Dept Press Release, St. Regis Hotel, Beijing, 19 March 
2007

[The following are excerpts of a press conference with Christopher R. 
Hill, Assistant Secretary for East Asian and Pacific Affairs, and 
Daniel Glaser, Deputy Assistant Secretary of Treasury for Terrorist 
Financing and Financial Crimes]

ASSISTANT SECRETARY HILL: Well we've been busy, and we're very pleased 
that we've been able to reach an understanding with the DPRK on the 
full return of funds as soon as possible. So, I'm going to introduce 
my colleague and friend Danny Glaser here -- who's been traveling the 
Pacific and watching all those movies on those airplanes -- to tell 
you what exactly has happened. And we can take some of your questions. 
Danny?

DEPUTY ASSISTANT SECRETARY GLASER: Thanks, Ambassador Hill. I do have 
a prepared statement to read, and I am going to read it. But before I 
start I do want to just thank Ambassador Hill for all the support that 
he's given us. He's really -- he's been pretty involved and has 
provided us very, very important guidance and advice and support on 
the diplomatic end of this. I really do think that in the future when 
people look back on this, they will look at this as a model for the 
way the Treasury Department and the State Department can work together 
in addressing very, very important issues in the international 
financial sector. So I just wanted to thank Ambassador Hill for that.

Let me read the prepared statement that I have for you all, and then 
I'll be happy to take some questions. And we are going to be releasing 
the following prepared statement on the Treasury Department web site:

"The United States and North Korean Governments have reached an 
understanding on the disposition of DPRK-related funds frozen at Banco 
Delta Asia.
"The DPRK has proposed the transfer of the roughly $25 million frozen 
in BDA into an account held by North Korea's Foreign Trade Bank at the 
Bank of China in Beijing.
"North Korea has pledged, within the framework of the Six-Party Talks, 
that these funds will be used solely for the betterment of the North 
Korean people, including for humanitarian and educational purposes. We 
believe this resolves the issue of the DPRK-related frozen funds.
"The disposition of the frozen assets has always been and remains a 
decision by the Macanese authorities to be taken in accordance with 
Macanese law. North Korea will need to work out the legal and 
technical intricacies of the arrangement with the Macanese. The 
Treasury has communicated to both the Macanese and Chinese Governments 
the United States' support of this arrangement.
"Separately, the final rule against Banco Delta Asia, issued by the 
Treasury Department under Section 311 of the USA PATRIOT Act, remains 
in place. The Treasury will continue to cooperate with the Macanese on 
this and other anti-money laundering issues.
"The events of the past 18 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."

That concludes the prepared statement, and, again, we'd be happy to 
take questions.

QUESTION: Ambassador Hill, could you explain why it was so difficult 
to reach this agreement and why we had to wait for the -- for a 
finalization of the agreement between the USA and North Korea?

ASSISTANT SECRETARY HILL: Well, I mean, the problem was, first of all, 
we needed to brief the various concerned parties on this. So as soon 
as the rule was published, Danny got on an airplane and got out to 
Macao within a day or two. He's here in Beijing to talk as well to the 
Chinese. And as soon as the North Koreans were able to pull together 
their team, I was able to brief them -- I believe it was on Saturday. 
So it just took a couple of extra days.

QUESTION: So does this mean that all the money is being released? Does 
this mean none of the money was involved in illegal activities?

ASSISTANT SECRETARY HILL: What this means is the North Koreans, the 
DPRK, understood our concerns and are prepared to cooperate with us to 
make sure this money is used appropriately.

QUESTION: Mr. Glaser, do you not have any concerns that this might 
send the wrong message, saying that all the money was involved in 
illicit activities?

DEPUTY ASSISTANT SECRETARY GLASER: No, I think the message at this 
time is, as I said in the prepared statement, first of all, the broad 
message that I think it sends, is that we will not be tolerating 
illicit conduct by financial institutions in the international 
financial system. With respect to the actual disposition of the funds, 
I think it's important to look where we were eighteen months ago and 
look where we're going now. Eighteen months ago, these funds were in a 
bank that did not have adequate anti-money laundering protections and 
that was facilitating illicit activity. There was very little being 
done about it. Eighteen months later, the bank is under responsible 
management, and we have received assurances that the funds are going 
to be transferred to an account in Beijing that can allow them to be 
used for humanitarian purposes, for educational purposes.
I think that's a great success. It's all part of an ongoing process to 
work with North Korea on trying to address what we've said before are 
a lot of the fundamental underlying concerns of the international 
financial community.

QUESTION: How do you guarantee those funds will be used for 
humanitarian purposes?

DEPUTY ASSISTANT SECRETARY GLASER: Well, there are no guarantees in 
this life, but this is an important step in our working through this 
problem. The North Koreans have given us assurances that it will be 
used for humanitarian purposes, for educational purposes, and we'll 
see if we can work this out. We've been meeting them in our bilateral 
financial working group. We're going to continue to meet with them in 
that group. This is part of an ongoing process of working with North 
Korea and explaining to North Korea what the issues are -- what the 
concerns of the international financial community are -- and trying to 
resolve those concerns.

QUESTION: Sir, you said as soon as possible. How -- what is your 
timeframe on the return of the funds?

DEPUTY ASSISTANT SECRETARY GLASER: Well, it's going to have to be 
conducted under Macanese law and in conformity with Macanese 
procedures and regulations. So that's going to be something for the 
North Koreans and the Macanese to work out. It's not going to happen 
overnight. There are going to be steps that are going to have to be 
taken.

ASSISTANT SECRETARY HILL: But I want to make clear: from the US 
perspective, we want it to happen as soon as possible

QUESTION: The fact that these are going into a Bank of China 
account -- does that suggest that China will have some responsibility 
in ensuring that the funds are used appropriately?

ASSISTANT SECRETARY HILL: I think any regulator has certain 
responsibilities, and I would put the Chinese in that category, as 
would any regulator of any bank account anywhere.

QUESTION: After saying that it was totally up to the Macanese 
authorities how to hand over the money, why is the USA announcing 
this?

DEPUTY ASSISTANT SECRETARY GLASER: We had -- I was in Macau just on 
Saturday, and we discussed a number of things with the Macanese 
authorities. It was an opportunity for us to present the results of 
the investigation that we had conducted into BDA, and we did that. It 
was an opportunity to discuss the finalization of the Section 311 
rule, and it was an opportunity to discuss the overarching mechanisms 
that could be used with respect to bringing a resolution to the funds 
transfer issue. Now this is a North Korean proposal, and both we and 
the Macanese thought that it was a very promising proposal. So I don't 
think this is about anyone imposing anything on Macau. I think this 
works very well for Macau, and I think that they found it to be a 
promising proposal. It will have to be accomplished in conformity with 
their laws, and I'm sure it will be.

QUESTION: But it is not only North Korean Government but also the 50 
account holders. All of them agree with this agreement? I mean, you 
know, the money to be used for the humanitarian assistance? Because 
the bank holders are not only North Korean government, right?

DEPUTY ASSISTANT SECRETARY GLASER: That's right. There are non-North 
Korean Government account holders, and again, this will have to be 
conducted within Macanese law. And I'm sure the Macanese and the North 
Koreans -- I'm sure the Macanese will discuss it with the North 
Koreans and explain to them exactly what needs to be done to 
accomplish this. (...)

QUESTION: Mr. Glaser, you been acting under the strict laws of the 
Patriot Act, or whatever the law is. How do you respond to the 
argument that the whole disagreement is motivated by political 
purposes?

DEPUTY ASSISTANT SECRETARY GLASER: We've laid our case out publicly; 
we laid our case out when we issued the notice for proposed 
rule-making. I think it's a fairly straightforward one. This was a 
bank that did not have adequate anti-money laundering controls. In 
spite of that it was soliciting high-risk clients. It was not only 
soliciting those high-risk clients but was providing them with a 
facilitative environment to engage in deceptive financial practices. 
This wasn't a very difficult case for us.

QUESTION: How do you verify the money will be used properly for 
humanitarian and educational purposes? How will the United States 
verify?

DEPUTY ASSISTANT SECRETARY GLASER: As I said, there are no guarantees 
in this, and we're embarking into this in the spirit of an ongoing 
process. We have received assurances. We're expecting that the 
assurances will be lived up to. We will be engaged in an ongoing 
dialogue, and we're going to have to take it from there. If North 
Korea wants to have access to the international financial system, 
they're going to have to start getting used to working productively 
with other members of the international financial system. Hopefully 
this is something that's going to be beneficial for everybody. We're 
going to continue to work with them. The funds are [to be deposited] 
in a Chinese bank, as Ambassador Hill said, regulated by Chinese 
regulators. We expect that people will live up to their obligations.

QUESTION: What's your plan for the counterfeiting issue?

DEPUTY ASSISTANT SECRETARY GLASER: What's the plan for the 
counterfeiting issues? Well counterfeiting issues are, I suppose, 
related to this in a tangential way. I don't want to speak for the US 
Secret Service, but the US Secret Service takes very seriously the 
counterfeiting of the US currency. At the last bilateral working group 
that we had with the North Koreans, I had two senior Secret Service 
investigators with me to discuss with the North Koreans those 
concerns. The Secret Service is going to continue to pursue their law 
enforcement investigations, and it continues to be an issue that we're 
going to raise -- because it's not acceptable for us to have our 
currency counterfeited.

QUESTION: So are your dealings with the North Koreans now done or are 
you going to continue your working group with the North Koreans, work 
on financial issues?

DEPUTY ASSISTANT SECRETARY GLASER: Yes, I hope we continue the group. 
I think it's important -- because resolving the Banco Delta Asia issue 
was one of the purposes of the group, but it was not the only purpose 
of the group. And frankly, I don't even think it was the fundamental 
underlying purpose of the group. The fundamental underlying purpose of 
the group was to explain to North Korea -- to try to work with North 
Korea on addressing the broad range of concerns that the international 
financial community has with respect to their conduct and to try to 
work with them to change that conduct and to put them in a position 
where they can be reintegrated into the international financial 
system. We still have work to do on that, and we hope to be able to 
take advantage of this group in order to continue to raise these 
concerns and to continue to try to address them. (...)

QUESTION: Ambassador Hill, are you confident the North Koreans will 
not raise this issue again in the Six Party Talks or in bilateral 
meetings?

ASSISTANT SECRETARY HILL: As Mr. Glaser said, this was a proposal they 
made, and it's a proposal we've accepted. It's a proposal that takes 
into account our concerns. It's a proposal that derives from a number 
of these bilateral discussions that Mr. Glaser held with the DPRK 
financial officials. We feel this is the basis of the solution. We met 
our 30-day requirement by announcing the rule. We then followed that 
up with intense consultations, as Mr. Glaser has been doing.

And so we feel this matter has been resolved and now we can move on to 
the next problem, of which there are many. And we continue to work 
hard; in fact today we have our first Six-Party meeting. We're going 
to evaluate all five of the working groups and evaluate how we're 
doing in terms of the 60-day set of actions and then the next phase as 
well. So we have a lot of work to do and we're very pleased that due 
to the hard work -- and especially the hard work of the Treasury 
Department by Danny Glaser and his very strong team and also the team 
back in Washington with Stuart Levey and others -- we feel that we're 
ready to move on.

QUESTION: Mr. Hill, with the BDA issue put aside, people are talking 
about the next milestone. When do you expect the next one is coming?

ASSISTANT SECRETARY HILL: We have had some 30-day actions, and one of 
them has been to resolve the BDA issue. That's been done, and I think 
it's been done to mutual satisfaction. And then we've also looked at 
the completion of the working groups in the 30-day time frame, and 
we've been able to get that done.

And so now we're going to look at 60-day requirements. There are a 
number of those. First of all, I think the DPRK has gotten off to a 
good start with the IAEA, with Mr. ElBaradei's visit to Pyongyang. And 
we would look forward to that process continuing in the next 30 days 
so that we will have the shutdown of the Yongbyon facility, the 
sealing of it, and the monitoring of it by IAEA personnel. We would 
also look forward to making sure the first shipment of fuel oil --  
which is called for in the February agreement -- reaches the DPRK 
within the 60-day time frame. And then looking beyond for the 
additional fuel oil and the additional milestones and 
denuclearization, we'll need to synchronize those steps. They involve 
some very important steps, including the disablement of the North 
Korean nuclear program as well as the issuing of a full declaration in 
return for considerable amounts of fuel oil and economic assistance. I 
think we'll continue on that, and for that reason we have a lot of 
work to do in the next couple of days with this meeting.

Also -- I want to emphasize the importance of this -- at the end of 
the 60 days we're looking forward to having a Six-Party ministerial, 
also called for in the February agreement, where Dr. Rice and all her 
colleagues, including the DPRK minister, will get together and begin 
to chart the course ahead.

So a lot of work to do. (...)
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End CanKor # 277

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