Cash freeze helps bring North Korea back to table

WASHINGTON — For three years, the Bush administration has waged a campaign to choke off North Korea's access to the world's financial system, where U.S. officials say it launders money from criminal enterprises to fuel its trade in missile technology and its plans for nuclear arsenal.

That effort has started to pay off.

U.S. pressure forced Macau this year to freeze North Korean assets in one of its banks, then foiled North Korea's panicky attempts to find friendly bankers in Vietnam, Mongolia, Singapore and Europe.

After North Korea's Oct. 9 nuclear test, China ordered some of its major banks to stop financial transactions with the country.

The cash crunch appears to have played a key role in North Korea's decision Tuesday to return to talks over its nuclear ambitions.

"They're not coming back because they want to give up nuclear weapons," said David Asher, the State Department's point man on North Korea until last year. "They are feeling the financial pressure and the cutoff from the international financial system, so they are trying to make nice."

The U.S. effort still faces two enormous obstacles: Russia and China.

Both fear a financial crackdown could destabilize or even bankrupt North Korea. North Korea is able to continue to deal with the two because both countries are riddled with political corruption and organized crime, and because it is willing to pay huge commissions to banks that help it, U.S. and Asian authorities have found.

For decades, the U.S. has gathered evidence that North Korea has used its embassies to coordinate illegal activities, its ships to move heroin and its factories to make counterfeit $100 bills and bogus brand-name cigarettes.

Kim Jong Il, the North Korean leader, has used the profits to fund his nuclear program, U.S. officials say, but also to import Mercedes-Benz cars, pricey cognacs and other luxury items to buy loyalty.

The U.S. fears North Korea could decide to deploy its well-established trafficking networks to sell Iran or others the hardware or know-how to make weapons of mass destruction.

A year ago, the United States moved on one of North Korea's bankers, officially designating the small Banco Delta Asia in Macau as a "primary money-laundering concern" under the Patriot Act. North Korea had banked much of its criminal proceeds in the former Portuguese colony.

In February, local officials froze at least $24 million in North Korean accounts at the bank. North Korea has repeatedly cited the action as justification for abandoning the nuclear-bargaining table.

Using spies, cooperative bankers and law-enforcement agents, Treasury officials visited Vietnam, Hong Kong, Singapore and Mongolia this year. They say they persuaded government officials and bankers to shun financial relationships with North Korea.