"Charges by the U.S. Treasury Department that a small bank in Macau knowingly laundered counterfeit U.S. currency on behalf of North Korea have no basis in fact,..."
Posted on Tue, Apr. 17, 2007
Report challenges U.S. allegations against Macau bank
BY KEVIN G. HALL
Charges by the U.S. Treasury Department that a small bank in Macau knowingly laundered counterfeit U.S. currency on behalf of North Korea have no basis in fact, according to a confidential audit ordered by the government of the Chinese enclave.
The audit, obtained by McClatchy News Service, also suggests that the Treasury overstated claims that the bank laundered ''hundreds of millions'' in ill-gotten gains through Banco Delta Asia.
On the basis of the allegations, the Treasury Department on March 14 blacklisted the tiny, family-controlled bank, which now is on the verge of being driven out of business.
The Bush administration now says it approves the release of $25 million originally frozen in Macau at Washington's behest, but portions of this Banco Delta Asia money tied to North Korea apparently have not been received by the regime's leaders. Consequently, they missed Saturday's deadline to begin dismantling a nuclear reactor as agreed to on Feb. 13 as part of an agreement with the United States and four other nations.
''From our investigations it is apparent that . . . the Bank did not introduce counterfeit U.S. currency notes into circulation,'' the Ernst & Young audit said, noting that large cash deposits from North Korea were routinely screened for counterfeits by the Hong Kong branch of an unidentified bank with U.S. operations.
The audit's conclusions about the laundering of counterfeit currency are significant because they cast doubt on Bush administration claims that North Korea has engaged in state-sponsored counterfeiting and introducing these fake bills via Banco Delta.
Moreover, the audit confirmed that the only time Banco Delta knowingly handled counterfeit U.S. notes was in 1994 when its inspectors discovered 100 counterfeit $100 bills and turned over $10,000 to local authorities. That $10,000 is far from the $15 million in counterfeit U.S. currency the Bush administration in 2005 said North Korea was manufacturing annually.
Ernst & Young presented the audit to Macanese banking regulators in December 2005 in response to concerns raised in Treasury's Sept. 20, 2005, proposed action against Banco Delta. The bank's lawyers offered to present the report to Treasury officials in October 2006 but insisted that it be excluded from access under the Freedom of Information Act -- in other words kept secret from the media. Treasury refused the offer.
The copy of the audit obtained by McClatchy News Service excises the names of North Korean entities and officials to protect their identities. The names of some banks with U.S. ties are also redacted.
Until now, the story of Banco Delta's travails has played out behind a wall of secrecy imposed by U.S., Chinese and Macanese regulators. But the audit, aspects of which were reported earlier by McClatchy News Service, for the first time spells out exactly what Treasury's concerns were and what international auditors discovered.
Banco Delta Asia is a private, family-run bank whose major shareholder is Stanley Au. Its deposits were only about $318 million before Treasury took action against it in 2005, and by last July its deposits had dwindled to $205 million. The audit reveals that Banco Delta handled North Korean accounts for decades.
For reasons not stipulated in the audit, Macanese monetary authorities in September 2004 asked Banco Delta to strengthen its internal controls over North Korea-related accounts or end the risky business of transferring North Korea's cash deposits and gold bullions. The bank apparently did not heed that advice.
The audit is hardly a clean bill of health for Banco Delta, finding the small enterprise lacked sufficient information about the underlying nature of the business for which North Korean companies or their partners in Macau were depositing large sums of cash.
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