North Korea's banking trouble

In addition to focusing on the nuclear, the US has been pressuring financial institutions to crack down on NK for drug trafficking and counterfeiting. In yesterday’s Financial Times, Anna Fifield and Guy Dinmore write:

North Korea’s leadership is under severe economic pressure. Financial sanctions imposed by the US in September last year appear to have had a tougher than expected effect.

So does this mean, US sanctions have weakened North Korea, cornered them and this is to our advantage… OR, US sanctions have weakened North Korea, made them desperate, furious, and so corner that they might just be willing to do something drastic, and there, not so much to our advantage.

Asia Times suggests that South Korea would agree with the latter interpretation. This article about South Korea’s concerns over the North Korean nuclear threat has an emphasis on the banking and sanctions issues.

The view in Seoul is that the US has already invited a strong North Korean reaction by what’s seen as a “tough” line, including the US Treasury Department’s crackdown on banks and financial firms seen as serving as conduits for US$100 “supernotes” counterfeited in North Korea, as well as laundering money from the sale of narcotics and arms.

South Korean officials keep hoping Washington will somehow say Macau’s Banco Delta Asia, the first target of the US ban on dealings with US banks or firms, has cleaned up its act and the ban is off. North Korea has repeatedly called for lifting of “sanctions”, while the US wants only to intensify them, and Pyongyang has made them the rationale for refusing to return to the six-party talks on its nuclear program, which have been in limbo for months.

Last September, the US pressured the Banco Delta Asia, based in Macau, to freeze $24m from North Korea. The bank was one of the key holders of North Korean accounts, which the US argued drew on drug trafficking and counterfeiting. In July 2006, The Bank of China also froze North Korean accounts.

What country, with perhaps a reputation of past shady banking, would be next on the NK banking list? Maybe Russia?

From Kommersant August 29 article:

Peter Beck, head of the authoritative international NGO International Crisis Group told Kommersant yesterday that Russia is “the last financial refuge for the People’s Democratic Republic of Korea.” He added that the United States sees “a high degree of likelihood” in that charge, given Moscow’s disinterest in overthrowing the North Korean regime.

Central Bank of Russia, which as I understand is the only bank that can deal with foreign government funds, denied having any such contact with NK. Kommersant next went to two banks likely to have accounts of North Korean nationals, which may be used to hold government funds. As is probably to be expected, the paper did not get much information from bank management.