by Don Pesci
It’s very nearly impossible to find out from the cursory accounts printed in most major newspapers what persuaded North Korean dictator Kim Jong Il to agree to shut down his nuclear program.
We know positively it was not the allure of sweet reason. Since his ascendancy to the exalted position of “Dear Leader” following his father’s demise, Kim has not been friendly to reason, the delicate pressure put on his country by China, or U.S. President George Bush’s decision not to engage in direct talks with North Korea. Despite pressure put upon it by both Kim and some major American newspaper, Bush declined direct talks with Kim, preferring instead multilateral talks involving countries that would be impacted should Kim be successful in producing big boom weapons that would give the dictator a power to negotiate terms with other nations he does not now possess.
Only a few months ago, the front pages of many newspapers bristled with accounts of Kim’s steadfast refusal to succumb to pressure from the West to shut down the program. Like his counterpart in Iran, Mahmoud Amadinijad, Kim insisted that his nuclear program was intended for peaceful purposes, even as he launched test missiles in the direction of Japan.
And now, quite suddenly, Kim has caved. UN inspectors this week announced the program had been dismantled.
What’s up with that?
How the U.S. Treasury Department Dished a Dictator.
Certainly it was no secret that the upper crust of North Korea, Kim and his associates, were living high off the hog while the rest of the country was plunged into a permanent depression brought on by Kim the Communist’s lust for power and glory.
The class divisions in Korea were dramatically displayed a few months ago in a nighttime photograph of Korea showing the North plunged in total darkness, except for scattered bright spots around Kim’s abode, while the South, liberated from the same fate by an American army and now bursting with enterprising non-communist citizens, shown in the night like a bright halo.
But if North Korea was broke, where were all the posh rulers of North Korea getting the money to put caviar on the table? North Korea’s economy was kaput; it had defaulted on its sizable international debt; and it was unable to borrow money. How then was Kim financing a trade deficit as high as $800 million a year with no access to capital markets?
A small working group calling itself The Illicit Activities Initiative, several people that came from the Treasury and State Department, quickly found the answer to the question. Kim’s North Korea, like the Mafia, was essentially a criminal enterprise that was realizing huge profit margins from drug trafficking, illegal weapon sales and counterfeiting in “superdollars” so high tech as to be virtually undetectable.
The IAI’s small operation soon mushroomed into an international initiative. Juan Sarate, according to a story in the June issue of National Review, was the first to discover a punishing provision in the Patriot Act that soon would bring Kim’s regime to its knees.
Section 311 of the Act empowers the Treasury Department to designate suspect foreign banks as “institutions of primary money laundering concern.” Having done so, Treasury is enabled to impose “special measures” such as closure of “correspondent accounts” in their dealing with such foreign banks. In other words, Treasury may cut the money laundering banks from the U.S. banking system.
In 2005, Treasury discovered that a small Macau bank, Banco Delta Asia, was at the center of North Korea’s money laundering activities and applied the provision. This action was timed to break a seemingly endless deadlock in multi-lateral talks with North Korea. And within days of the implementation of the measure, North Korea agreed to fully denuclearize in exchange for economic aid and normalization of relations.
The day after Treasury’s announcement Banco Delta Asia’s reserves were depleted by a run on the bank and Macanese authorities took over the bank and froze $25 million held in several dozen accounts related to North Korea. The Bank of China froze its North Korean related accounts, and other international banks, realizing they too could be cut off from U.S. banks, increased due diligence on their North Korean accounts and refused to take on any new business from Kimland.
The reaction from North Korea was predictable: It backed out of the six-party talks for a year, declined to return to the table unless its ill gotten assets were restored, test fired new ballistic missiles and detonated a nuclear warhead.
And every time Kim’s associates approached Christopher Hill, a State Department undersecretary who represented the U.S. in the six-party talks, to demand restoration and amelioration, Hill said that the damage could not be undone unless Korea abandoned its criminal activity. The U.S. government was powerless to change economic laws operating in the international free market. Treasury could not help Kim. The Americans had not frozen Kim’s accounts: they were frozen by Macau and the China bank.
Attempting to be helpful, Treasury released a statement that the U.S. would “support a decision by the Macau authorities to unblock the accounts in question.” The accounts were unfrozen but – big problem – no bank in the world was willing to accept a wire transfer of funds tied to criminal activity. The U.S. government then asked Wachovia Bank to accept the wire transfer from Banco Delta Asia, promising it would not enforce Section 311 of the Patriot Act in this instance.
The effects unleashed by Section 311 of the Patriot Act are almost irreversible, a potent weapon indeed, provided it is not repealed by Bush ill-wishers in the U.S. Congress. That is a slender hope for the dictators of the world to rely upon when they cannot rely upon American banks like Wachovia to bless their criminal enterprises. But who knows, the rebellious Democrats, still in a campaign mode months after wresting control of the Congress from Republicans, may yet prevail and repeal the whole act.