Kim's U.N. Banker

June 11, 2007
The Wall Street Journal
Original Source: http://online.wsj.com/article/SB118151742932230672.html

The case of the United Nations and North Korea gets curiouser and curiouser. Only a week ago, the U.N. was claiming that a preliminary audit of its programs in North Korea showed irregularities that were no big deal. But now the U.S. has new evidence that U.N. funds intended to help the people of one of the world's poorest countries were diverted to prop up Kim Jong Il's regime.
The latest chapter in the Cash for Kim saga shows how the United Nations Development Program operated as the North Korean dictator's private banker. The U.N. agency facilitated Pyongyang's purchases of high-tech equipment that could be used for military purposes, as well as property in France, Britain and Canada. The outlines of the scam were reported over the weekend in the Chicago Tribune and Washington Post.
The details are worth studying, however, both for what they show about the sophistication of Kim Jong Il's financial manipulation and the lack of oversight by the UNDP. Unlike the $100 billion Oil for Food scandal, there's no proof that UNDP officials were in on the game, but there's plenty of evidence of willful blindness.
Many of the transactions were carried out through North Korea's National Coordinating Committee for UNDP, established at the Ministry of Foreign Affairs for the ostensible purpose of financing UNDP's NEX projects and other activities. In U.N. lingo, NEX stands for nationally executed and refers to programs funded by the UNDP but staffed and operated by the country in which they are located. In North Korea -- where many projects were subject neither to site visits nor careful audits -- NEX apparently stands for non-existent.
The U.S. says it has documents showing that more than $7 million in UNDP money between 2001 and 2005 often ended up elsewhere. The North Koreans transferred $2.7 million for goods and equipment to Zang Lok Trading Co., based in Macau. Zang Lok has ties to Tanchon Commercial Bank, which was designated in 2005 under President Bush's Executive Order 13382 as the main North Korean financial agent for sales of WMD. Doing business with Tanchon violates U.S. law.
Another $2.8 million was transferred to North Korean missions in Europe and New York to cover buildings and houses, according to the payment details. A familiar name turns up in this transaction -- Banco Delta Asia, the Macau bank sanctioned for money-laundering by the U.S. Treasury. The payments went through accounts at Banco Delta Asia at the direction of International Finance and Trade Joint Co., another Macau-based entity.
Then there's the dual-use equipment. In May of last year, the UNDP procured and delivered to North Korea global positioning system equipment, a portable high-end mass spectrometer and a large quantity of high-specification computer hardware. The purpose? The equipment was designated for what the UNDP called an agricultural assistance project for landscaping, supposedly to help with flood control. The U.S. says the UNDP country program for 2005-2008 mentions no such project.
The U.S. has also raised concerns that North Korea used the UNDP to cover up its counterfeiting. The UNDP often paid for foreign travel for North Korean officials. In a number of cases, North Korean employees of the UNDP appear to have abetted a money-laundering scheme involving real dollars and fake dollars and the UNDP's euro account at the Foreign Trade Bank in Pyongyang. The real dollars were pocketed by the government, while the fake ones were distributed by North Korean officials on their foreign travels.
We're told that U.N. Secretary-General Ban Ki-moon claims to be shocked by these latest U.N. findings. We hope that means he's finally motivated to buck the U.N. bureaucracy and insist on the independent, external audit of U.N. operations in North Korea that he promised in January. As these revelations show, there's a long way to go before we get to the bottom of the Cash for Kim scandal.