N. Korea used UN-linked accounts for arms sales: US probe
January 25, 2008
Agence-France Press
Original Source: http://afp.google.com/article/ALeqM5gS1QEUW1AlPNwV5E9oepk_Ax0A4A
WASHINGTON (AFP) — Nuclear-armed North Korea used UN-linked bank accounts to secretly transfer funds in connection with alleged weapons sales, a US Senate probe showed Thursday.
The investigation was held following media reports last year about alleged mismanagement in the operations in North Korea of the United Nations Development Program (UNDP), the largest UN development agency.
The probe discovered that the UNDP operations in the hardline communist country did not follow standard policies and were undermined by management and operational deficiencies, said Senator Carl Levin, head of a panel that conducted the inquiry.
Many of the deviations in the UNDP, which suspended operations in North Korea last year, stemmed from demands by the government in Pyongyang, he said at a Senate hearing on the issue Thursday.
Pyongyang, for example, pushed the UNDP to conduct its financial transactions using the North Korean state-owned Foreign Trade Bank, he said.
But the UN agency had no access to the bank account records, said the Democratic lawmaker chairing the permanent Senate panel on investigations.
UNDP was surprised to learn that the bank had routed some outgoing UNDP funds through a Chinese firm, International Finance and Trade Joint Company (IFTJ), with links to alleged weapons sales, Levin said.
He said two UN payments totalling about 50,000 dollars, that had been made by UNDP on behalf of other UN agencies, had gone to an entity that the State Department later linked to North Korean weapons sales, including ballistic missiles.
The probe showed that the transaction was made through an IFTJ account in Banco Delta Asia, a bank in the Chinese enclave of Macao which was hit with US-led sanctions in 2005 for allegedly acting as a clearing house for illicit North Korean financial dealings.
UNDP officials told the Senate panel that they had no knowledge of such a connection at the time the payments were made, an extensive probe report said.
UNDP said in a statement at the hearing Thursday that when the State Department alerted the agency that Chinese entity Zang Lok, which received the payments, had ties to a North Korean group with links to Pyongyang's armaments program, UNDP immediately agreed to cease doing business with the entity.
The Senate probe also found that in 2002, Pyongyang used its relationship with the United Nations to execute deceptive transactions by moving 2.72 million dollars of its own funds to North Korean diplomatic missions abroad through a UNDP-linked account.
North Korean officials interviewed in the probe said their foreign affairs ministry used the UNDP-related accounts as a secure channel for transferring its own funds, apparently because it was less likely to incur international scrutiny and be frozen, Levin said.
North Korea has been under international scrutiny for years over its nuclear weapons program as well as other reported illicit activities.
Some media reports had suggested that the UNDP might have supplied more than 100 million dollars in hard currency to North Korea.
The UNDP suspended operations in North Korea in March 2007 and withdrew from the impoverished country a month later after Pyongyang refused to allow the agency to impose tighter controls on its activities.
UNDP told the probe team that the 100 million dollar figure was impossible since the agency's total expenditure during the 1995-2005 period in North Korea did not exceed about 33.5 million dollars, of which only about 400,000 dollars was transferred to Pyongyang's account for use on development projects.
The probe team is unable to confirm these estimates through its own analysis since key financial records remained in Pyongyang, Levin said.
A UNDP commissioned external audit, led by former Hungarian prime minister Miklos Nemeth, is now underway and a final report was expected in March.
There appears to be little reason to believe that the figure of upward of 100 million dollars that appeared in the press will be sustained, Levin said.