Report: N. Korea Exploited U.N. Account

By Colum Lynch
Washington Post Staff Writer
Thursday, January 24, 2008

UNITED NATIONS, Jan. 23 -- In the months after President Bush's 2002 speech branding Iran, Iraq and North Korea as an "axis of evil," North Korean officials channeled at least $2.7 million through a bank account normally used to process United Nations development projects because of fears that the United States would block its ability to transfer money outside the country, according to a Senate subcommittee report.

The report supports U.S. assertions that the North Korean government routinely manipulated the U.N. Development Program to move cash around the world. But it stopped short of confirming reports that millions of dollars in U.N. funds were diverted to purchase properties in Europe and Canada.

"The North Korean government made a concerted effort to conceal the movement of its funds out of North Korea and into western financial institutions," according to the report by the Senate Permanent Subcommittee on Investigations. "North Korean officials explained to the subcommittee that they expected sanctions against their country would be tightened and were concerned their wire transfers would be barred."

The report, prepared by the staff of the subcommittee, found that UNDP's operations were plagued by "management and operational deficiencies" that rendered the agency "vulnerable to manipulation by North Korea." Its release comes on the eve of a Senate hearing Thursday on the UNDP's past North Korea operations.

The Senate report asserts that between April and September 2002, North Korea made nine wire transfers totaling $2.7 million from a U.N.-affiliated account at Pyongyang's Foreign Trade Bank to the Macau-based Banco Delta Asia. The funds were deposited in an account controlled by a Chinese company, International Finance Trade Joint Company, and then transferred to North Korean diplomatic missions in the United States and Europe.

U.S. officials said the Senate report confirmed their most serious concerns about a breakdown in UNDP's controls that aided the North Korean dictatorship in abusing international efforts to improve the lives of its people. But UNDP insisted that Wednesday's report "contains nothing" to substantiate persistent allegations that it transferred tens of millions of dollars to North Korea or that its funds were diverted to a clandestine North Korean nuclear or missile program.

"We are gratified that the staff report contains no suggestion that these allegations can be substantiated," said UNDP spokesman David Morrison.

The U.N. development agency, which employs more than 7,000 workers in 166 countries, had operated in North Korea since 1981. It shut down its North Korean operations in March 2007 after U.S. and Japanese criticisms about its practice of hiring government-appointed employees and paying their salaries directly to the North Korean government.

The Senate report said there was no way to verify whether the government skimmed a portion of salaries. It asserted that UNDP appears to have "unwittingly" transferred about $50,000 to a company that the United States has linked to a North Korean entity responsible for the sale of conventional arms and ballistic missiles.

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