The standard US government position on Banco Delta Asia (BDA), explained almost daily by the US State Department’s spokesperson, is that “the whole issue related to BDA [is] a lot more complicated than anybody could have possibly anticipated. The rules, regulations and traditional behaviors in the international financial system make this sort of resolution very complicated.” Ultimately, the matter “is one between North Korea and its bankers.”
This is incorrect in two respects. First, until the US stepped in, the DPRK (North Korea) had no apparent trouble with its bankers. Second, now that trouble exists, BDA has been willing for quite some time to transmit DPRK-related funds to any other bank willing to accept them. But any bank accepting those funds risks incurring Washington’s wrath. Thus, the last portion of the above statement should more accurately say: “It is a matter between the US government and banks willing but too afraid to do business with North Korea.”
The BDA affair is essentially a political matter that concerns the DPRK and the United States (and perhaps China). It is not a question of one bad bank. Banks, however, are conservative, risk-averse bodies. Washington turned these qualities to its advantage to meet the political objective of isolating the DPRK from the international financial community. In December 2005, long before Washington officially decided to blacklist BDA, the US Treasury Department explained what kind of risk averse behavior it expected from the world’s banks with respect to the DPRK: the taking of “reasonable steps to guard against the abuse of their financial services by North Korea.”
BDA is “complicated” for the State Department for the reason that it does not have the legal power to end the bank’s blacklisting. The Treasury Department has that power. The blacklisting of BDA came about through Treasury’s imposition of a regulation following a period of public notice and comment that set the table for an 18-month US government investigation of the Macau bank, whose results remain secret. If that regulation were lifted, DPRK funds on deposit at BDA or any other bank could once again circulate freely through the global banking system. More importantly, the Six Party process that has ground to a halt over the BDA issue could resume and contribute toward the easing of tensions in Northeast Asia. Treasury, however, remains unwilling to withdraw the regulation.