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US official to tackle bank row

The US is scrambling a top Treasury official to China to unblock a banking row that triggered North Korea's walkout from nuclear disarmament talks, officials said on Friday.

"The policy and diplomatic issues have been solved -- this is now down to implementation," Daniel Glaser, the deputy assistant secretary for terrorist financing and financial crimes, said ahead of his weekend trip to Beijing.

Battling to get the nuclear talks back on track, diplomats are trying to find a bank outside China to receive North Korean funds that lie frozen in a bank in Macau, South Korea's envoy said.

The US on Monday said it had cleared the way for the release of the US$25 million from Banco Delta Asia (BDA) in Macau.

But the designated recipient, the Bank of China, has refused to accept the money for fear the transaction may hurt its credit rating, said Chun Young-woo, Seoul's chief nuclear negotiator.

"The Macanese and Chinese have made clear that they want to ensure implementation of the agreement is consistent with their own laws and with their international obligations," Glaser said.

"We are bringing Treasury expertise to help the Macanese and Chinese wade through some of these implementation issues," said Glaser, who is due to arrive in Beijing today.

The latest round of six-party disarmament talks -- grouping the two Koreas, the US, China, Japan and Russia -- ended abruptly in Beijing on Thursday after Pyongyang refused to negotiate until it receives the cash.

In late 2005, the US effectively blacklisted BDA on suspicions it was handling the proceeds of North Korean counterfeiting and money-laundering, prompting Macau authorities to freeze the North's accounts there.

The Treasury Department also persuaded banks in Singapore, Vietnam and elsewhere to shut down North Korean accounts, effectively shutting the communist state out of much of the international banking system.

Envoys to the six-party talks came together on Monday for their first meeting since a Feb. 13 accord that set a timetable for the North to begin disarming.

The talks were launched in 2003 aimed at ending the North's nuclear weapons ambitions. But they have been plagued by disputes, amid which Pyongyang shocked the world by conducting its first atomic test in October.

With three weeks to go before North Korea is due to close its main nuclear reactor at Yongbyon and allow UN inspectors back into the country, US envoy Christopher Hill insisted on Friday the deadline could be met.

"I don't think there is a broader point here about whether they are committed to the nuclear deal. I think they are. Throughout the week, they reiterated that," Hill said in Beijing.

In exchange for shutting the reactor down, North Korea is to receive 50,000 tonnes of heavy fuel for energy use, eventually rising to one million tonnes or equivalent energy aid if it completely dismantles all its nuclear programs.

One concern raised was how money the US has claimed for so long was contaminated by money laundering and counterfeiting could suddenly be cleared.

With that credit issue in mind, the South Korean envoy said officials were now trying to find a bank outside China to receive the funds.

"It seemed possible that the money will go to a bank in a third country ... that way, a solution is being worked out," Chun was quoted as saying.
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