Bank's links to North Korea go back decades
The Ernst and Young report into allegations against Macau's Banco Delta Asia provides a rare window into the bank's three decades of links with North Korea.
The document describes Banco Delta chiefs visiting gold mines in North Korea as part of its role in trading bullion through Hong Kong.
It also outlines an extensive banking business involving term deposits, trade financing and cash transactions connecting North Korean banks, state companies and trading firms linked to Pyongyang.
The report was instigated by the Macau government after US Treasury Department warnings in September 2005 that Banco Delta was a 'willing pawn' in North Korean state crime. Reviewing three years and eight months of operations until the department's September announcement, it clears Banco Delta of money laundering allegations but warns of a string of management and reporting inadequacies and oversight.
The bank is citing the report as evidence in its bid to overturn a move by the department this week to formally blacklist Banco Delta from the US financial system.
The report outlines a US$120 million trade in North Korean gold and silver over the period. Six North Korean firms moved 9.1 tonnes of ingots stamped 'Central Bank of North Korea' to Macau by hand, sometimes flying them in direct.
Effectively a storage warehouse, the gold was hand carried to Banco Delta's Hong Kong subsidiary, Delta Asia Credit, which on-sold the ingots to a German bullion trader. The transactions were made through US dollar accounts.
'Banco Delta appears to handle a material percentage of North Korea's gold sales,' the report says.
It notes one source describing how trading firms would barter with North Korean firms, needing to sell the bars to obtain foreign exchange.
Warning of insufficient 'know your customer' research into the firms involved in the trade and the commercial basis behind the gold sales, the report notes responses from the bank that the gold purchased was North Korean.
Other parts of the report detail term-deposit activity with North Korean concerns totalling more than HK$1 billion over the period.
The report also notes that Banco Delta's North Korean business accounted for more than 7 per cent of its revenues and 22 per cent of its turnover during the same period.
Banco Delta is a private, family owned operation. Its main shareholder is Stanley Au, a CPPCC member and one-time candidate for Macau chief executive. The bank is currently being run by an administrative committee appointed by the Macau government after the US Treasury warnings.