An Ernst and Young report into Macau's Banco Delta Asia provides a rare window into the bank's three decades of North Korea links.
It describes Banco Delta chiefs visiting gold mines in North Korea as part of 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 2005 that the bank was a 'willing pawn' in North Korean state crime. Reviewing more than three years of operations, it clears the bank 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 this week to overturn a move by the department to formally blacklist it 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.
The gold was hand carried to the bank'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. The report says the bank handled 'a material percentage of North Korea's gold sales', and notes one source describing how trading firms would barter with North Korean firms needing foreign exchange.
Warning of insufficient 'know your customer' research into the North Korean firms involved and the commercial basis behind the gold sales, the report notes responses from the bank that the gold was produced by North Korea.
The report details term-deposit activity with North Korean concerns totalling more than HK$1 billion over the period. It also notes that Banco Delta's North Korean business accounted for more than 7 per cent of its revenue and 22 per cent of its turnover during the same period.