Macau
getting image makeover
As Reported
by The Seattle Times
MACAU
— For decades, this former Portuguese colony was renowned
as the favorite haunt of counterfeiters, drug runners and spies,
a kind of real-life "Casablanca" whose cobblestone
sidewalks and smoke-filled baccarat parlors probably hatched
more intrigues than any script.
Banks here
handled millions of dollars on behalf of North Korea's isolated
communist government, which long has been accused by the United
States of selling illegal drugs to raise hard currency. The
nation's founder, Kim Il Sung, and his son, current leader Kim
Jong Il, allegedly kept their ill-gotten gains in Macau. And
a North Korean terrorist confessed to plotting the 1987 bombing
of a South Korean airliner from a hotel here overlooking the
sparkling waters of the South China Sea.
But now
the welcome mat has been rolled up, and the North Koreans, who
didn't have many friends to begin with, find themselves distinctly
unwelcome in this autonomously governed Chinese territory.
In February,
Macau's banking regulators froze $25 million worth of North
Korean accounts in the Banco Delta Asia, a bank the Treasury
Department had accused in September of helping the North Korean
regime launder money and distribute counterfeit U.S. currency.
A North
Korean company, Jokwang Trading, long believed to be a front
for illicit activities, closed its headquarters on the fifth
floor of an office building near the bank. Most of its personnel
have relocated to Zhuhai, just across the border into the Chinese
mainland, according to business sources here.
"You
used to see the North Koreans around here all the time with
their Kim Il Sung badges, but suddenly they're gone," said
Seok Yeong Chong, a South Korean businessman living here. He
says their numbers have dropped from more than 100, to only
a few. "They gave the Macau government too much of a headache."
Businesspeople
here say the North Korean presence here became a liability at
a sensitive time. The Pyongyang regime is more unpopular than
ever internationally because of its pursuit of nuclear weapons.
At the same time, China is trying to develop Macau into a gambling
destination to rival Las Vegas.
After Macau
reverted to Chinese control in 1999, the Chinese government
busted the casino monopoly that had been controlled by billionaire
Stanley Ho, a long-standing friend of the North Korean regime
and the owner of a casino in Pyongyang.
The first
U.S.-owned casino, the Sands Macau, opened in 2004, and a $1.2
billion casino operated by Steve Wynn is scheduled for a September
opening. Even Stanley Ho's family (he has passed many of his
casino interests to his daughter, Pansy) has struck a deal with
MGM Mirage for another new casino.
"Today
people here want to do business with the Americans, not the
North Koreans," said Jose Rocha Dinis, director of the
Jornal Tribunal de Macau, a Portuguese-language newspaper. "When
they are seeking investment from the outside, they can't let
the North Koreans get in the way."
There is
still a cloak-and-dagger feeling to Macau, an hour from Hong
Kong by high-speed ferry. But Americans are bringing with them
not only Las Vegas glitz but more modern notions about transparency
and accounting.
"Macau
had to clean up its act," says David Asher, a former State
Department official, who was one of the architects of the action
against the Macau bank. "There are $5 billion in annual
gaming revenues at stake. They have to work with the United
States."
The freezing
of the $25 million in the Banco Delta Asia has been a particularly
big blow for a regime scraping by for lack of hard currency.
North Korean banks kept large sums of money in the Macau bank.
Now, with those accounts suspended and other banks frightened
off by the Treasury Department action, North Korea has been
largely cut off from international trade.
"The
impact is severe," said Nigel Cowie, a British banker based
in Pyongyang who is general manager of the Daedong Credit Bank,
serving mostly the tiny foreign community in the North Korean
capital.
Cowie said
that North Korea, because it has no credit and a weak banking
system, deals almost exclusively in cash — which might
have created the appearance of money laundering when it was
not.
"I
can't speak for what everybody was doing, but I can say that
in our case, a lot of legitimate business has been hurt,"
Cowie said.
The North
Koreans blame the United States for their woes in Macau. A senior
North Korean diplomat, Li Gun, visited Washington last month
on what appears to have been a futile attempt to get the Macau
freeze lifted. He left angry, declaring that North Korea would
boycott negotiations on its nuclear program until the banking
situation was resolved.
"Under
this continuing U.S. pressure, we can't go back to the negotiation
table," Li said.
For their
part, U.S. officials protest loudly that the crackdown in Macau
is unrelated to the prolonged struggle over nuclear weapons.
In a news release issued in response to the North Koreans' accusations,
the Treasury Department said that it wished to clarify that
its actions against Banco Delta Asia were "intended to
protect American institutions and not serve as sanctions against
North Korea."
Denials
notwithstanding, the Bush administration has been angling for
ways to apply pressure without seeking full-fledged U.N. sanctions
since North Korea pulled out of the Nuclear Non-Proliferation
Treaty in 2002. Sanctions almost certainly would be opposed
by its old Communist allies in China and Russia. Until now,
China has staunchly refused to apply any pressure whatsoever
to North Korea.
What's happening
in Macau has been the result of a delicate diplomatic dance
among the United States, China and the government of Macau,
designated, like Hong Kong, a special autonomous region.
U.S. officials
had been complaining to local authorities about North Korean
activities in Macau and getting little response, according to
people involved with the case. Then last year, the Treasury
Department decided to unleash the USA Patriot Act.
In September,
the Treasury Department published a notice designating the Macau-based
Banco Delta Asia as a "primary money-laundering concern"
under a section of the post-Sept. 11 law that is designed to
cut off money to groups that present a security risk.
Panicky
banking customers lined up in front of the silver-facade headquarters
in downtown Macau. In a matter of six days, they had withdrawn
$133 million out of $390 million in deposits. The Macau government
intervened and took control of the bank.
However,
Macau's financial authorities have reacted very aggressively
since. They have drawn up new money-laundering laws. They have
frozen without interest 50 accounts belonging to North Korean
banks, trading companies and individuals.
According
to a letter sent this year by their lawyers to the Treasury
Department, there is likely to be a criminal investigation into
the bank and the money will be confiscated if Macau courts determine
the accounts were involved in illegal activities.
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