U.S. and Macau (2006)

The Department of the Treasury

September 12, 2006
HP-93

Testimony of Daniel Glaser,
Deputy Assistant Secretary
(Terrorist Financing and Financial Crimes)
U.S. Department of the Treasury
Before the Senate Committee on Banking, Housing and Urban Affairs

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B. Using Financial Authorities to Combat WMD proliferation

Attacking WMD Proliferators Through the Use of Targeted Financial Sanctions

In addition to the eight entities named in the annex of E.O. 13382, the Treasury Department has designated 19 entities and one individual as WMD proliferators. These actions described in greater detail in Director Szubin's testimony, have exposed some of the front companies, suppliers, financial institutions and individuals that facilitate their WMD proliferation, including:

Sanam Industrial Group and Ya Mahdi Industries Group, both subordinates to Iran's Aerospace Industries Organization (AIO), which manages and coordinates Iran's missile program and oversees all of Iran's missile industries.
Chinese companies Beijing Alite Technologies Company, Ltd. (ALCO), LIMMT Economic and Trade Company, Ltd., China Great Wall Industry Corporation (CGWIC), and China National Precision Machinery Import/Export Corporation (CPMIEC), as well as a U.S. office of CGWIC located in California. These companies supplied Iran's military and Iranian proliferators with missile-related and dual-use components.
Swiss company Kohas AG, which acted as a technology broker in Europe for the North Korean military and procured goods with weapons-related applications, and its president, Swiss national Jakob Steiger.

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C. State Sponsors of Terrorism

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Iran

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Moreover, we have begun to engage with the international financial community to discuss the risks of doing business with Iran. In fact, Treasury Under Secretary Stuart Levey is engaged in precisely such consultations in Europe this week. We are already seeing private institutions – particularly those in the financial community – responding to Iran's provocative behavior and reassessing their relationships with Iran. Earlier this year, the Swiss bank UBS cut off all dealings with Iran. HSBC and Credit Suisse have also limited their exposure to Iranian business. According to the banks, these were business decisions, pure and simple – handling Iran's accounts was no longer good business. As further evidence of the change in tide, a number of foreign banks are refusing to issue new letters of credit to Iranian businesses. And earlier this year, the OECD raised the risk rating of Iran, reflecting this shift in perceptions and sending a message to those institutions that have not yet reconsidered their stance.

North Korea

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Second, we took a regulatory action to protect our financial system against Banco Delta Asia (BDA), a Macau-based bank that was handling North Korea's dirty business without any pretense of due diligence or control. BDA was a willing partner, actively helping North Korean agents conduct surreptitious, multimillion dollar cash deposits and withdrawals without questioning the basis of these transactions. Indeed, BDA officials had negotiated a lower standard of due diligence with their North Korean clients. As I previously discussed, using our Section 311 authorities, Treasury designated Banco Delta Asia as a primary money laundering concern. This action has had a profound effect, not only in protecting the U.S. financial system from abuse, but also in notifying financial institutions and jurisdictions globally of an illicit finance risk.

As a result of these actions and public revelations about North Korea's conduct, responsible foreign jurisdictions and institutions have taken steps to ensure that North Korean entities engaged in illicit conduct are not receiving financial services. Press reports indicate that some two dozen financial institutions across the globe have voluntarily cut back or terminated their business with North Korea, notably including institutions in China, Japan, Vietnam, Mongolia, and Singapore. The result of these voluntary actions is that it is becoming very difficult for the Kim Jong-Il regime to benefit from its criminal conduct. UN Security Council Resolution 1695 has accelerated the trend. It requires all countries to prevent the transfer of financial resources in relation to North Korea's WMD and missile programs.

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