U.S. and Macau (2008)

The Department of the Treasury

April 1, 2008
HP-898

Under Secretary for Terrorism and Financial Intelligence Stuart Levey
Testimony Before the Senate Committee on Finance

Washington -- Chairman Baucus, Ranking Member Grassley, and distinguished members of the Committee, thank you for the opportunity to speak with you today about the work of the Treasury Department's Office of Terrorism and Financial Intelligence (TFI). I want to thank this Committee and the others that oversee TFI for the continued support and guidance we have received. Today, I want to brief you on the progress we have made over the past four years and also talk about some of the challenges we face moving forward.

THE OFFICE OF TERRORISM AND FINANCIAL INTELLIGENCE AND THE TREASURY DEPARTMENT'S ROLE IN PROTECTING NATIONAL SECURITY

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A. COMBATING THREATS WITH TARGETED FINANCIAL MEASURES

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3. Combating the Illicit Financial Conduct of Rogue Regimes

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North Korea

Confronted with North Korean conduct ranging from WMD and missile proliferation-related activities to the counterfeiting of U.S currency and other illicit financial behavior, the Treasury Department took two important public actions. First, we targeted a number of North Korean proliferation firms under E.O. 13382. Second, we acted under Section 311 of the USA PATRIOT Act to protect our financial system from abuse by Banco Delta Asia, a Macau-based bank that, among other things, knowingly allowed its North Korean clients to use the bank to facilitate illicit conduct and engage in deceptive financial practices.

Much of the real impact of these actions came from the information we made public in conjunction with the actions and the information we shared with governments and banks around the world. The private sector's reaction was dramatic. Since the information pointed to the North Korean regime's involvement in the illicit conduct, many of the world's private financial institutions terminated their business relationships not only with designated entities, but also with North Korean clients altogether. Banks in China, Japan, Vietnam, Mongolia, Singapore and across Europe decided that the risks associated with this business far outweighed any benefit. The result has been North Korea's virtual isolation from the global financial system. That, in turn, put enormous pressure on the regime -- even the most reclusive government depends on access to the international financial system. This effort was valuable both in securing the integrity of the international financial system and in providing the State Department with leverage in its diplomacy with North Korea.

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