Money Laundering—Banco Delta Asia

The US Department of the Treasury has accused the Macau-based Banco Delta Asia [hereinafter BDA] of money laundering, a charge that has sent ripples through that country’s financial system.^[1] According the Treasury Department, which designated BDA a “primary money laundering concern” under Section 311 of the USA PATRIOT Act,^[2] the bank “represents an unacceptable risk of money laundering and other financial crimes” and “has been a willing pawn for the North Korean government to engage in corrupt financial activities in Macau.”^[3] By late Saturday, the accusation had caused customers to withdraw roughly US$37.5 million from the bank.^[4]

The Treasury Department lists the following deficiencies which led to its designation:

• Banco Delta Asia has provided financial services for over 20 years to Democratic Peoples Republic of Korea (DPRK) government agencies and front companies. It continues to develop relationships with these account holders, which comprise a significant amount of Banco Delta Asia's business. Evidence exists that some of these agencies and front companies are engaged in illicit activities.
• Banco Delta Asia has tailored its services to the needs and demands of the DPRK with little oversight or control. The bank also handles the bulk of the DPRK's precious metal sales, and helps North Korean agents conduct surreptitious, multi-million dollar cash deposits and withdrawals.
• Banco Delta Asia's special relationship with the DPRK has specifically facilitated the criminal activities of North Korean government agencies and front companies. For example, sources show that senior officials in Banco Delta Asia are working with DPRK officials to accept large deposits of cash, including counterfeit U.S. currency, and agreeing to place that currency into circulation.
• One well-known North Korean front company that has been a client of Banco Delta Asia for over a decade has conducted numerous illegal activities, including distributing counterfeit currency and smuggling counterfeit tobacco products. In addition, the front company has also long been suspected of being involved in international drug trafficking. Moreover, Banco Delta Asia facilitated several multi-million dollar wire transfers connected with alleged criminal activity on behalf of another North Korean front company.
• In addition to facilitating illicit activities of the DPRK, investigations reveal that Banco Delta Asia has serviced a multi-million dollar account on behalf of a known international drug trafficker.^[5]

When the Treasury Department makes such a designation under Section 311, US financial institutions are required to take “special measures” against those designated institutions. The special measures “range from enhanced recordkeeping or reporting obligations to a requirement to terminate correspondent banking relationships with the designated entity.”^[6]

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[1] US Money Laundering Accusation Ignites Resentment in Macao, Asia Pulse via Yahoo!, Sept. 19, 2005, available here; see also Macau Bank’s Customers Withdraw, CNN.com, Sept. 19, 2005, available here;
[2] Codified at 31 U.S.C. § 5318A.
[3] US Department of the Treasury, Treasury Designates Banco Delta Asia as Primary Money Laundering Concern Under USA PATRIOT Act, Sept. 15, 2005, available here [hereinafter DoT].
[4] US Charge Shakes Environment for Macao’s Financial System, Asia Pulse via Yahoo!, Sept. 19, 2005, available here.
[5] DoT, supra note 2.
[6] Id; 31 U.S.C. § 5318A(b).