Squeezing the Norks

Newsweek:

Swiss businessman and Asian-art collector Jakob Steiger never figured in headlines before last month. But his low profile ended with a bang when the U.S. Treasury announced that it was imposing sanctions against his firm, Kohas AG, for acting as a "technology broker" for the North Korean military. The Bush administration claims that the company, based in the university town of Fribourg, is half-owned by a North Korean firm that was named on a previous U.S. blacklist of entities suspected of involvement in "the proliferation of goods with weapons-related applications."

On its own the action against Kohas might seem like a sideshow in the much larger U.S. effort to eliminate Kim Jong Il's nuclear-weapons program. But in fact, the move is just the latest twist in an intense American offensive against North Korea—one that experts believe is finally beginning to squeeze the regime. Numerous U.S. government agencies, including the FBI, Treasury, State Department and CIA, have been working for three years to curtail Pyongyang's vast network of black-market activities—from the sale of missile technology to heroin trafficking to the manufacture of fake cigarettes and bogus Viagra—and to cut off the financial conduits by which the proceeds are laundered. David Asher, who ran the Bush administration's interagency effort, says that criminal North Korean businesses were targeted as part of "the largest undercover investigation against Asian organized crime in a decade." Washington has raised the possibility of sanctions against financial institutions that deal with Pyongyang, and has arrested or indicted dozens of figures linked to Chinese triads and the Irish Republican Army, among other groups.

... Washington officials believe that this campaign of "targeted sanctions" is proving very effective. "From what we've seen, this has been affecting the North Korean elite in particular," says Peter Beck, a Seoul-based analyst with the International Crisis Group (ICG). Indeed, according to an unclassified U.S. government document obtained by NEWSWEEK, during Kim Jong Il's January trip to China, he reportedly told Chinese President Hu Jintao that "his regime might collapse under the weight of the U.S. crackdown on his financial dealings."

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The U.S. decision to ratchet up the pressure on North Korea's illicit activities was taken shortly after George W. Bush was first elected. Asher, a former banker and State Department official, started leading what became known as the North Korea Illicit Activities Initiative in late 2001, and it immediately conducted a study of the North Korean economy. Investigators found that the country's official revenues couldn't cover a "black hole" of about $500 million—equivalent to half the country's annual exports. Pyongyang was plugging that shortfall in its balance sheet, the experts concluded, through a broad network of criminal business dealings.

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... On Sept. 15 the Treasury Department issued a blandly worded announcement designating a bank in the Chinese gambling haven of Macau as a "primary money laundering concern" for North Korea....

Nervous depositors immediately staged a run on BDA, withdrawing nearly 40 percent of its deposits within a week. In a desperate attempt to salvage its reputation, BDA announced it was cutting all ties with Pyongyang and froze nearly 50 accounts linked with North Korean companies and institutions—including nine belonging to presumably high-ranking members of the Pyongyang government. A U.S. official tells NEWSWEEK that at least some of the names on the frozen accounts, both corporate and individual, were not the real names of the assets' owners. The official says there was some reason to believe that those nine accounts handled personal business for Kim Jong Il or members of his immediate circle....

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There is much more.