Why did the Fed help North Korea launder money?

Ron Paul: All we have to say is, what do they have to hide?

When Ron Paul's bill to audit the Federal Reserve was blocked through a parliamentary procedure, some people had to ask - what is so wrong with auditing the Federal Reserve?
The question reminded me of something. So I dug through my old writing and found this little gem that has never been fully explained to me.

(Bloomberg) -- Last week the New York Federal Reserve made what may go down as the most misguided move in the history of the Federal Reserve system. They laundered money for North Korea.
Here is the back story.

Last February, North Korea approved a new version of the Clinton administration's framework for shutting its renegade nuclear reactor program. As part of the deal, the U.S. agreed to unfreeze $25 million at Banco Delta Asia, a Macao bank that has been a primary conduit to the outside world for North Korea.

This bank was formally determined by the U.S. Treasury to be a ``primary money laundering concern.'' The Macao bank denies any wrongdoing. The U.S. doesn't allow such banks to do business in the U.S. Accordingly, reputable banks from Singapore to Russia won't do business with Banco Delta Asia. Even China refuses to do deal with the bank.

This U.S. action significantly impeded the ability of North Korea to wash illicit funds through the world financial system. If it sells a missile to Iran, it must take the payment in cash. If it deposits counterfeit money in its account, there is no easy way to get the money into the world economy.

The U.S. committed to unfreeze the funds last February, but didn't agree to let this pariah state resume its allegedly criminal banking activities. In other words, if North Korea wanted to, it could go to the bank, and withdraw the money physically and fly it back to North Korea.

Wired Home

North Korea didn't want to do that, however.

The country then reneged (as it always seems to), and said that it needed the money to be wired home, something the U.S. never agreed to.

North Korea clearly added this new condition because it hoped to reenter the world financial system. No bank would transfer money from Banco Delta Asia without express approval from the U.S. Treasury. If that permission was given, the prohibition was broken, signaling to other banks around the world that they could resume business with the rogue state.

So the U.S. State Department, ever the naive optimist with regard to North Korea, got the clever idea that it could ask the New York Fed Bank to be the conduit for the North Korean funds, since it might not be covered by the U.S. law prohibiting commercial entities from doing business with money launderers.

Avoiding Politics

Historically, the Fed has tried to avoid such complicated political entanglements, but incredibly, it agreed to help in this case.

On June 14th, in a web of intrigue worthy of a James Bond movie, the New York Fed wired the North Korean money to the Russian central bank, which then transferred it to a dormant North Korean account in a Russian bank.

Many in the foreign policy community are incensed that the State Department engineered this concession to the North Koreans. Since the New York Fed has done business with Kim Jong Il's regime, directly, or indirectly, one can expect other banks around the world to line up to do so again as well. After all, the Fed has given the North Koreans the financial equivalent of the Good Housekeeping Seal of Approval.

I've seen no resolution to this audit. I have no idea what the results were, or if there were any results.
But it certainly seems like something worth covering up, doesn't it? And what other shady dealings does the Fed have to cover up?

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very good question

but they are doing it. In this post is a video where I titled it the war of the audit but they are clearly doing everything to block an audit and it's probably only Populist outrage that such a bill has a chance of getting passed.

If they were laundering money for N. Korea, what other kind of financial intrigue is going on and if that's true, will we hear the bill (if passed) is a "threat to national security" to find out where $2 trillion dollars has gone?

Ya know me, I could care less about some secret operation to kill Bin Laden that Congress didn't find out about...I mean I'm more fine with secret weirdness than most on the left but $2 trillion bucks is a whole other ball game.

More information

I kept researching the topic and found a couple applicable articles. I thought I would share them.

Remember how North Korea was counterfeiting dollars?

Two years ago, as he was ratcheting up a campaign to isolate and cripple North Korea's dictatorship financially, President Bush accused the communist regime there of printing phony U.S. currency.
However, a 10-month McClatchy investigation on three continents has found that the evidence to support Bush's charges against North Korea is uncertain at best and that the claims of the North Korean defectors cited in news accounts are dubious and perhaps bogus. One key law enforcement agency, the Swiss federal criminal police, has publicly questioned whether North Korea is even capable of producing "supernotes," counterfeit $100 bills that are nearly perfect except for some practically invisible additions.

Many of those alleged counterfeit notes wound up in Banco Delta Asia, the bank in question. Thus was this bank actually laundering money?

The second article is also informative for a entirely different reason.

A tiny bank in Macau that was at the center of stalled talks over North Korea’s nuclear program will be quietly returned to its former owner Saturday, a move that seems to clear him of charges that he helped Pyongyang launder counterfeit U.S. cash.

In a one-paragraph statement, the government in Macau, a former Portuguese colony that's a burgeoning gambling haven, said Banco Delta Asia had shown “remarkable improvement” during two years of government oversight.
It said that Stanley Au, a former gold dealer who ceded control of the bank in September 2005, would be put in charge of the bank again Saturday.

The bank issued a statement quoting Au saying that its return “reflected the exoneration of the bank and clearance of its name as well as its staff from taking part in any illicit activities.”
The Bush administration continues to list the bank as a “primary money laundering concern,” and the Treasury Department didn't immediately respond Friday to questions about why concerns over the bank’s alleged past activities may have dissipated.

When the Treasury Department first fingered the bank in 2005, Macau authorities froze some $25 million in North Korean-linked money in some 50 accounts.

In a complex, U.S.-brokered deal in June that was intended to get the nuclear talks back on track, the frozen assets reportedly were transferred to the New York Federal Reserve, then to the Russian central bank and finally to a private Russian bank where North Korea has an account.

At this point the story appears to be dead, but extremely suspicious.
I'm not sure what to do with this information, but I get the feeling that it might be useful to hand onto.

ya know who will eat up this post

Zero hedge. They go places where we don't care to tread. I also noticed they have (tried) to implement Drupal (what this site is based on). I haven't created an account to know what their set up is, but you might go do a comment "check this story out" link on their site and see if they run with it. ;)