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UN Agency Provided Millions In Hard Currency To North Korea January 19, 2007

Posted by notapundit in World News.
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UNITED NATIONS (AP)–The U.S. accused the U.N. development agency of funneling millions of dollars in hard currency to North Korea with little assurance that leader Kim Jong Il used the money to help his people instead of diverting it to other activities including nuclear weapons, according to U.S. officials and letters obtained Friday.

U.S. deputy ambassador Mark Wallace charged that the agency’s program in North Korea operated “in blatant violation of U.N. rules” for years. He demanded an immediate external audit of the program going back to at least 1998 that would focus on U.S. concerns that Pyongyang converted U.N. development funds “to its own illicit purposes.”

The U.N. Development Program, known as UNDP, said the use of hard currency for its operations in North Korea “in difficult circumstances” was approved by its executive board and it would welcome an external audit. Following the U.N. imposition of sanctions against North Korea in October for conducting a nuclear test, UNDP said it was taking measures to prevent “unintended consequences” of its activities.

UNDP Associate Administrator Ad Melkert disputed U.S. allegations that the agency violated U.N. rules, insisting it followed UNDP financial rules. Nonetheless, he said that by March 1, all hard currency payments to the government, national partners, local staff and suppliers would be replaced by payments in North Korean won – but he stressed that the only place to get local currency was from the country’s central bank.

Neither the U.S. nor UNDP would give a figure of how much money was involved, but Melkert responded to a question saying it wasn’t hundreds of millions of dollars. In a Jan. 5 letter to Wallace, he said, from 2001 to 2005, UNDP spent an average of $2.3 million annually on both program and administration, including approximately $100,000 annually on local salaries.

U.N. Secretary General Ban Ki-moon, who took over as U.N. chief on Jan. 1, responded to the U.S. concerns about UNDP’s program in North Korea by calling for an urgent “external inquiry” into all activities of U.N. funds and programs around the globe, U.N. spokeswoman Michele Montas said. Many of the agencies – like UNDP – operate semi-independently and have their own boards.

Montas said the external audits that Ban called for will take time to conduct, but she stressed that they will cover all funds and programs including the U.N. Children’s Fund, the U.N. refugee agency, the World Food Program and the World Health Organization.

An exchange of letters between Wallace and senior UNDP officials goes back to November and was first reported by The Wall Street Journal.

U.S. officials said the U.S. first received indications that there might be some irregularities in UNDP’s North Korea program in the second half of 2006, and raised concerns that the cash might be going to Pyongyang’s nuclear program.

A Jan. 4 letter from Wallace to UNDP Administrator Kemal Dervis raised “U.S. concerns that UNDP has transferred hard currency directly to the regime of Kim John Il.”

He pressed UNDP for copies of internal audits – which the program considers management tools and doesn’t release to governments, though other U.N. agencies do. After further correspondence, Wallace and a U.S. team were allowed to look at audits for 1999, 2001 and 2004 on Jan. 11 but not to photocopy them.

Wallace’s harshest letter, dated Jan. 16, said the U.S. concluded from the audits that UNDP’s local staff is dominated by government employees of North Korea – officially known as the Democratic People’s Republic of North Korea, or DPRK – who have managed the agency’s programs and finances in violation of UNDP rules.

He cited three other violations of U.N. rules – the government’s insistence that UNDP pay cash to North Korean government suppliers, UNDP’s failure to oversee projects it funds in the country and its failure to conduct audit reviews of its programs.

“The UNDP program has laudable goals of providing assistance to the North Korean peoples,” said Wallace, who focuses on U.N. management issues. “Unfortunately, because of the actions of the DPRK government and the complicity of UNDP, at least since 1998, the UNDP DPRK program has been systematically perverted for the benefit of the Kim Jong Il regime – rather than the people of North Korea.”

Acting U.S. Ambassador Alejandro Wolff said the U.S. is still seeking answers and doesn’t know the extent of the problem, or how much money was involved.

“It simply boggles the imagination that they simply dole out cash without controls,” he said.

“The overriding concern is that we are providing funds to UNDP, as are other governments, to undertake certain specific activities in the development sphere, and if those funds are misdirected into other spheres, we want to know about it, and we want to put a stop to that,” Wolff said.

UNDP’s Melkert said the agency was operating in North Korea at the request of its board in an environment reminiscent of the Cold War 20 years ago, when many communist bloc countries selected staff employed by U.N. agencies which often operated under severe financial and travel restrictions. Those Cold War-era operations still prevail in North Korea today, he said.

“Around 1999, there were many concerns expressed by internal auditors,” Melkert told a news conference. “We’ve seen a gradual tendency of a diminishing number of issues brought to the attention of management by the (internal) auditors, but some very tough issues remain and those are the issues that we have addressed now.”

In addition to ending hard currency payments, he said, UNDP will discontinue government recruitment of national staff “and we will put the right monitoring and audits in place addressing the issue of national execution.”

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