HK link to Pyongyang counterfeit US bills-report

HONG KONG, Feb 26 (Reuters) US authorities are set to seize more than US 2.67 million dollars from Hong Kong bank accounts linked to trade in North Korean counterfeit US notes and cigarette smuggling, the South China Morning Post reported today.

The money is frozen in three accounts belonging to an unemployed mainland migrant, Kwok Hiu Ha, at the Lai Chi Kok Road branch of Chiyu Banking, a subsidiary of Bank of China Hong Kong, according to US court documents obtained by the paper.

The funds are believed to be the first known link between Hong Kong's open banking system and what US authorities fear is a growing underground trade in high quality ''supernotes'', minted on North Korean state-run presses, the report said.

Officials at the US consulate in Hong Kong could not be reached for comment.

A Bank of China Hong Kong spokeswoman Clarina Man said the bank would not comment on individual clients, but added the bank complied with relevant laws and regulations.

The United States accuses North Korea of conducting illicit financial activities, including counterfeiting 100 dollars bills to help finance its nuclear arms programmes. US diplomatic pressure is intensifying over the trade -- one of the reasons cited for recent sanctions against Pyongyang, it said.

In September, Washington banned US institutions from doing business with Macau's Banco Delta Asia over allegations it helped launder North Korean funds from drug trafficking and counterfeit goods.

The United States and North Korea are locked in a standoff over Pyongyang's nuclear programmes, and North Korea has said it will not attend six-party talks hosted in China aimed at resolving the issue until US financial action against it stops.

North Korean diplomats are set to meet in early March with US officials who will brief them on why Washington imposed financial restrictions on Pyongyang.

The South China Morning Post reported US government sources said the Department of Justice would soon start legal action to seize the funds.

REUTERS PR BS1207