MACAU -- For decades, this former Portuguese colony was renowned as a haunt of counterfeiters, drug runners and spies.
Banks here handled millions of dollars on behalf of North Korea's government, which long has been accused by the United States of selling illegal drugs to raise hard currency. The nation's founder, Kim Il Sung, and his son, current leader Kim Jong Il, allegedly kept their ill-gotten gains in Macau.
But now the welcome mat has been rolled up and the North Koreans, who didn't have many friends to begin with, find themselves distinctly unwelcome in this autonomously governed Chinese territory.
In February, Macau's banking regulators froze $25 million in North Korean accounts in the Banco Delta Asia, a bank the U.S. Treasury Department had accused in September of helping the North Korean regime launder money and distribute counterfeit U.S. currency.
A North Korean company, Jokwang Trading Co., long believed to be a front for illicit activities, closed its headquarters in an office building near the bank. Most of its personnel have relocated to Zhuhai, just across the border in the Chinese mainland, according to business sources here.
Businesspeople here say the North Korean presence became a liability at a sensitive time. The Pyongyang regime is more unpopular than ever internationally because of its pursuit of nuclear weapons. At the same time, China is trying to develop Macau into a gambling destination to rival Las Vegas.
After Macau reverted to Chinese control in 1999, the Chinese government busted the casino monopoly that had been controlled by billionaire Stanley Ho, a long-standing friend of North Korea and the owner of a casino in Pyongyang.
The first U.S.-owned casino, the Sands Macau, opened in 2004, and a $1.2 billion casino operated by Steve Wynn is scheduled for a September opening. Stanley Ho's family (he passed many of his casino interests to his daughter, Pansy) has struck a deal with MGM Mirage for another new casino.
The freezing of the $25 million in the Banco Delta Asia has been a particularly big blow for a regime scraping by for lack of hard currency. North Korean banks kept large sums of money in the Macau bank. Now, with those accounts suspended and other banks frightened off by the Treasury action, North Korea has been largely cut off from international trade.
"The impact is severe," said Nigel Cowie, a British banker based in Pyongyang who is general manager of the Daedong Credit Bank, serving mostly the tiny foreign community in the North Korean capital.
In a telephone interview from Pyongyang, Cowie said that North Korea, because it has no credit and a weak banking system, deals almost exclusively in cash - which might have created the appearance of money laundering when it was not.
"I can't speak for what everybody was doing, but I can say that in our case, a lot of legitimate business has been hurt," Cowie said.
The North Koreans blame the United States for their woes in Macau. A senior North Korean diplomat, Li Gun, visited Washington last month on what appears to have been a futile attempt to get the Macau freeze lifted. He left angry, declaring that North Korea would boycott negotiations on its nuclear program until the banking situation was resolved.
U.S. officials had been complaining to local authorities about North Korean activities in Macau and getting little response, according to people involved with the case. In September, the Treasury Department published a notice designating the Macau-based Banco Delta Asia as a "primary money laundering concern" under a section of the Patriot Act designed to cut off funding to groups that present a security risk.
Within six days, panicky banking customers had withdrawn $133 million out of $390 million in deposits. The Macau government intervened and took control of the bank.
Barbara Demick writes for the Los Angeles Times.