The North refuses to honour a six-nation February disarmament pact until it receives 25 million dollars which had been frozen in Banco Delta Asia (BDA) since 2005 following the US blacklist.

Yonhap news agency, quoting an unidentified South Korean government official, said the US, Chinese and South Korean foreign ministers had held phone conversations about the latest proposal regarding BDA.

It said Washington suggested taking BDA off a US Treasury blacklist on condition its top executives resigned to take responsibility for allegedly ignoring the North's reported money laundering and counterfeiting.

The US also wants China to play an increased role in settling the financial dispute, according to the official.

South Korea's Foreign Minister Song Min-Soon and US Secretary of State Condoleezza Rice held telephone talks Monday and Tuesday, Yonhap quoted the official as saying.

They agreed quickly to find a solution to the financial dispute in a way "that can satisfy all parties involved," the official said.

Rice also had phone conversations with Chinese Foreign Minister Yang Jiechi on the issue, the official was quoted saying.

A foreign ministry spokesman said there was a conversation between Song and Rice but could not confirm the rest of the Yonhap report.

Washington said the North's BDA accounts were unfrozen in March but the North has had problems finding a foreign bank to transfer money seen as tainted. It wishes to make a transfer, rather than just withdrawing the cash, to ensure it has regained access to the international banking system.

Yonhap quoted diplomatic sources as saying China was likely to respond to the latest US proposals during the current G-8 summit in Germany, pushing the five other countries involved in the talks to achieve a breakthrough in the banking dispute by mid-June.

BDA chairman Stanley Au has petitioned against the US Treasury's blacklisting of his bank, and has strongly denied undertaking any illegitimate transactions on behalf of North Korea.

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