Congressmen, human rights activists, and a former ambassador are challenging the Federal Reserve Bank of New York’s plan to transfer $25 million in frozen funds to North Korea.

The plan puts on the spot Federal Reserve board members, some of whom are prominent New Yorkers, including the president of Columbia University, Lee Bollinger, who is a First Amendment attorney, and the president of New York State AFL-CIO, Denis Hughes. Each might be liable if the funds are used for nefarious purposes by North Korea, a country that does not allow organized labor.

“These are tainted funds and it would be bad enough to have a private bank handle them, let alone the Fed,” a former American ambassador to the United Nations, John Bolton, who is now a senior fellow at the American Enterprise Institute, said.

The chairwoman of the North Korea Freedom Coalition, Suzanne Scholte, said it was “appalling” that the Federal Reserve Bank of New York was getting involved. “It’s like we’re trying to figure out a way to launder his money,” she said, referring to North Korea’s dictator, Kim Jong-il. She also pointed to the irony that the government of North Korea had already been caught counterfeiting American money.

North Korea has linked the release of frozen funds to its commitment made on February 13 to commence nuclear disarmament. Wachovia and other banks have previously refused to contravene the prohibition by the Treasury Department in September 2005 that labels Banco Delta Asia, a Macao-based bank where North Korea’s funds are frozen, a “primary money laundering concern” under the USA Patriot Act. The Federal Reserve may lie outside the relevant provision of the Patriot Act covering commercial entities.

The ranking member of the House Committee on Foreign Affairs, Rep. Ileana Ros-Lehtinen, led a group of House Republicans yesterday in asking the Government Accountability Office to examine whether this recent move is consistent with anti-laundering and counterfeit laws.

Others signing the letter were Rep. Christopher Smith of New Jersey, Rep. Dan Burton of Indiana, Rep. Edward Royce of California, Rep. Mike Pence of Indiana, and Rep. Joseph Pitts of Pennsylvania.

Mr. Bolton said the State Department was caving in to pressure from North Korea. He said North Korea was not going to comply with its obligation under the February 13 agreement.

Ms. Scholte, who is also president of the nonprofit Defense Forum Foundation, said America had fallen into a trap of letting North Korea decide the ground rules by focusing on the nuclear issue.

“It is absolutely foolhardy to free up the funds,” the author of “Over the Line: North Korea’s Negotiating Strategy,” Chuck Downs, said. Such a move would make clear that any bank around the world could deal with North Korea and not be afraid of the U.S. Treasury Department, he said.

Ms. Scholte said releasing the frozen funds would strengthen North Korea’s dictator enough to crack down further on the country’s people. “Sadly, we’re going down a slippery slope,” she said, adding that the Kim Jong-il cares only about keeping himself in power.

The executive director of the U.S. Committee for Human Rights in North Korea, Debra Liang-Fenton, said she hoped human rights would be included in security talks with North Korea. “You can’t have normalization with a country that tortures its own people.” She said North Korea runs a vast gulag system, with political prisoners charged with offenses that are not punishable by international standards.

Mr. Downs said the original negotiating posture of America was a bad one of giving North Korea what it wanted first. “We knew that they were counterfeiting, drug smuggling, and money laundering through that bank,” he said.

He added that America previously put the squeeze on North Korea financially, which he said was very effective.

Mr. Bollinger is one of three board directors of the Federal Reserve Bank of New York appointed to represent the public. Columbia’s press office did not return calls for comment.

The other two are the president of Tishman Speyer, Jerry Speyer, whose spokesman did not respond to a query by press time, and Mr. Hughes of the AFL-CIO, whose spokesman referred comment to the Federal Reserve Bank of New York.

A spokeswoman for the Federal Reserve Bank of New York, Linda Ricci, declined comment.

A spokesman for the chairman of General Electric Co., Jeffrey Immelt, did not get back by press time.

Mr. Immelt is one of three board members elected by member banks to represent the public. Another is the chairman of Lehman Brothers Holdings Inc., Richard Fuld Jr., a spokesman for whom said Mr. Fuld could not reply yesterday, as the company had released its earnings that day. The third is the president of PepsiCo Inc., Indra Nooyi, whose spokeswoman said she was away from the office and unable to be reached.

A spokesman for one of the three board members elected to represent member banks, Jamie Dimon, president of JPMorgan Chase, declined comment.

Mr. Bolton said the decision to unfreeze the funds was unfortunate, and referring to the head of the board of governors of the Federal Reserve System, said: “Chairman Bernanke — call your office.”