North Korean officials could not be reached for comment. Meanwhile, state media in the largely isolated communist country has not yet reported on the incident.
Kazi Muhammad Ziauddin, a top official in Bangladesh's customs agency, told CNN his officers discovered the gold on the afternoon of March 5th, after the diplomat arrived on a Singapore Airlines flight.
Ziauddin said customs officials had received a confidential tip that a North Korean diplomat would be carrying "illegal items."
"It was very tough. We have to be very careful and sensitive when we deal with a diplomat," Ziauddin said, referring to the Vienna Convention, which affords diplomats certain degrees of consular immunity.
He said the suspect, whom he identified as Son Young Nam, the first secretary of North Korea's embassy in Dhaka, initially refused to allow his baggage to be searched.
"He said there is no way we can open or scan his bag," Ziauddin said. "At first he said 'This is an electric motor.' After further questioning he changed his mind and told us, 'These are cipher machines and very confidential.'"
Eventually, customs officers opened the diplomat's bag and found the undeclared goods, that included 170 gold bars and golden ornaments.
At current market prices, the gold would be valued at around $1 million.
Entering Bangladesh without declaring this quantity of precious metal is a violation of the country's customs regulations.
An official with Bangladesh's Foreign Secretary, speaking to CNN on condition of anonymity, said his government lodged a protest with the North Korean ambassador.
North Korea sanctions
It's far too early to jump to conclusions about whether the alleged gold smuggling incident could be an isolated example of corruption or an effort to move official funds.
Due to international sanctions, North Korea faces substantial obstacles when trying to access international banking systems.
"It would be interesting to see if [the diplomat] is disciplined when he gets back" to North Korea, said John Delury, associate professor at Yonsei University's Graduate School of International Studies. "That would be a way of saying whether or not he's a corrupt diplomat."
According to the Foreign Secretary's office in Bangladesh, the North Korean diplomat allegedly caught carrying the gold has since left the country.