We've got an instance of DB2 Connect from Unix to the MF. Its been working fine, and we can manually connect (db2 connect to XXXX user XXXXX etc), but the application reports SQL1032N error.

We are running db2 as follows.
DB21085I Instance "wt5tinst" uses "32" bits and DB2 code release "SQL08021"
with level identifier "03020106".
Informational tokens are "DB2 v8.1.1.80", "s041221", "U800400", and FixPak "8".
Product is installed at "/usr/opt/db2_08_01".

We are running Enterprise Server Edition.
The permissions on the SYNC executable are correct.

We DON'T have DB2 Admin Server running.

Has anyone seen this before?