North Korean vessel, the other was the Belize-flagged Wan Heng 11.Lights on both ships were blazing, arousing a Japanese spy plane’s suspicion they were carrying out a "ship-to-ship" transfer banned under UN sanctions imposed over North Korea’s nuclear weapons program.
Records for the Wan Heng and a number of other ships identified in recent UN and US sanctions blacklists and Japanese surveillance reports reveal ties to Hong Kong through front companies based here. The findings underscore rising concern over the southern Chinese financial capital’s role as a nexus for North Korea’s underground business network, which has led the US government to urge Hong Kong authorities to crack down.
The corporate registration agents that set up these front companies "present a key vulnerability in the implementation of financial sanctions," said a report by the UN Panel of Experts on North Korean sanctions released on March 16. Researchers said North Korea relies on front companies acting as middlemen to mask its overseas trading links, many of which involve China.
Successively tighter rounds of sanctions aim to deprive North Korea of key sources of revenue by choking off its ability to smuggle exports, including through oil transfers between ships on the high seas.
Hong Kong, an Asian business hub, is "staying highly vigilant about activities and suspected cases" of sanctions violations and is "looking into the cases" involving Hong Kong-registered companies, the government said in a statement.
The city often tops business and economic freedom rankings, based on criteria that include ease of setting up business. That can also facilitate illicit dealings.
The city hosts a vast industry of company formation experts who can register corporations quickly and with minimum information from their clients. Many operate out of anonymous, one-room offices with as little as a single employee. They promise to set up a firm within a day for clients who can apply online if they’re not in Hong Kong.