North Korean sanctions evasions reveal Hong Kong’s middleman role

Hong Kong's North Point Asia-Pac Commercial Center, which houses an office that is linked to the Wan Heng 11, a ship suspected of helping North Korea evade sanctions. Hong Kong has emerged as a key nexus in North Korea's underground business network aimed at dodging sanctions. (AP)
Updated 23 March 2018
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North Korean sanctions evasions reveal Hong Kong’s middleman role

HONG KONG: In the dead of night last month, two tanker ships pulled alongside each other in the East China Sea. One was a 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.

Out of 11 companies based outside North Korean named in a US Treasury sanctions list last month, two each were in China and Taiwan and one each in Singapore and Panama. The remaining five were in Hong Kong.

The UN report said separate investigations of a Singaporean company and Glocom, identified as North Korean military equipment supplier, found evasion tactics included the use of Hong Kong front companies.

Hong Kong has imposed new rules aimed at preventing money laundering that took effect this month that require licensing of corporate registration agents. Companies also must now identify and disclose their beneficial owners, but only to law enforcement authorities.

It’s not unusual in itself for a company to operate out of secretarial office, said David Webb, a Hong Kong corporate governance activist.

But he says lax corporate disclosure rules give “Hong Kong a sort of Monaco of the East image, as a funny place for shady people.”

A review of Hong Kong company filings and shipping databases revealed a murky web of company names and employees working out of a variety of unlikely locations.

One US-sanctioned company, Liberty Shipping, shared an address with its registration firm in Hong Kong’s Wan Chai district. A woman at the office, which had yet another name on the door, said it had ceased doing business with Liberty Shipping and didn’t have contact information. She added that it dealt with the company through an intermediary she wouldn’t name. Liberty Shipping’s annual return showed that its director lived in Dalian in China’s northeast but didn’t provide a phone number.

In the Wan Heng’s case, shipping databases give the rusty tanker’s registered owner and commercial manager as Zhejiang Wanheng Shipping Co., with a care-of address for an apparently related company, Hong Kong Wanheng International Trading, at an apartment in The Beaumont, a suburban luxury apartment development. No one answered the apartment’s buzzer on a recent visit.

Corporate registration records gave a second office address in Hong Kong’s North Point neighborhood. A woman who answered the office door, which didn’t have a sign, said Wanheng’s director, Yip Kwok-man, was not in.

“He just uses the office as a nameplate. It’s not convenient to give you any more information,” she said, refusing to provide her name, adding that she and three other women in the office weren’t his staff.

A woman listed as Wanheng’s company secretary said she was recruited by a friend. But she said she didn’t work for the company anymore because it was too much hassle, without being more specific.

Yip’s home address in Wanheng’s annual return turned out to be a modest one-bedroom unit in an aging public housing complex in the city’s Tsing Yi suburb. No one was home when the AP visited and a neighbor said the resident there had a different surname.

A further search of records found a second address for Yip in an upscale waterfront apartment block in the Sai Wan Ho district. A man who answered the intercom didn’t respond when asked in both Mandarin and Cantonese whether Yip Kwok-man was there.


India court allows Vedanta to reopen controversial plant

Updated 16 December 2018
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India court allows Vedanta to reopen controversial plant

  • The city of Thoothukudi had been rocked by long-running protests over the plant
  • Protesters say it harms the environment and the health of those living near it, claims the company has long denied

NEW DELHI: An Indian copper smelter at the centre of a police shooting that left 13 protesters dead has been granted permission to reopen by the country's environmental court.
The Sterlite plant, owned by British mining giant Vedanta Resources, was closed after the bloody police crackdown in May on protesters who say the smelter is poisoning the air and water.
Vedanta Resources, owned by Indian-born billionaire tycoon Anil Agarwal, had appealed against the plant's closure by the state government of Tamil Nadu where it is located.
The National Green Tribunal, a federal authority which rules on environmental matters, ordered Saturday that the plant in Thoothukudi city could resume operation.
Sterlite CEO P. Ramnath on Sunday welcomed the decision.
"We are happy that all those affected by the closure will get back their source of livelihood and the town of Thoothukudi will revert to normalcy," he said in a statement on Twitter.
The Tamil Nadu state government has said it will appeal the decision in India's highest court.
The city of Thoothukudi, previously known as Tuticorin, had been rocked by long-running protests over the plant, one of the largest in India.
Protesters say it harms the environment and the health of those living near it, claims the company has long denied.
The demonstrations intensified in May after Vedanta sought to double the annual capacity of the plant.
On May 22, police opened fire on thousands of protesters, killing 13 people.
The plant was shuttered by the state government in the aftermath of the shooting.
The company denies all charges and maintains that it adheres to the best environmental standards.
The federal green court ordered Vedanta to spend one billion rupees ($13.9 million) over three years to assist local communities.
But it criticised the pollution regulators in Tamil Nadu, saying they stalled the case by tying up the company in paperwork.