US warns Hong Kong on illicit North Korea trade

A senior United States official warned Hong Kong authorities Wednesday they must stop the city being used as a "safe harbour" for illicit trade with North Korea, in violation of United Nations sanctions. The warning came weeks after a Hong Kong-flagged ship was seized in South Korea for transferring oil products to another vessel. The UN -- at the urging of the US -- has imposed a series of sanctions against North Korea aimed at tightening the economic screws on Pyongyang over its missile and nuclear programme. At a briefing in Hong Kong Wednesday, Sigal P. Mandelker, under secretary for terrorism and financial intelligence at the US treasury, said it was "extremely easy" for companies to register in Hong Kong, and authorities needed to tighten up. Hong Kong prides itself on making it easy to do business in the city, with light-touch regulation, discretion and non-cooperation with foreign tax authorities. But it has also earned a reputation for murky dealings -- the 2016 Panama Papers leak exposed the city as playing a key role in channelling money to tax havens via thousands of shell companies, including some linked to China's top political brass. Mandelker said that city authorities must "send a strong message that Hong Kong is not going to be a place where companies can find any kind of safe harbour" for front companies or shell companies. "This shouldn't be a place where companies can establish themselves to help in the smuggling, ship-to-ship transfers, et cetera," she told reporters. Hong Kong's government said Wednesday it "strictly implements" the UN sanctions and is "highly vigilant" about suspected violations, which would be investigated by authorities. "Regarding company incorporation, Hong Kong's regime is similar to that of many other common law jurisdictions such as the UK and Singapore," it said in a statement provided to AFP. Two new laws strengthening existing regulatory requirements will come into force in March, the statement added. Mandelker also said her team had pressed Beijing to expel North Korean financial facilitators or bank representatives who "illicitly access the international financial system". China is the North's biggest trading partner and has been accused by US President Donald Trump of helping Pyongyang skirt sanctions. Last month it emerged that South Korea had briefly seized and inspected a Hong Kong-registered ship in November for transferring oil products to a North Korean vessel and breaching UN sanctions. The Lighthouse Winmore, which was chartered by a Taiwanese company and carrying around 600 tonnes of oil products from South Korea's Yeosu port, transferred part of its cargo to a North Korean vessel on October 19, a foreign ministry official said. The firm that owned the ship had a registered office in Hong Kong and a director with an address in the southern mainland city of Guangzhou, according to Hong Kong's companies registry. Hong Kong is part of China but is semi-autonomous with its own British-style independent legal system. Rule of law has been a major factor in wooing global business.