News that North Korean agents bought nationalities as directors of Hong Kong companies shows the downside to being one of the world's freest commercial centres. Hong Kong has long been one of the easiest places to register and maintain a private firm, both in terms of cost and reporting requirements. That means many of the region's more unsavoury connections lurk within the files of the dozens of small secretarial practices that exist, quite legally, to support a steady trade in shelf companies. Some are used to obscure property ownership, tax liabilities and questionable trading. The South China Morning Post reported this week that two agents, linked to illegal shipments of military technology to Myanmar, were registered as directors of the Hong Kong-registered private firm New East International as they set about changing their North Korean passports to ones issued in the island states of Kiribati and then the Seychelles - despite international warnings. The company, a branch of a Tokyo office where staff were arrested and convicted three years ago, was formed in 2004 and disbanded in 2009, Hong Kong documents show. UN sanctions on North Korea were tightened in 2006 amid intense United States pressure in the wake of Pyongyang's first nuclear test. Officials at the North Korean consulate refused to comment yesterday. "The details are certainly juicy but am I surprised? Sadly, no," said one Hong Kong veteran commercial investigator, part of the cottage industry in due diligence that exists to track movements of people and funds through Hong Kong's shelf company trade. "That's long been the nature of Hong Kong's company registry environment. "There are a lot of secrets out there in the files; the problem is knowing where to look." Another investigator said that while the Hong Kong Companies Registry was more open than those of some jurisdictions, particularly tax havens such as the British Virgin Islands and Guernsey, legal methods could easily be used to obscure ownership. Hong Kong has repeatedly tightened money laundering regulations, requiring transactions involving possible drugs, terrorism or "politically exposed persons" to be reported to the Joint Financial Intelligence Unit. But both police and private investigators say basic company registration operations rarely involve banking or accounting procedures. "Those kind of details simply don't emerge in the registration process, so that is a real grey area in terms of suspicious transactions," one police officer said. Both Asian and Western countries have attempted to monitor several local trading firms in recent years, fearing they could be linked to North Korean trade in military technology and equipment and other sanctioned items. North Korean state firms and shipping operations have long legally gone through Hong Kong, some using established front companies. Several North Korean ships were stopped by Hong Kong port authorities in 2006 for safety violations and since then North Korean vessels have generally avoided Hong Kong, according to North Korean shipping officials. US Treasury Department officials visited Hong Kong and Beijing last September to warn of the need for intensified scrutiny of Iranian and North Korean sanctions-busting activity. An earlier department crackdown in 2006 effectively crippled privately owned Banco Delta Asia in Macau, which for decades served as Pyongyang's main banking and gold-trading bolt-hole. The crackdown forced Pyongyang's network of Macau front companies and locally based fixers to scatter.