Washington asks Hong Kong to devote additional resources to enforce North Korea and Iran sanctions
- US consulate says that delegations from State and Commerce departments met local officials last week
- Request comes after Huawei executive Sabrina Meng was arrested in Canada at behest of the US but Hong Kong government source denies the two are related
Washington has asked the city to “devote additional resources” to enforce international sanctions on North Korea and Iran, it was disclosed on Monday, amid the high-profile arrest of a Huawei Technologies executive for allegedly trading with Iran via a Hong Kong shell company.
A press release dispatched on Monday by the United States Consulate General in Hong Kong and Macau said that Washington also noted Hong Kong had taken steps to enact laws to make it harder to operate shell companies in the city, but wanted checks on re-exports of strategic commodities to be tightened.
The requests were put forward to Hong Kong last week when senior delegations from the US Department of State and US Department of Commerce were in the city to meet local officials to review the city’s performances in sanctions enforcement and strategic trade controls.
The meeting coincided with the arrest of Sabrina Meng Wanzhou in Canada, for possible extradition to the US. Meng is the deputy chairwoman and chief financial officer of China’s Huawei Technologies. She is accused of lying about Huawei’s ties to a Hong Kong shell company named Skycom that traded with Iran.
Meng allegedly tried to sell telecoms equipment made by US manufacturer Hewlett-Packard to Iran through the shell company.
Shell companies are legitimate corporations, but do not possess significant assets or maintain active business operations. To set up a company in Hong Kong, one needs a director and a company secretary based in Hong Kong. The system is designed to make Hong Kong an easy place to do business.
But there have been concerns about possible abuse – that companies are being set up to conceal the real identities of the entities behind these firms. Earlier this year, Hong Kong tightened its money-laundering laws to hold lawyers and other professionals responsible if they were found to be negligent in monitoring the flow of huge unidentified amounts of funds and to prevent shell companies from laundering money. A licensing scheme is also in place for those who help set up shell companies.
The US Consulate General in Hong Kong and Macau said in its release that US delegations visited Hong Kong from Wednesday to Friday last week.
The statement said: “The US team recommended that Hong Kong improve the flow of enforcement cooperation information, and devote additional resources to sanctions enforcement, particularly with respect to shipping activities that violate United Nations sanctions on North Korea and Iran.”
“On exports controls, the US delegation sought further improvements in Hong Kong’s tracking of strategic commodities and controlled items building on recent progress, and additional action and assistance in enforcement of restrictions on re-exports, so as to prevent diversion of such items to the development and production of weapons of mass destruction and unauthorised military end users,” it continued.
A US consulate spokesman declined to further comment on the timing of the meeting.
A Hong Kong government source said that the meetings had nothing to do with the Huawei incident as they had been arranged long before. Another Hong Kong government source also said they were working-level meetings held regularly between both sides and that the Hong Kong side had briefed the US officials on the city’s work.
Hong Kong lawmaker Kenneth Leung, who chairs a Legislative Council subcommittee to examine the institution in Hong Kong of United Nations Security Council resolutions relating to sanctions, said he was satisfied Hong Kong had done much in implementing them.
But he agreed that the timing of the issuance of the release was sensitive.
The Trade and Industry Department of Hong Kong said: “Hong Kong had been observing strictly and comprehensively strategic trade control to prevent Hong Kong from being used as a conduit for the proliferation of weapons of mass destruction.
“Our system has won recognition and respect by trade partners. We have been keeping regular contact and cooperation with the US to exchange views,” the spokesman said.
Additional reporting by Alvin Lum and Gary Cheung