Complications in Hong Kong

The Wall Street Journal had a story last week that made me think of the Cold War all over again.  It was on the North Korean front companies in Hong Kong.  These are companies that the US and UN sanctioned in trying to crack down on trade between North Korea and the rest of the world.  It is a really difficult thing to do.

As the Journal points out, Hong Kong is made for ease of business development.  You can register a new company in a couple of days and be off and rolling on whatever it is you do.  China has used Hong Kong as a base for many of its intelligence related front companies, and uses the same addresses for many of those.  At least eight years ago, Congress presented a study that showed 35 companies operating from a single address.  Most of them had officers that were relatives of Chinese intelligence officials, something the Chinese have stopped doing since then.  The Journal article identifies a small home listed as the address of a shipping company that was passing cargo off to a North Korean vessel.  The guy who lived there doesn’t own ships and has no dealings with the North.   If anyone had Google-mapped the address they would know there were no company there.

Now, they not only don’t use relatives, they locate the companies in other countries like Panama where they can be discovered other ways.  We have all heard of he Panama Papers which exposed a number of front companies being operated for various evasion and tax reasons.  The Chinese can hide their front companies among those with little chance of detection.

What we need to focus on is not the front companies but the fact that they are Chinese, and many related to Chinese intelligence agencies.  The leadership of China signs UN agreements to bar North Korea from getting any support, while the Intelligence Services of China facilitate the exchange of oil and other products to the North.  Certainly the Central Government knows what is going on.  This two-faced approach allows China to say they are cracking down, and smile, knowing they are really not.