Hong Kong banks need more support from the government to reduce their exposure to sanctioned North Korean entities via the Chinese firms they do business with. That was the view of a United Nations sanctions expert in 2016, and, concern is once again highlighted in a recent UN report that sheds light on the financial hub’s conduit role when Pyongyang seeks to bypass the many sanctions imposed on it.

Chinese entities remain the key middlemen through which sanctioned North Korean companies gain access to the outside world and launder their illegal profits.

Stephanie Kleine-Ahlbrandt, a member of the United Nations Panel of Experts on North Korea told a forum: “North Koreans have become very adept at utilising these types of mechanisms, aliases and front companies … and we’ve seen a lot of exposure for Hong Kong banks, a lot of transactions originating here.

“The problem is the indirect exposure you get by offering your services to Chinese customers that do engage with North Korean transactions.”

Hong Kong banks need help from the Hong Kong government and law enforcement to determine whether they are indirectly providing services to sanctioned North Korean companies through their Chinese customers, Kleine-Ahlbrandt added.

“You need to go back to government and ask for support,” she said.

The UN’s report show that governments in Beijing and Hong Kong may have been conniving in these shadowy practices for some time.

It also brings into question several Hong Kong-based secretarial firms that have helped help North Korea-affiliated entities or representatives set up shell companies and offshore accounts for money-laundering.

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Hong Kong is now a conduit for Pyongyang to bypass international sanctions. Photo: iStock / Getty

For instance, Unaforte Limited Hong Kong, whose office is in Easey Commercial Building on Hennessy Road, Wan Chai, is accused in the report of violating sanctions on Pyongyang by helping the country make money internationally, thereby funding everything from its nuclear weapons program to the lavish lifestyle of supreme Leader Kim Jong-un.

Unaforte’s registered office in that office tower is, however, occupied by an unrelated company. A “representative for Unaforte’s secretarial firm only comes by every so often to pick up mail,” according to an investigation by CNN.

Hong Kong is one of two business jurisdictions, along with the British Virgin Islands, where the UN’s Panel of Experts on North Korea has seen the largest share of North Korean-controlled front companies operating.

Analysts believe that the Hong Kong banking sector’s real-time gross settlement (RTGS) system for fund transfers – its Clearing House Automated Transfer System is jointly administered by the Hong Kong Association of Banks and the Hong Kong Monetary Authority, the territory’s de facto central bank – may well be used to channel money towards entities with business ties with the Kim regime.

Local watchdogs, whether the HKMA, or the police force’s Joint Financial Intelligence Unit – which monitors suspicious transactions – have neither barked nor bitten, despite dubious dealings coming to the UN’s attention.

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Artists channeling Kim Jong-un (left) and Donald Trump are seen inside a train in Hong Kong. Photo: Reuters

Apple Daily suspects that Beijing may have told Hong Kong to go lightly on these funds, which are seen as a lifeline to Pyongyang amid a stepped-up international containment effort following its missile-firing spree.

Last year’s North Korea defector crisis also laid bare the fact that Hong Kong has always been a hotly contested center of espionage for the two feuding governments on the Korean Peninsula.

Seoul pressed the Hong Kong government for tightened security at the South Korea’s Consulate in the city after a teenage “talbukja” – the Korean word for defectors fleeing the Communist regime – sought asylum there.

Declassified files show Pyongyang started to station agents in Hong Kong in the wake of the Korean War after visits by movie actors and senior officials from Seoul became more frequent, and as trade between Hong Kong and Seoul also increased.