What does a Hong Kong-registered company have to do with North Korean-assembled military tactical communications equipment that landed in the hands of insurgents in the volatile African state of Eritrea?

Quite a lot, revealed a report complied by the United Nations Panel of Experts on North Korea, which has shed light on the clandestine shell firms and front companies registered in Hong Kong that are helping Pyongyang circumvent international sanctions and trade embargoes in the wake of the regime’s defiant nuclear tests.

For instance, backroom deals by Glocom Int’l Limited, incorporated in Hong Kong in May 2016 according to information retrieved via the Companies Registry’s Public Search Center, helped its North Korean parent Pan Systems source electronic parts and components and materiel from Hong Kong for assembly of lucrative military communication equipment in North Korea that would be sold to Eritrean militants.

Glocom’s registered address is the office of a Hong Kong secretarial firm, a legal practice commonly used in the city to conceal the real business operations of a company.

Both Pan Systems and Glocom maintain close dealings with the Korean People’s Army, according to Reuters.

A shipment of such equipment to Eritrea was interdicted by the UN and investigation by the expert panel is still under way, the panel’s report noted.

As well, in August 2016, a cargo ship originating from North Korea’s Haeju port was intercepted by Egyptian authorities in the Suez Canal, where anti-armor weaponry, mostly consisting of 30,000 RPG-7 shoulder-launched anti-tank rocket-propelled grenade launchers, were seized.

The fact that the ship’s registration and documents were maintained by a Hong Kong shipping company founded by a Chinese citizen surnamed Fan who resided in northeastern China’s Liaoning province, which shares a border with North Korea, has also drawn into question Hong Kong’s role in Pyongyang’s guile and its whirlpool of networks to bypass the international embargo.

Online news portal HK01 found that Fan had registered another shipping company after the September release of the UN report, and it is believed that the new shell company, which has no substantive ‌business operation, is aimed only at obscuring his North Korean ties as a middleman as Pyongyang seeks to tap well-connected mainland businessmen to camouflage its materiel imports and exports.

A Chinese flag in front of the Friendship bridge over the Yalu River connecting North Korea and China. Photo: Reuters/Damir Sagolj
A Chinese flag waves in front of the Friendship Bridge over the Yalu River connecting North Korea and China. Photo: Reuters/Damir Sagolj

In turn, these mainlanders flock to Hong Kong to open shell entities, exploiting the city’s free-port status and the local authorities’ laissez-faire approach to regulating business operations.

Observers also have reasons to believe that the Hong Kong government may have been dissuaded by Beijing from stepping in to suppress such irregularities that can be traced back to its Communist ally.

According to the UN report, North Korean nationals have also been operating in Hong Kong under pseudonyms for the procurement of military equipment from international gray markets, with the help from local partners.

Leader Int’l Trading Ltd, for example, caught the UN’s attention as early as in 2013 when it acted, at the behest of Pyongyang, as a proxy for Korea Ming Development Trading Corp, a major munitions dealer, and contacted potential overseas buyers and suppliers. The company’s registered address was a secretarial firm and it was deregistered in 2016.