The Wan Chai connection: The Washington-accused drug lords, gun runners and dictators’ financiers tied to one Hong Kong district
11 Dec 2020

The Hong Kong neighborhood of Wan Chai may be home to the most eclectic and densest concentration of US-sanctioned enterprises anywhere on the planet.

In less space than a square mile, you’ve got offices tied to: an alleged financier for Hezbollah, the Lebanese militant group; an individual accused of helping Iran acquire millions of dollars of military equipment in violation of US sanctions; a man accused of helping Venezuelan President Nicolas Maduro plunder his country’s resources; and a company that allegedly opened a bank in North Korea in violation of United Nations Security Council resolutions. As if that wasn’t enough, there’s also an office tied to a powerful Southeast Asian militia and a casino mogul accused of trafficking drugs, wildlife and even humans.

Walk these streets on the northern part of Hong Kong Island by day, however, and you’ll likely see well-dressed professionals out to lunch. At night, it’s twenty-somethings getting drunk in rowdy bars — not drug lords slinging kilos of methamphetamine or gun runners trying to sell crates of AK-47s.

That’s because all five offices appear to be front companies.

Front companies are not inherently illegal. They are legitimate corporations without significant assets or active business operations that can be used to conceal illegal or unsavory transactions, evade taxes and generally avoid scrutiny. Essentially, they are near-empty offices in tall towers seldom, if ever, visited by their owners.

But the five companies all appear to exist for one reason: to evade the watchful eye of American law enforcement.

Four of the five alleged front companies in Wan Chai have, since 2015, been added to the US Treasury Department’s “Specially Designated Nationals And Blocked Persons List” — a massive document that names all entities sanctioned by the US government. People or companies put on the list are generally barred from doing business with Americans, conducting transactions in US dollars and using the US financial system.

Allegations against the fifth company, the one tied to the North Korean bank, were raised in 2017 by a UN panel that monitors the efficacy and enforcement of sanctions on Pyongyang.

Why exactly the five are in Wan Chai — and so close together — isn’t clear. It might be as simple as the lure of a good location and cheap rent. But they’re not alone. The Center for Advanced Defense Studies’ sanctions explorer, a tool created by a Washington-based non-governmental organization that scans the Treasury Department’s sanctions list, turns up at least 13 entries in Wan Chai and more than 120 in all of Hong Kong.

They’ve all likely flocked to the city for the same reasons that many legitimate businesses do. Hong Kong is fully integrated into the global financial system. It’s incredibly easy — too easy, some critics argue — to form a company and staff it with well-educated local employees.

And, for decades, Hong Kong has wholeheartedly embraced limited economic regulation and corporate oversight. Free market, non-interventionist policies have helped supercharge the city’s economy. But financial crime experts say they have historically allowed shady businesses to pour money into the city, regardless of how it was obtained.

Hong Kong’s Companies Registry, which is part of the city’s Financial Services and the Treasury Bureau, told CNN that US sanctions are “unilateral” and have no force in local law. The Companies Registry declined to make the head of the agency, Ada Chung, available for an interview.

Hong Kong has passed laws in recent years aimed at curtailing malicious corporate activity, but plugging the systemic gaps that allow illicit front companies to thrive would risk choking Hong Kong’s legitimate economy, angering the city’s powerful tycoons and, in some cases, furthering American geopolitical aims at a time of intense rivalry between Washington and Beijing.

It’s a balancing act the city has performed for years.

The foundation of a fortune

It was about 70 years ago when a 27-year-old Wan Chai native named Henry Fok figured out that Hong Kong’s leaders weren’t willing to stifle business to preserve the interests of governments on the other side of the planet.

When Mao Zedong and the People’s Republic of China joined the Korean War on behalf of North Korea in 1950, the United States and its allies responded by instituting an economic embargo on Beijing. In May 1951, the United Nations recommended its members enact their own trade restrictions against China.

Fok saw opportunity. China would be willing to pay a steeper price for everything from medicine to war materiel. All he had to do was ship the goods to them — a task for which he was well-placed.

Though Fok was born poor, he had learned English in the British colony. That meant he could read local gazette auction listings and buy cheap military surplus goods left over from World War II. His first purchase was a tugboat, he told the Wall Street Journal in 1997. He had also helped his mother run a small shipping business, meaning he knew that industry.

So, under the cover of night, Fok began shipping everything from asphalt to iron plates, plastic hoses, steel, gasoline and rubber tires to mainland China via Macao, which at the time was not strictly enforcing the embargo.

“Whatever the mainland needed we could get it for them,” Fok wrote in his memoir, though he denied the longstanding rumors that he was a gun runner. “It was quite dangerous. But I didn’t care, if there was money to make then it deserved a try.”

By Joshua Berlinger, CNN Business, 10 December 2020

Read more at CNN Business

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