US Treasury official presses Hong Kong, Beijing on NKorea

A U.S. Treasury official said Wednesday she has urged officials in Hong Kong and Beijing to step up measures to counter North Korean smuggling and financing, as part of Washington's fine tuning of efforts to shut down Pyongyang's nuclear program.

Treasury Undersecretary for terrorism and financial intelligence Sigal Mandelker said she told Hong Kong officials it should be harder for North Korea to use shell companies registered in the Asian business hub.

Mandelker said she also repeatedly pressed officials in Beijing to expel sanctioned North Koreans in China who facilitate North Korean financial transactions.

Despite various hurdles, she said three increasingly stringent United Nations Security Council resolutions last year on North Korea were having a "significant impact." She did not give any details.

Also Wednesday, Japan's Foreign Ministry said a Japanese Navy surveillance aircraft spotted a sanctioned North Korean tanker four days ago carrying out what was thought to be an illicit offshore transfer in the East China Sea.

The ministry said in a statement that North Korean-registered Rye Song Gang No. 1 was seen alongside a Dominican-flagged tanker, the Yuk Tung, before dawn on Jan. 20.

The ministry said it reported the sighting, including four photos, to the U.N. Security Council committee on North Korea sanctions.

Ship-to-ship trade with North Korea at sea, including transfers of oil, is prohibited under U.N. sanctions adopted Sept. 11.

The Rye Song Gang No. 1 is among ships on the U.N.'s sanctioned vessel list, which prohibits them from entering ports. The ministry said it appeared to be using a phony name, Song Hae, to evade sanctions.

The sanctions are aimed at depriving North Korea of revenue for its nuclear weapons program and otherwise exerting pressure on the government in Pyongyang.

South Korea's recent seizure of two ships suspected of being used for illegal oil sales to North Korea revealed a murky web of shell companies listed as their owners or managers, including some registered in Hong Kong. Two of eight other ships sanctioned by the U.N. last year also have links to Hong Kong shell companies.

The former British colony often tops the business and economic freedom rankings, based on criteria that include ease of setting up business. But that can also facilitate illicit dealings.

"Hong Kong of course is an international finance hub and at the same time it has company formation and registration rules that we think need to be stronger," said Mandelker. She said she discussed that issue with officials including those at Hong Kong's Financial Services and Treasury Bureau.

"This shouldn't be a place where companies can establish themselves to help in the smuggling and ship-to-ship transfers," she said.

Recent scandals about offshare havens revealed Hong Kong to be a global center for front companies.

"Our law enforcement agencies will closely follow up on suspected violations" of sanctions, the Hong Kong government said in a statement, adding that it is working on strengthening business incorporation regulations.

Mandelker said she urged officials at her previous stop in Beijing to take action against North Koreans that the Treasury Department sanctioned in September for acting as representatives of the country's banks. Most of the 26 individuals listed live in China.

"These are highly skilled people who have been able to illicitly access the international financial system," she said. "One point that we pressed repeatedly in Beijing is that those individuals need to be expelled."

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AP writer Mari Yamaguchi contributed to this report from Tokyo.