HONG KONG: In the dead of night last month, two tanker ships pulled alongside each other in the East China Sea. One was a North Korean vessel, the other was the Belize-flagged Wan Heng 11.

Lights on both ships were blazing, arousing a Japanese spy plane鈥檚 suspicion they were carrying out a 鈥渟hip-to-ship鈥� transfer banned under UN sanctions imposed over North Korea鈥檚 nuclear weapons program.

Records for the Wan Heng and a number of other ships identified in recent UN and US sanctions blacklists and Japanese surveillance reports reveal ties to Hong Kong through front companies based here. The findings underscore rising concern over the southern Chinese financial capital鈥檚 role as a nexus for North Korea鈥檚 underground business network, which has led the US government to urge Hong Kong authorities to crack down.

The corporate registration agents that set up these front companies 鈥減resent a key vulnerability in the implementation of financial sanctions,鈥� said a report by the UN Panel of Experts on North Korean sanctions released on March 16. Researchers said North Korea relies on front companies acting as middlemen to mask its overseas trading links, many of which involve China.

Successively tighter rounds of sanctions aim to deprive North Korea of key sources of revenue by choking off its ability to smuggle exports, including through oil transfers between ships on the high seas.

Hong Kong, an Asian business hub, is 鈥渟taying highly vigilant about activities and suspected cases鈥� of sanctions violations and is 鈥渓ooking into the cases鈥� involving Hong Kong-registered companies, the government said in a statement.

The city often tops business and economic freedom rankings, based on criteria that include ease of setting up business. That can also facilitate illicit dealings.

The city hosts a vast industry of company formation experts who can register corporations quickly and with minimum information from their clients. Many operate out of anonymous, one-room offices with as little as a single employee. They promise to set up a firm within a day for clients who can apply online if they鈥檙e not in Hong Kong.

Out of 11 companies based outside North Korean named in a US Treasury sanctions list last month, two each were in China and Taiwan and one each in Singapore and Panama. The remaining five were in Hong Kong.

The UN report said separate investigations of a Singaporean company and Glocom, identified as North Korean military equipment supplier, found evasion tactics included the use of Hong Kong front companies.

Hong Kong has imposed new rules aimed at preventing money laundering that took effect this month that require licensing of corporate registration agents. Companies also must now identify and disclose their beneficial owners, but only to law enforcement authorities.

It鈥檚 not unusual in itself for a company to operate out of secretarial office, said David Webb, a Hong Kong corporate governance activist.

But he says lax corporate disclosure rules give 鈥淗ong Kong a sort of Monaco of the East image, as a funny place for shady people.鈥�

A review of Hong Kong company filings and shipping databases revealed a murky web of company names and employees working out of a variety of unlikely locations.

One US-sanctioned company, Liberty Shipping, shared an address with its registration firm in Hong Kong鈥檚 Wan Chai district. A woman at the office, which had yet another name on the door, said it had ceased doing business with Liberty Shipping and didn鈥檛 have contact information. She added that it dealt with the company through an intermediary she wouldn鈥檛 name. Liberty Shipping鈥檚 annual return showed that its director lived in Dalian in China鈥檚 northeast but didn鈥檛 provide a phone number.

In the Wan Heng鈥檚 case, shipping databases give the rusty tanker鈥檚 registered owner and commercial manager as Zhejiang Wanheng Shipping Co., with a care-of address for an apparently related company, Hong Kong Wanheng International Trading, at an apartment in The Beaumont, a suburban luxury apartment development. No one answered the apartment鈥檚 buzzer on a recent visit.

Corporate registration records gave a second office address in Hong Kong鈥檚 North Point neighborhood. A woman who answered the office door, which didn鈥檛 have a sign, said Wanheng鈥檚 director, Yip Kwok-man, was not in.

鈥淗e just uses the office as a nameplate. It鈥檚 not convenient to give you any more information,鈥� she said, refusing to provide her name, adding that she and three other women in the office weren鈥檛 his staff.

A woman listed as Wanheng鈥檚 company secretary said she was recruited by a friend. But she said she didn鈥檛 work for the company anymore because it was too much hassle, without being more specific.

Yip鈥檚 home address in Wanheng鈥檚 annual return turned out to be a modest one-bedroom unit in an aging public housing complex in the city鈥檚 Tsing Yi suburb. No one was home when the AP visited and a neighbor said the resident there had a different surname.

A further search of records found a second address for Yip in an upscale waterfront apartment block in the Sai Wan Ho district. A man who answered the intercom didn鈥檛 respond when asked in both Mandarin and Cantonese whether Yip Kwok-man was there.