The Wall Street Journal: Hong Kong has become an Iran money-laundering hub, with $4.8 billion in underground gold flows exposed

According to a report by The Wall Street Journal, Hong Kong is currently a key hub in the Iranian funds circulation system. Through a complex network of shell companies and alternative financial channels, Hong Kong not only helps Iran handle massive oil proceeds totaling as much as several billion dollars, but also has become an important stepping stone for Tehran to evade U.S. sanctions and procure sensitive controlled technologies for its military and drone programs.

How has Hong Kong become an important base for Iran’s shadow banking?

The report says that data from the U.S. Department of the Treasury and relevant financial crime-prevention agencies indicate that Hong Kong’s business environment—because company-setup procedures are convenient—has become a breeding ground for concealing the identities of sanctioned parties. In 2024, the scale of financial transactions involving Hong Kong entities related to Iran’s shadow banking system is estimated to have reached as much as 4.8 billion dollars, with the transaction volume ranking second only to the United Arab Emirates.

These networks, made up mostly of shell companies, mainly involve converting the People’s Government-billed Chinese yuan generated from Iran’s sale of oil into U.S. dollars, euros, or other strong foreign currencies, to meet Iran’s funding needs in international trade.

Iran procures military and drone parts through shell companies in Hong Kong

In addition to money laundering, Hong Kong is also a key node for Iran to obtain sensitive military technology. U.S. authorities point out that since 2019, the CEO of a trading company in Tehran, Iran’s capital—Hamed Dehghan—has continued to use shell companies in Hong Kong to purchase Western controlled technologies worth millions of dollars for Iran’s missile program and the Islamic Revolutionary Guard Corps (IRGC). The technologies include key electronic components and rocket fuel precursor materials used to develop “Shahed” attack drones.

Despite the U.S. Department of the Treasury repeatedly placing the implicated Hong Kong entities on its blacklist, the threshold for setting up new companies locally is extremely low. As a result, after older companies are sanctioned, new replacement shell companies can often be established quickly and take over the business.

How do funds evade U.S. sanctions?

To avoid scrutiny from the U.S.-based financial system, transactions related to Iran often intentionally bypass major global multinational banks. The report says these funds are typically settled through small and medium-sized local banks that lack international business exposure (for example, Kunlun Bank), and that they mainly use Chinese yuan as the transaction currency to isolate review risks.

In addition, Iran’s foreign exchange institutions reportedly under the control of entities connected to Iran’s commercial banks (such as Bank Tejarat) are said to have controlled dozens of shell companies in Hong Kong, specializing in managing the flow of underground funds for the Islamic Revolutionary Guard Corps.

Ghost fleet and maritime “laundering bases”: Hong Kong’s logistics role in smuggling Iranian crude oil

In terms of actual trade, Hong Kong also plays a logistics hub role in supporting Iran’s “ghost fleet.” Many shipping companies registered in Hong Kong actively assist in transporting tankers carrying Iranian crude oil, conducting “ship-to-ship” transshipment operations at sea. By forging invoices and tampering with crude-oil origin-label markings (typically disguised as Omani or Malaysian crude oil), these network operators successfully conceal the oil’s true source, allowing sanctioned Iranian crude oil to smoothly enter refineries in places such as China, and to circulate covertly within global trading systems.

The Hong Kong government refuses to cooperate with unilateral sanctions: the U.S.’s new strategy to block shell companies

Hong Kong Special Administrative Region Chief Executive John Lee has clearly stated that the Hong Kong SAR government only implements sanctions resolutions issued by the United Nations Security Council and does not recognize “unilateral sanctions” carried out by individual countries (such as the United States). This policy stance allows entities targeted by the United States to operate freely within Hong Kong, with almost no need to worry about being investigated and cracked down on by local law-enforcement agencies.

Faced with the severe challenge posed by the proliferation of shell companies in Hong Kong, U.S. authorities changed tactics starting last October. They shifted the targets of sanctions and enforcement to those institutional addresses of entities that specifically handle company-registration business, hoping that by increasing the difficulty of setting up shell companies, they can cut off Iran’s underground funds and supplies chain from the source.

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This article, The Wall Street Journal: Hong Kong becomes Iran’s money-laundering hub; $4.8 billion in underground funds exposed, first appeared on Chain News ABMedia.