The front companies facilitating North Korean arms exports

Investigation reveals the complex web of companies involved in DPRK arms exports
May 30th, 2013
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WASHINGTON, D.C. – Four years after an aircraft was seized in Bangkok with a cargo of illicit weapons being sent from North Korea to Iran, the UN and other governments have concluded an investigation revealing new details of a sophisticated worldwide criminal network to circumvent UN sanctions designed to halt the proliferation of nuclear, missile, and other technologies to some of the world’s most volatile conflicts.

Dozens of shell companies involving at least 16 countries were created in the weeks before the aircraft was seized – paper industries designed to disguise the shadowy players behind the 2009 arms shipment that almost evaded international law enforcement.

On the night of December 11, 2009, the U.S. Ambassador to Thailand called the Prime Minister with an important request: U.S. intelligence had information a cargo plane had departed Pyongyang smuggling 35 tons of clandestine arms and was scheduled to land in Bangkok to refuel. The U.S. wanted the Thai army to seize the aircraft and its cargo, banned under international laws mandated by United Nations sanctions.

But when the aircraft was seized at 4.00pm the next day, the international intricate web of shell companies simply vanished into thin air.

In reality, they never existed except on paper.

The companies were all mail drops hurriedly established in obscure offices spanning the globe. They were all creations of other legal companies that exploited loopholes in national laws from New Zealand to Hong Kong to Ukraine to London – established to hide the true identities of the owners.

The officers listed on company registration papers were “nominee” directors with no power or knowledge over company operations. They received their instructions from the real owners whose true identities, nationalities, and locations they did not know.

Like an optical illusion, the complex global network was a hall of mirrors and the real identities of the powers behind the operation vanished immediately when the cargo was seized.

The only people that proved quickly identifiable were the airplane crew:–one Belarusian and four Ukrainians–who had no idea who they were working for, what cargo they were transporting, who their cache of goods was being delivered to, or even to where it was destined.

But the illicit weapons cache did yield a gold mine of documents that paints a vivid portrait of the complex global network used to evade international and national laws.

Leaked UN reports two weeks ago said their four year investigation into the Bangkok seizure had been concluded, and named three individuals who were part of the intricate web of deceit.

AN INTRICATE WEB

The 52-page confidential report by the Panel of Experts on sanctions against the DPRK named two Ukrainian citizens, Yuri Lunov and Igor Karev-Popov, and one citizen of Kazakhstan, Aleksandr Viktorovich Zykov, for their involvement in the North Korea arms cache seized in Bangkok.

Kazakh Aleksandr Viktorovich Zykov was an international arms trafficker whose company, then registered in the United Arab Emirates, owned the Russian made cargo plane until just months prior to it being used to transport the North Korean arms shipment.

Ukrainian Yuriy Lunov owned the Georgian company, Air West, who held the operating license to the aircraft, and hired the crew to fly the cargo plane.

Ukrainian Igor Karev-Popov was the mysterious figure who was “a UK based European” who controlled the New Zealand registered shell company, SP Trading, which from the shadows leased the aircraft from Air West from SP Trading’s shell mail-drop office in Kiev, Ukraine.

Upon leasing the plane, SP Trading signed an agreement with a just created Hong Kong registered front company, Union Top Management (UTM), which chartered the aircraft.

Four days later the aircraft departed Azerbaijan for a circuitous trip around the globe to Pyongyang.

From shell offices that included Kiev, Ukraine, Auckland, New Zealand, Hong Kong, and a mysterious company registered in London, SP Trading and UTM  choreographed the operation. The cargo, which included 35 surface-to-air missiles that could theoretically shoot down a passenger plane, originated in Pyongyang and were destined for Hezbollah via distributors in Iran and Syria.

The real beneficial owners of the New Zealand shell company, SP Trading, ltd., and the Hong registered UTM were in real control of getting the weapons from North Korea to Tehran, where they would subsequently have gone to the Palestinian guerrilla army, Hezbollah, via Syria.

The four year UN investigation by the Panel of Experts, in cooperation with a number of law enforcement, aviation, and financial investigators and intelligence agencies, notably New Zealand, uncovered a jigsaw puzzle that has revealed remarkable details of how international criminal syndicated transport illicit commodities under the radar of international and national laws.

A PORTRAIT EMERGES

While North Korea can mask operations within its own borders, there are many national and international laws to abide by in order to operate globally – particularly in shipping, international flight operations, financial systems and company registration. This is compounded within the national borders of countries that are more sensitive to operating within the parameters of international laws and regulations.

Aircraft ownership, operator licenses, safety requirements, cargo manifests, international flight plans, etc, all required documentation – documentation that was found aboard the seized aircraft in 2009, and provided a paper trail that sparked four years of international investigation.

“New Zealand authorities investigated the beneficiaries of SP Trading and passed information to the (UN) Sanctions committee,” a New Zealand Ministry of Foreign Affairs spokesperson told NK News, confirming their ongoing investigation into who was behind the New Zealand-registered companies linked to the seized plane.

“New Zealand legislation will shortly be passed that will close the loophole for non-resident directors,” the New Zealand government added.

IGOR KAREV-POPOV

The “non-resident director” and beneficiary of SP Trading was Igor Karev-Popov, – the same Igor Karev-Popov identified as sanctioned by the UN Panel of Experts this May, and said to be the most important power behind the network revealed so far.

But while Karev-Popov had never previously been publicly identified by name, the New Zealand government has been aware of his identity since at least 2010.

He is is the mysterious unnamed “UK based client” who was the person behind the creation of the two key paper companies, SP Trading and UTM, who controlled decisions to lease the aircraft, create the flight plan, pay those involved, and, most importantly, approve the cargo manifest that, ultimately, contained the 35 tons of proscribed armaments.

The real and beneficial owners of SP Trading and UTM were in control of getting the weapons from North Korea to Iran.

Those involved in the actual transport of the proscribed cargo and who set up the web of front companies, knew very little, if anything, about the scheme they played various compartmentalized roles in. It is routine, in fact, for flight crews to have no knowledge of the specifics of the cargo they are hauling, arms trafficking investigators say

YURI LUNOV AND ALEKSANDR VIKTOROVICH ZYKOV

Yuri Lunov is on paper the owner of the Georgian company, Air West, which the seized aircraft was registered to. He is an arms trafficking associate of the Kazakh national named Aleksandr Viktorovich Zykov.

Zykov previously owned the aircraft which was “wet leased” to the New Zealand Company, SP Trading. Zykov himself vigorously denied any knowledge of the cargo contents on the seized aircraft.

“After the Thai incident I left the airline business….I will not hide that the incident in Bangkok made me switch to another business,” Zykov told the Kazakh Vremya newspaper on May 16.

“I have all documents proving that I am not involved in this story and I am innocent. I repeat again: I do not have any connection to this scandal! In the end, I still have the right to protect my honor and reputation. If what you have told is really taking place, I do not rule out that I will have to appeal to court.”

THE HIRING OF THE AICRAFT AND CREW

The timeline of events in the weeks prior to the aircraft being seized offers a portrait of the efforts made to obscure tracing back the primary figures behind such illicit shipments.

In the five months prior to the seizure of the aircraft in December 2009, a series of related events took place to put in place the network required to get the clandestine weapons from Pyongyang to Iran, according to an exhaustive joint research report first published by International Peace Information Service in Antwerp and TransArms – Research Center for the Logistics of Arms Transfers in Chicago, arms trafficking investigative organizations funded by the European Union.

On June 6, 2009, Ukranian Yury Lunov’s newly formed company in Georgia, Air West, was issued an Operator Certificate for the Ilushy IL-76 airplane 4L-AWA .

The next month on July 22, 2009, SP Trading company was issued a Certificate of Incorporation in New Zealand. Four days later, the flight crew—three Kazakhs and a Belarusian were hired and ordered to the Ukraine to wait for instruction on operating a cargo flight whose destination and contents they were not informed of.

On September 1, UTM was issued a Memorandum of Association by the Hong Kong company registry, incorporating the firm there on November 2, 2009. The documentation listed one director, Spanish citizen Dario Cabreros Garrmendia, a Barcelona native who later turned out not to exist.

On September 24, 2009, the Air West-owned 4L-AWA was issued a Certificate of Registration by the Georgian Civil Aviation Authority.

On November 5, Air West “wet leased” the aircraft to SP Trading, which meant Air West provided the crew, insurance and maintenance services to SP Trading along with the Ilyushin-76 cargo plane.

The Spaniard who was listed as director of UTM signed an agreement with SP Trading to charter the aircraft on behalf of UTM on December 4, 2009.

Dario Cabreros Garrmendia, the alleged Spaniard listed as director of UTM, signed an agreement with SP Trading to charter the aircraft on behalf of UTM on December 4, 2009. UTM’s on-paper owners traced back to an address in the secretive financial tax haven in Tortola, the capital of the British Virgin Islands.

Four days later, the aircraft began its flight to Pyongyang to pick up its cargo.

THE WEB OF FRONT COMPANIES

The New Zealand company, SP Trading, operated out of an office in Auckland which shared the address with more than a 1000 other similar shell companies.

A 25 year-old Chinese immigrant with a day job at a local Burger King, Lu Zhang, was listed as the sole director of SP Trading Ltd.

Zhang was only the nominal director of SP Trading, of course –– New Zealand government records show she was director of 78 similar companies, all of which were located at the same mailing address in Auckland.

Like SP Trading Ltd, those similar companies were, in fact, registered to another company called Vicam, which in turn was owned by another company, GT Group, registered in the unregulated tax haven of the tiny Pacific Island of Vanuatu.

GT Group described itself on its website as “providing an extensive range of offshore company services for privacy, legal tax avoidance, asset protection, financial independence and freedom”.

Such intentionally convoluted webs of companies have become standard in the network of international traffickers in arms and other illicit goods.

During the same immediate weeks prior to the cargo plane laden with 35 tons of banned weaponry departed Pyongyang, another company was registered in Hong Kong–UTM. It, too, was a shell paper company created by Hong Kong based firms that quickly register new companies to obscure the real powers who control them.

UTM was owned by a man who was registered as a Spanish citizen from Barcelona, who later turned out not to exist. Its on paper owners traced back to an address in the secretive financial tax haven in Tortola, the capital of the British Virgin Islands.

The intentionally convoluted web of companies is in fact a standard network for international traffickers in arms and other illicit goods.

Picture credit: JetPhotos

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About the Author

Nate Thayer

Nate Thayer is an award winning investigative journalist with 25 years of experience in Asia, specializing in conflict, intelligence, security, transnational crime. He has a noted expertise on Cambodia and a current focus on North Korea.

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