A new report released by the Committee for Freedom in Hong Kong Foundation (CFHK) suggests that Hong Kong has become a critical financial and logistics hub by helping Iran evade international sanctions through oil smuggling, money laundering, weapons procurement, and covert financial networks.
The May 11 report, titled: ‘Oil, Arms, and Cash: How Hong Kong Fuels the Iranian Regime’, argues that the city, which has been under Chinese Communist Party (CCP) rule since 1997, has evolved into one of Tehran’s most important offshore platforms for bypassing Western restrictions.
CFHK is urging the U.S. government to designate Hong Kong as a “Primary Money Laundering Concern” (PMLC) and impose secondary sanctions on Hong Kong banks that continue facilitating transactions tied to sanctioned Iranian entities.
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Key entry points
According to the report, Iran has relied heavily on shell companies and corporate service providers operating overseas to circumvent sanctions imposed by the U.S. and Europe. Investigators found that Hong Kong-registered shell companies have played a central role in arranging “shadow fleet” oil shipments using vessels registered in Hong Kong or Panama to transport sanctioned Iranian oil to China.
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One Hong Kong shell company identified in the report, Hero Companion, allegedly handled as much as $20 million in oil-related transactions last year alone. The report also cited U.S. Financial Crimes Enforcement Network (FinCEN) data showing that Hong Kong has become a major conduit for Iranian “shadow banking” activity used to process illicit financial flows.
According to CFHK, more than half of the approximately $9 billion in identifiable Iranian shadow banking activity globally in 2024, roughly $4.8 billion, passed through Hong Kong-linked companies. The report further alleged that Hong Kong has emerged as a center for cryptocurrency- and gold-based money laundering operations tied to Iran.
As Hong Kong authorities have promoted cryptocurrency and gold trading in recent years, investigators warned that those sectors have increasingly become channels for sanctions evasion.
Weapons procurement networks
Some Iranian oil transactions were reportedly conducted through intermediaries in Hong Kong using Tether (USDT) transfers. The report also alleged that organizations such as Iran’s Islamic Revolutionary Guard Corps (IRGC) and Hezbollah used physical gold transactions to obscure financial flows and complicate enforcement efforts. Hong Kong firms allegedly linked to weapons procurement networks
The report also accused Hong Kong-based companies of helping Iran obtain sensitive technologies used in drones, missiles, and nuclear centrifuge development. According to CFHK, investigators found that components recovered from Iranian drones used in both the Russia-Ukraine war and Middle East conflicts showed records of having passed through Hong Kong-linked supply chains.
It further criticized Hong Kong’s corporate transparency and regulatory environment, arguing that lax oversight allowed Iranian-linked front companies to purchase restricted Western microelectronics and engine components through the city. CFHK also claims that Hong Kong has played a role in helping Iran expand domestic surveillance capabilities.
The report cited Huawei subsidiary Skycom, previously registered in Hong Kong, as allegedly assisting Iran in constructing a nationwide surveillance system used to identify and arrest protesters. In addition, surveillance technology companies Hikvision and Dahua were also mentioned, which alleged that the firms expanded financing and market access through Hong Kong-related channels while contributing to surveillance infrastructure later used for domestic repression in Iran.
Calls for tougher sanctions
CFHK argued that Hong Kong’s refusal to enforce unilateral Western sanctions, combined with what it described as a welcoming environment for sanctioned entities, has made the city a more attractive destination for sanctions evasion than other financial hubs such as Singapore or Dubai.
Coinciding with the report’s release, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a new round of sanctions targeting individuals and companies accused of facilitating Iranian oil shipments. The sanctions included four Hong Kong-registered companies: HKBOL, Hong Kong Sanmu Limited, Jiandi HK Limited, and Max Honor International Trade Co.
CFHK urged Washington to go further by formally designating Hong Kong as a major money laundering concern and imposing secondary sanctions on banks involved in facilitating illicit Iranian financial activity, including restricting access to U.S. dollar clearing systems. The report noted that both the Biden and Trump administrations had previously threatened sanctions against Chinese and Hong Kong financial institutions but ultimately stopped short of fully implementing them.
Samuel Bickett, one of the report’s authors, argued that sanctions efforts must target the service providers enabling shell companies and logistics operations supporting sanctioned networks. “These sanctions need to go deeper into the secretary companies and logistics providers repeatedly supporting sanctioned entities,” Bickett said, warning that otherwise “sanctions will have almost no real effect.”
Speaking separately to The Light Chaser, Bickett compared current Western sanctions enforcement to a game of “whac-a-mole,” arguing that governments should directly target the firms helping establish shell companies and cut off their access to the U.S. financial system.
