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FILE PHOTO: People walk on a pavement at Hong Kong's financial Central district during sunset May 11, 2011. REUTERS/Bobby Yip/File Photo

(reuters_tickers)

By Sumeet Chatterjee

HONG KONG (Reuters) - Hong Kong needs to tighten rules to ensure the Asian financial hub is not used to violate international sanctions on North Korea to give up its nuclear ambitions, a senior U.S. Treasury official said on Wednesday.

North Korea is developing missile and nuclear technology in defiance of U.N. Security Council resolutions amid regular threats to destroy the United States and Japan. But tensions have eased with North Korea agreeing to take part in the Winter Olympics in the South next month.

Bordering China, Hong Kong benefits from a surge of capital flows from the mainland that some say is one of the sources of dirty funds for North Korea.

Hong Kong has come under pressure from international bodies to clamp down on illegal money flows following cases involving local firms including so-called fake trade invoicing that allows billions of dollars of capital to leave China illegally.

The former British colony has been beefing up its anti-money laundering laws, after recent scandals showed that Hong Kong was the most active centre in the world for the creation of shell companies.

"Hong Kong, of course, is an international financial hub and at the same time it has company formation and registration rules that we think need to be stronger," said Sigal Mandelker, the U.S. Treasury's Under Secretary for Terrorism and Financial Intelligence.

"We have also stressed here in Hong Kong the importance of having the appropriate mechanism in place to enforce UN Security Council resolutions and other regulations prohibiting activities that facilitate financial transactions with North Korea."

Referring to her talks with Hong Kong officials, Mandelker said Hong Kong should continue to enhance and enforce laws to send a strong message that the financial hub would not be a place to "facilitate front company, shell company" activities.

The U.S. official, who visited and held talks with her counterparts in China on Tuesday, said she emphasised the need for Beijing to expel North Korean "financial facilitators" identified by Washington.

U.S. President Donald Trump in an interview with Reuters last week praised China for its efforts to restrict oil and coal supplies to North Korea but said Beijing could do much more to help constrain Pyongyang.

Trump criticised Russia for helping North Korea evade international sanctions, saying Pyongyang was getting "closer every day" to being able to deliver a long-range missile to the United States.

(Reporting by Sumeet Chatterjee; Editing by Jacqueline Wong)

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