Let me say first off, I have not tried this. There was a book on amateur rocket making that had a trick using kerosene or light oil as a smoke maker. It did not involve any combustion. The idea was to have two holes in a cylinder tank above the rocket engine. The cylinder was full of kerosene. The upper hole in the cylinder was open to the air, and the lower hole had a small cork or piece of tape over it. When the rocket reached any sort of speed, the tape or cork was blown off by aerodynamic pressure and the kerosene or any NON- volatile liquid, such as anti-freeze, light oil, or even colored water, would be sucked out the lower hole and turned to a mist resembling smoke.
A similar trick is used by the Blue Angles and other aerobatic teams to make red, white, or blue smoke. If you introduce a non volatile liquid into a fast moving air stream you will get a smoke like mist. It might take a lot of colorant or dye to make the liquid appear colored, white is the easiest.
I'll leave it up to you guys to figure out how to make a chamber with two holes in your mortar shells. Remember, the liquid won't come out unless air is pushed in, or a spring is used to push it out. The speed of the shell should do the rest of the job. The should be no problem with any regulations using a method like this.