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Friday, 05 June 20
U.S. SANCTIONS COMPLIANCE GUIDANCE RELEASED FOR THE GLOBAL MARITIME, ENERGY AND METALS SECTORS - AKIN GUMP
 Key Points
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On May 14, 2020, OFAC, the Department of State and the U.S. Coast Guard jointly released guidance for persons involved in the maritime industry regarding common deceptive shipping practices used to subvert U.S. and United Nations sanctions programs targeting Iran, North Korea and Syria.
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The guidance highlights certain deceptive practices employed in maritime activity that could signal sanctions evasion.
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The guidance also contains specific measures that the maritime industry and energy and metals sectors can take to tailor their sanctions compliance programs to avoid sanctions violations or otherwise supporting illicit shipping activities.
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This Guidance is part of a sustained focus on the international shipping industry, including the U.S. Government’s latest enforcement actions in the shipping sector on June 2, 2020.
The Guidance
On May 14, 2020, the Department of the Treasury’s Office of Foreign Assets Control (OFAC), the Department of State and the U.S. Coast Guard jointly released guidance (the “Guidance”) regarding common deceptive shipping practices in order to aid persons involved in the maritime industry, and energy and metals sectors, in tailoring their due diligence and sanctions compliance policies and procedures. The Guidance is particularly targeted towards ship owners, managers, operators, brokers, ship chandlers, flag registries, port operators, shipping companies, freight forwarders, classification service providers, commodity traders, insurance companies and financial institutions. The shipping industry continues to present particularly challenging issues associated with U.S. sanctions compliance, including the involvement of numerous parties in particular voyages all with different, yet overlapping risks.
The Guidance continues a further and concerted effort by OFAC to focus in particular on the shipping industry and builds on prior advisories that it has issued directed at the shipping industry, including one issued on September 4, 2019, entitled “Sanctions Risks Related to Shipping Petroleum and Petroleum Products from Iran” that also identified specific deceptive shipping practices and risk mitigation measures for the industry. As the U.S. Government’s latest enforcement actions on June 2, 2020 demonstrate, OFAC sanctions enforcement attention is squarely focused on the international shipping industry.
The Guidance also provides important insights for companies operating in the maritime sector regarding the criteria that OFAC applies when evaluating an effective sanctions compliance program for such companies.
Below we summarize key points from the Guidance that are relevant for the shipping sector, including a summary of deceptive practices highlighted in the Guidance, a summary of general practices for effective identification of potential sanctions evasion and summaries of guidance for certain actors in the maritime industry and country-specific guidance.
Deceptive Shipping Practices
The Guidance provides a summary of common tactics utilized to facilitate sanctionable or illicit maritime trade linked to Iran, North Korea and Syria, including:
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Disabling or manipulating the Automatic Identification System (AIS) on vessels to conceal a vessel’s port of call or other information regarding its voyage.
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Physically altering vessel identification to obscure the identities of sanctioned vessels or vessels engaging in sanctionable activities.
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Falsifying cargo and vessel documents, particularly with respect to shipments involving petrochemicals, petroleum, petroleum products, metals (steel, iron) or sand to disguise their origin.
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Ship-to-Ship (STS) Transfers used to conceal origin/destination of products.
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Voyage irregularities to disguise the ultimate destination or origin of cargo, including indirect routing, unscheduled detours or transit or transshipment of cargo through third countries.
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False flags and flag hopping (i.e., repeatedly registering vessels with new flag states).
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Use of complex ownership or management to disguise the ultimate beneficial owner of cargo or commodities in order to avoid sanctions or other enforcement actions.
General Practices for Effective Identification of Sanctions Evasion
The Guidance also highlights, and provides details regarding, the following practices for effective identification of potential sanctions evasion:
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Institutionalizing a sanctions compliance program, including through the implementation of written standardized operational compliance policies, procedures, standards of conduct and safeguards.
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Establishing AIS best practices and contractual requirements that make disabling/manipulating AIS for illegitimate reasons grounds for termination of contracts or investigations.
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Monitoring ships throughout the entire transaction lifecycle, including through supplementing AIS with Long Range Identification and Tracking (LRIT) and receiving periodic LRIT signals on a frequency informed by the entity’s risk assessment.
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Conducting “Know Your Customer” due diligence on customers and counterparties, which could include “maintaining the names, passport ID numbers, address(es), phone number(s), email address(es), and copies of photo identification of each customer’s beneficial owner(s).”
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Exercising supply chain due diligence, including, as appropriate, conducting due diligence to ensure that recipients and counterparties to a transaction are not sending or receiving commodities that may trigger sanctions, such as Iranian petroleum or North Korea-origin coal, and implementing controls that allow for verification-of-origin and recipient checks for ships that conduct STS transfers.
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Incorporating the above “best practices” into contracts.
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Sharing information about sanctions evasion techniques and threats amongst industry groups.
Annex A: Actor-specific Guidance
In Annex A, the Guidance provides bulleted lists of guidance and information for particular actors within the maritime industry, including: maritime insurance companies, flag registry managers, port state control authorities, shipping industry associations, regional and global commodity trading, supplier, and brokering companies, financial institutions, ship owners, operators, and charterers, classification societies, vessel captains and crewing companies.
Below we summarize the guidance with respect to ship owners, operators and charterers, vessel captains and crewing companies.
Ship Owners, Operators, and Charterers:
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Identify vessels that, in the past two years, have a pattern of AIS manipulation not consistent with the International Convention for the Safety of Life at Sea and terminating business relationships with clients that continue to use those vessels.
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Keep and analyze records, including, where possible, photographs, of delivery and recipient vessels and/or recipients located at ports when possible, to enhance end-use verification.
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Protect employees who reveal illegal or sanctionable behavior from retaliation.
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Incorporate data into due diligence practices from organizations that provide commercial shipping data.
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Communicate to counterparts as necessary and appropriate (e.g., ship owners, managers, charterers, operators) an expectation that they have adequate and appropriate compliance policies.
Vessel Captains:
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Ensure deck officers are aware of the International Maritime Organization’s (IMO) AIS regulations, including the requirement to consistently broadcast AIS transmissions.
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Communicate to ship owners and charterers that vessels are monitored for AIS disablement and that any occurrences of AIS disablement will be investigated.
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Understand vessels’ AIS history to determine whether they may have been involved in illicit activities.
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Before engaging in ship-to-ship transfers, verify the other vessel’s name, IMO number and flag, and ensure there is a legitimate business purpose for the transfer.
Crewing Companies:
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Ensure crewmembers are aware of IMO guidance in relation to illicit shipping and the reasons why certain practices are unsafe.
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Communicate to clients that crews are monitored for AIS disablement and that any occurrences of AIS disablement will be investigated.
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Understand vessels’ AIS history to determine whether it may have been involved in illicit activities.
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Ensure that crewmembers who reveal illegal or sanctionable activity are protected from retaliation and providing a confidential mechanism for reporting sanctionable conduct.
Annex B: Country Guidance
In Annex B, the Guidance summarizes relevant provisions of U.S. and U.N. sanctions programs concerning North Korea, Iran and Syria and actions prohibited under said programs relevant to the maritime industry. It also highlights a few points with respect to recent deceptive practices to facilitate illicit shipping to North Korea, Syria, and Iran which are summarized below.
North Korea:
North Korea reportedly exported 3.7 million metric tons of coal between January and August 2019, in violation of U.N. sanctions. Further, while under United Nations Security Council Resolution 2397, North Korea is limited to importing a maximum of 500,000 barrels of petroleum per year, from January to October 2019. North Korea ports received 221 tanker deliveries, which, if fully laden, would result in approximately 3.89 million barrels of imports. According to the Guidance, these illicit exports and imports are primarily effectuated via ship-to-ship transfers in Chinese territorial seas. Image 1 below depicts the most common areas in which such ship-to-ship transfers take place.
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Common Locations of Ship-to-Ship Transfers subverting North Korean Sanctions1 |
North Korea is also reportedly acquiring vessels destined for scrapping and non-ocean-going barges that do not transmit AIS signals to engage in illicit import/export operations.
Syria:
The Guidance notes that “the supply chain and petroleum-related shipments [to Syria] create significant sanctions risk for those in the maritime industry.” As an example, it highlights the September 2019 OFAC action against Maritime Assistance LLC for facilitating the sale and delivery of jet fuel to Russian military forces operating in Syria. It also highlights the OFAC action in the November 2018 scheme in which Iranian and Russian entities engaged in a payment offsetting arrangement in which the sale and shipment of Iranian oil to Syria provided funding to Iran and proxy groups such as Hizballah, the Islamic Resistance Movement (HAMAS) and the Islamic Revolutionary Guard Corps-Quds Force (IRGC-QF).
Iran:
The Guidance did not provide specific guidance with respect to deceptive shipping practices used to subvert Iran-related sanctions—rather, it noted that the IRGC-QF continues to try to evade U.S. sanctions “by obfuscating the origin, destination, and recipient of oil shipments,” stating that “the use of such deceptive tactics is unique neither to Iran nor to Iran’s petroleum industry.”
Companies in the shipping industry or whose businesses intersect the shipping sector should assess their sanctions risk in light of this latest U.S. government guidance and make necessary modifications or enhancements to their compliance programs to mitigate this risk.
Source: Akin Gump, Strauss Hauer & Feld LLP
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Friday, 22 March 24
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Showing 26 to 30 news of total 6871 |
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- Sical Logistics Limited - India
- Eastern Energy - Thailand
- Carbofer General Trading SA - India
- Indian Energy Exchange, India
- Gujarat Electricity Regulatory Commission - India
- White Energy Company Limited
- Toyota Tsusho Corporation, Japan
- Kalimantan Lumbung Energi - Indonesia
- Global Coal Blending Company Limited - Australia
- European Bulk Services B.V. - Netherlands
- Karbindo Abesyapradhi - Indoneisa
- Energy Development Corp, Philippines
- Larsen & Toubro Limited - India
- Intertek Mineral Services - Indonesia
- Chamber of Mines of South Africa
- SN Aboitiz Power Inc, Philippines
- IHS Mccloskey Coal Group - USA
- Global Green Power PLC Corporation, Philippines
- Baramulti Group, Indonesia
- Semirara Mining and Power Corporation, Philippines
- Semirara Mining Corp, Philippines
- McConnell Dowell - Australia
- Iligan Light & Power Inc, Philippines
- Siam City Cement - Thailand
- Ind-Barath Power Infra Limited - India
- TeaM Sual Corporation - Philippines
- Sojitz Corporation - Japan
- Karaikal Port Pvt Ltd - India
- Romanian Commodities Exchange
- Formosa Plastics Group - Taiwan
- Gujarat Sidhee Cement - India
- Globalindo Alam Lestari - Indonesia
- Aboitiz Power Corporation - Philippines
- Kaltim Prima Coal - Indonesia
- Holcim Trading Pte Ltd - Singapore
- ASAPP Information Group - India
- Indogreen Group - Indonesia
- Africa Commodities Group - South Africa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Indian Oil Corporation Limited
- Sakthi Sugars Limited - India
- Ministry of Finance - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Rio Tinto Coal - Australia
- Australian Coal Association
- Bulk Trading Sa - Switzerland
- Power Finance Corporation Ltd., India
- Energy Link Ltd, New Zealand
- The State Trading Corporation of India Ltd
- PowerSource Philippines DevCo
- Marubeni Corporation - India
- New Zealand Coal & Carbon
- Heidelberg Cement - Germany
- Xindia Steels Limited - India
- Orica Mining Services - Indonesia
- Maheswari Brothers Coal Limited - India
- Agrawal Coal Company - India
- Bahari Cakrawala Sebuku - Indonesia
- Edison Trading Spa - Italy
- Posco Energy - South Korea
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kepco SPC Power Corporation, Philippines
- Mercuria Energy - Indonesia
- Bukit Baiduri Energy - Indonesia
- India Bulls Power Limited - India
- Jaiprakash Power Ventures ltd
- Singapore Mercantile Exchange
- Kobexindo Tractors - Indoneisa
- Timah Investasi Mineral - Indoneisa
- Kideco Jaya Agung - Indonesia
- Electricity Authority, New Zealand
- Bayan Resources Tbk. - Indonesia
- Star Paper Mills Limited - India
- Videocon Industries ltd - India
- VISA Power Limited - India
- Mintek Dendrill Indonesia
- Parliament of New Zealand
- Coastal Gujarat Power Limited - India
- Coal and Oil Company - UAE
- The Treasury - Australian Government
- Rashtriya Ispat Nigam Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bhushan Steel Limited - India
- Neyveli Lignite Corporation Ltd, - India
- AsiaOL BioFuels Corp., Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Coalindo Energy - Indonesia
- Chettinad Cement Corporation Ltd - India
- Price Waterhouse Coopers - Russia
- Miang Besar Coal Terminal - Indonesia
- Planning Commission, India
- Minerals Council of Australia
- Savvy Resources Ltd - HongKong
- Directorate General of MIneral and Coal - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Georgia Ports Authority, United States
- Samtan Co., Ltd - South Korea
- Uttam Galva Steels Limited - India
- CIMB Investment Bank - Malaysia
- Mjunction Services Limited - India
- Bhatia International Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Aditya Birla Group - India
- Kapuas Tunggal Persada - Indonesia
- Attock Cement Pakistan Limited
- PetroVietnam Power Coal Import and Supply Company
- Indo Tambangraya Megah - Indonesia
- Dalmia Cement Bharat India
- PTC India Limited - India
- Binh Thuan Hamico - Vietnam
- Lanco Infratech Ltd - India
- Sree Jayajothi Cements Limited - India
- Standard Chartered Bank - UAE
- MS Steel International - UAE
- Trasteel International SA, Italy
- Cigading International Bulk Terminal - Indonesia
- Independent Power Producers Association of India
- Thai Mozambique Logistica
- London Commodity Brokers - England
- CNBM International Corporation - China
- Bharathi Cement Corporation - India
- Sarangani Energy Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- Thiess Contractors Indonesia
- Mercator Lines Limited - India
- Bukit Makmur.PT - Indonesia
- Parry Sugars Refinery, India
- GN Power Mariveles Coal Plant, Philippines
- ICICI Bank Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Indonesian Coal Mining Association
- Grasim Industreis Ltd - India
- PNOC Exploration Corporation - Philippines
- Ministry of Mines - Canada
- Petron Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Offshore Bulk Terminal Pte Ltd, Singapore
- Vizag Seaport Private Limited - India
- Meralco Power Generation, Philippines
- Merrill Lynch Commodities Europe
- Essar Steel Hazira Ltd - India
- Ambuja Cements Ltd - India
- Deloitte Consulting - India
- Krishnapatnam Port Company Ltd. - India
- SMG Consultants - Indonesia
- Indika Energy - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Interocean Group of Companies - India
- Jindal Steel & Power Ltd - India
- Anglo American - United Kingdom
- TNB Fuel Sdn Bhd - Malaysia
- Therma Luzon, Inc, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- The University of Queensland
- Electricity Generating Authority of Thailand
- Antam Resourcindo - Indonesia
- Simpson Spence & Young - Indonesia
- Australian Commodity Traders Exchange
- Tata Chemicals Ltd - India
- Vedanta Resources Plc - India
- Kohat Cement Company Ltd. - Pakistan
- Cement Manufacturers Association - India
- SMC Global Power, Philippines
- Siam City Cement PLC, Thailand
- Manunggal Multi Energi - Indonesia
- Tamil Nadu electricity Board
- Bhoruka Overseas - Indonesia
- South Luzon Thermal Energy Corporation
- Ceylon Electricity Board - Sri Lanka
- GAC Shipping (India) Pvt Ltd
- Central Java Power - Indonesia
- Orica Australia Pty. Ltd.
- Global Business Power Corporation, Philippines
- Leighton Contractors Pty Ltd - Australia
- Riau Bara Harum - Indonesia
- Barasentosa Lestari - Indonesia
- LBH Netherlands Bv - Netherlands
- Altura Mining Limited, Indonesia
- Directorate Of Revenue Intelligence - India
- Port Waratah Coal Services - Australia
- Goldman Sachs - Singapore
- GMR Energy Limited - India
- Sinarmas Energy and Mining - Indonesia
- Medco Energi Mining Internasional
- Borneo Indobara - Indonesia
- Salva Resources Pvt Ltd - India
- Wood Mackenzie - Singapore
- Maharashtra Electricity Regulatory Commission - India
- Meenaskhi Energy Private Limited - India
- Bangladesh Power Developement Board
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kartika Selabumi Mining - Indonesia
- GVK Power & Infra Limited - India
- Banpu Public Company Limited - Thailand
- Economic Council, Georgia
- Jorong Barutama Greston.PT - Indonesia
- Makarim & Taira - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Malabar Cements Ltd - India
- Renaissance Capital - South Africa
- Metalloyd Limited - United Kingdom
- Ministry of Transport, Egypt
- Eastern Coal Council - USA
- Madhucon Powers Ltd - India
- Pendopo Energi Batubara - Indonesia
- San Jose City I Power Corp, Philippines
- Kumho Petrochemical, South Korea
- Straits Asia Resources Limited - Singapore
- Wilmar Investment Holdings
- Sindya Power Generating Company Private Ltd
- Commonwealth Bank - Australia
- Central Electricity Authority - India
- IEA Clean Coal Centre - UK
- International Coal Ventures Pvt Ltd - India
- Latin American Coal - Colombia
- Oldendorff Carriers - Singapore
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