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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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Showing 31 to 35 news of total 6871 |
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- IEA Clean Coal Centre - UK
- Anglo American - United Kingdom
- Gujarat Sidhee Cement - India
- Indogreen Group - Indonesia
- Bulk Trading Sa - Switzerland
- Eastern Energy - Thailand
- TNB Fuel Sdn Bhd - Malaysia
- Asmin Koalindo Tuhup - Indonesia
- VISA Power Limited - India
- AsiaOL BioFuels Corp., Philippines
- Toyota Tsusho Corporation, Japan
- Binh Thuan Hamico - Vietnam
- Interocean Group of Companies - India
- Bayan Resources Tbk. - Indonesia
- Energy Link Ltd, New Zealand
- Baramulti Group, Indonesia
- Directorate Of Revenue Intelligence - India
- Mintek Dendrill Indonesia
- San Jose City I Power Corp, Philippines
- Semirara Mining Corp, Philippines
- Economic Council, Georgia
- White Energy Company Limited
- Kohat Cement Company Ltd. - Pakistan
- Energy Development Corp, Philippines
- GMR Energy Limited - India
- Jindal Steel & Power Ltd - India
- Coastal Gujarat Power Limited - India
- South Luzon Thermal Energy Corporation
- Singapore Mercantile Exchange
- International Coal Ventures Pvt Ltd - India
- Australian Commodity Traders Exchange
- PTC India Limited - India
- Larsen & Toubro Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- GAC Shipping (India) Pvt Ltd
- Cement Manufacturers Association - India
- Barasentosa Lestari - Indonesia
- PNOC Exploration Corporation - Philippines
- Siam City Cement PLC, Thailand
- Port Waratah Coal Services - Australia
- Central Java Power - Indonesia
- Eastern Coal Council - USA
- London Commodity Brokers - England
- Thiess Contractors Indonesia
- Savvy Resources Ltd - HongKong
- Romanian Commodities Exchange
- Mercator Lines Limited - India
- Indika Energy - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Madhucon Powers Ltd - India
- The University of Queensland
- Mjunction Services Limited - India
- Electricity Authority, New Zealand
- Australian Coal Association
- CNBM International Corporation - China
- Thai Mozambique Logistica
- Videocon Industries ltd - India
- MS Steel International - UAE
- Chamber of Mines of South Africa
- Star Paper Mills Limited - India
- Maheswari Brothers Coal Limited - India
- Krishnapatnam Port Company Ltd. - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Africa Commodities Group - South Africa
- Leighton Contractors Pty Ltd - Australia
- The Treasury - Australian Government
- Aboitiz Power Corporation - Philippines
- Bharathi Cement Corporation - India
- European Bulk Services B.V. - Netherlands
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sree Jayajothi Cements Limited - India
- ASAPP Information Group - India
- Timah Investasi Mineral - Indoneisa
- Bukit Makmur.PT - Indonesia
- Global Business Power Corporation, Philippines
- Planning Commission, India
- India Bulls Power Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Malabar Cements Ltd - India
- SMG Consultants - Indonesia
- Price Waterhouse Coopers - Russia
- Meenaskhi Energy Private Limited - India
- Coalindo Energy - Indonesia
- Aditya Birla Group - India
- Globalindo Alam Lestari - Indonesia
- Agrawal Coal Company - India
- Kobexindo Tractors - Indoneisa
- Essar Steel Hazira Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Vedanta Resources Plc - India
- Karbindo Abesyapradhi - Indoneisa
- Tata Chemicals Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Oldendorff Carriers - Singapore
- Parliament of New Zealand
- McConnell Dowell - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Trasteel International SA, Italy
- Mercuria Energy - Indonesia
- Makarim & Taira - Indonesia
- Carbofer General Trading SA - India
- Iligan Light & Power Inc, Philippines
- Alfred C Toepfer International GmbH - Germany
- Coal and Oil Company - UAE
- Marubeni Corporation - India
- Attock Cement Pakistan Limited
- Heidelberg Cement - Germany
- Siam City Cement - Thailand
- Bangladesh Power Developement Board
- Latin American Coal - Colombia
- Indonesian Coal Mining Association
- Metalloyd Limited - United Kingdom
- Electricity Generating Authority of Thailand
- Pendopo Energi Batubara - Indonesia
- Ministry of Mines - Canada
- Orica Mining Services - Indonesia
- Petron Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Independent Power Producers Association of India
- Kapuas Tunggal Persada - Indonesia
- Rio Tinto Coal - Australia
- Kaltim Prima Coal - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Central Electricity Authority - India
- Banpu Public Company Limited - Thailand
- Vizag Seaport Private Limited - India
- Antam Resourcindo - Indonesia
- Georgia Ports Authority, United States
- Manunggal Multi Energi - Indonesia
- Indian Energy Exchange, India
- Minerals Council of Australia
- Sojitz Corporation - Japan
- Formosa Plastics Group - Taiwan
- Merrill Lynch Commodities Europe
- Miang Besar Coal Terminal - Indonesia
- Indo Tambangraya Megah - Indonesia
- Bhoruka Overseas - Indonesia
- Sindya Power Generating Company Private Ltd
- Kideco Jaya Agung - Indonesia
- OPG Power Generation Pvt Ltd - India
- Kumho Petrochemical, South Korea
- PetroVietnam Power Coal Import and Supply Company
- Ministry of Finance - Indonesia
- New Zealand Coal & Carbon
- Dalmia Cement Bharat India
- Petrochimia International Co. Ltd.- Taiwan
- Simpson Spence & Young - Indonesia
- Global Coal Blending Company Limited - Australia
- Bhatia International Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- CIMB Investment Bank - Malaysia
- Gujarat Mineral Development Corp Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Edison Trading Spa - Italy
- Ceylon Electricity Board - Sri Lanka
- LBH Netherlands Bv - Netherlands
- SMC Global Power, Philippines
- SN Aboitiz Power Inc, Philippines
- Sakthi Sugars Limited - India
- Borneo Indobara - Indonesia
- Renaissance Capital - South Africa
- Ministry of Transport, Egypt
- GVK Power & Infra Limited - India
- Standard Chartered Bank - UAE
- Parry Sugars Refinery, India
- Indian Oil Corporation Limited
- Salva Resources Pvt Ltd - India
- Orica Australia Pty. Ltd.
- Medco Energi Mining Internasional
- Intertek Mineral Services - Indonesia
- Ind-Barath Power Infra Limited - India
- Wood Mackenzie - Singapore
- Xindia Steels Limited - India
- Posco Energy - South Korea
- The State Trading Corporation of India Ltd
- Global Green Power PLC Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- Goldman Sachs - Singapore
- GN Power Mariveles Coal Plant, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Directorate General of MIneral and Coal - Indonesia
- Grasim Industreis Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Bhushan Steel Limited - India
- Straits Asia Resources Limited - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Uttam Galva Steels Limited - India
- Sarangani Energy Corporation, Philippines
- Meralco Power Generation, Philippines
- Tamil Nadu electricity Board
- Commonwealth Bank - Australia
- ICICI Bank Limited - India
- Kepco SPC Power Corporation, Philippines
- Cigading International Bulk Terminal - Indonesia
- Deloitte Consulting - India
- Kartika Selabumi Mining - Indonesia
- Chettinad Cement Corporation Ltd - India
- Wilmar Investment Holdings
- Samtan Co., Ltd - South Korea
- IHS Mccloskey Coal Group - USA
- Jaiprakash Power Ventures ltd
- Bukit Baiduri Energy - Indonesia
- PowerSource Philippines DevCo
- Ambuja Cements Ltd - India
- Power Finance Corporation Ltd., India
- Holcim Trading Pte Ltd - Singapore
- Lanco Infratech Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Altura Mining Limited, Indonesia
- Riau Bara Harum - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- TeaM Sual Corporation - Philippines
- Karaikal Port Pvt Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Sical Logistics Limited - India
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