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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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Thursday, 04 June 20
DON'T FORGET THE REAL PURPOSE OF RISK ASSESSMENTS - GARD
KNOWLEDGE TO ELEVATE
When doing a risk assessment, we often overcomplicate it and forget its real purpose.
Rather than ensuring that crew ...
Wednesday, 03 June 20
MARKET INSIGHT - INTERMODAL
Once again shipping is about to venture into uncharted waters and before the challenges of the past decade are forgotten, shipowners will have to o ...
Tuesday, 02 June 20
KOSPO LOOKING FOR 80000 MT OF 4200 NCV COAL FOR JULY
COALspot.com: Korea Southern Power Co., Ltd. (KOSPO) has issued an International tender for 80,000 Metric Tons (MT) 4200 NCV coal for 12 - 21, July ...
Tuesday, 02 June 20
INDONESIAN COAL MINER BUMI RESOURCES Q1 OUTPUT UP 5% - REUTERS
Indonesia’s largest coal miner Bumi Resources posted a 5% increase in first-quarter output at 20.8 million tonnes, the company said in a stat ...
Tuesday, 02 June 20
CHINA TAIYUAN COAL TRANSACTION PRICE INDEX DOWN 0.86 PCT - XINHUA
China Taiyuan coal transaction price index stood at 123.95 points Monday, down 0.86 percent week on week.
The index, released by Chi ...
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- Romanian Commodities Exchange
- Maharashtra Electricity Regulatory Commission - India
- Neyveli Lignite Corporation Ltd, - India
- Ceylon Electricity Board - Sri Lanka
- Siam City Cement PLC, Thailand
- Thai Mozambique Logistica
- Indogreen Group - Indonesia
- GMR Energy Limited - India
- Mjunction Services Limited - India
- Deloitte Consulting - India
- Bulk Trading Sa - Switzerland
- Mercator Lines Limited - India
- The Treasury - Australian Government
- Attock Cement Pakistan Limited
- Banpu Public Company Limited - Thailand
- Simpson Spence & Young - Indonesia
- PTC India Limited - India
- Semirara Mining and Power Corporation, Philippines
- Ind-Barath Power Infra Limited - India
- Dalmia Cement Bharat India
- Tamil Nadu electricity Board
- Ambuja Cements Ltd - India
- Directorate Of Revenue Intelligence - India
- Pendopo Energi Batubara - Indonesia
- Indian Oil Corporation Limited
- Vijayanagar Sugar Pvt Ltd - India
- The University of Queensland
- McConnell Dowell - Australia
- Georgia Ports Authority, United States
- Port Waratah Coal Services - Australia
- Therma Luzon, Inc, Philippines
- Miang Besar Coal Terminal - Indonesia
- Kumho Petrochemical, South Korea
- Cigading International Bulk Terminal - Indonesia
- Billiton Holdings Pty Ltd - Australia
- ICICI Bank Limited - India
- Kartika Selabumi Mining - Indonesia
- Edison Trading Spa - Italy
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Indonesian Coal Mining Association
- Trasteel International SA, Italy
- Sindya Power Generating Company Private Ltd
- Essar Steel Hazira Ltd - India
- Goldman Sachs - Singapore
- GN Power Mariveles Coal Plant, Philippines
- San Jose City I Power Corp, Philippines
- Coastal Gujarat Power Limited - India
- Economic Council, Georgia
- Australian Coal Association
- Bhushan Steel Limited - India
- Eastern Coal Council - USA
- Holcim Trading Pte Ltd - Singapore
- Toyota Tsusho Corporation, Japan
- India Bulls Power Limited - India
- Bukit Makmur.PT - Indonesia
- White Energy Company Limited
- Interocean Group of Companies - India
- Kideco Jaya Agung - Indonesia
- Global Green Power PLC Corporation, Philippines
- ASAPP Information Group - India
- Maheswari Brothers Coal Limited - India
- Sree Jayajothi Cements Limited - India
- Videocon Industries ltd - India
- Power Finance Corporation Ltd., India
- Salva Resources Pvt Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Sojitz Corporation - Japan
- SN Aboitiz Power Inc, Philippines
- Barasentosa Lestari - Indonesia
- Altura Mining Limited, Indonesia
- Sinarmas Energy and Mining - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indo Tambangraya Megah - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Madhucon Powers Ltd - India
- Singapore Mercantile Exchange
- Kobexindo Tractors - Indoneisa
- Metalloyd Limited - United Kingdom
- Renaissance Capital - South Africa
- IHS Mccloskey Coal Group - USA
- Larsen & Toubro Limited - India
- Commonwealth Bank - Australia
- South Luzon Thermal Energy Corporation
- Globalindo Alam Lestari - Indonesia
- Lanco Infratech Ltd - India
- Anglo American - United Kingdom
- Ministry of Transport, Egypt
- Marubeni Corporation - India
- GAC Shipping (India) Pvt Ltd
- Wilmar Investment Holdings
- Minerals Council of Australia
- Kapuas Tunggal Persada - Indonesia
- Posco Energy - South Korea
- Indian Energy Exchange, India
- Siam City Cement - Thailand
- Bayan Resources Tbk. - Indonesia
- Orica Australia Pty. Ltd.
- Karbindo Abesyapradhi - Indoneisa
- Krishnapatnam Port Company Ltd. - India
- Grasim Industreis Ltd - India
- Indika Energy - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Carbofer General Trading SA - India
- Heidelberg Cement - Germany
- Standard Chartered Bank - UAE
- Mintek Dendrill Indonesia
- Vizag Seaport Private Limited - India
- Savvy Resources Ltd - HongKong
- Meralco Power Generation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Latin American Coal - Colombia
- Thiess Contractors Indonesia
- Oldendorff Carriers - Singapore
- TeaM Sual Corporation - Philippines
- Borneo Indobara - Indonesia
- Global Business Power Corporation, Philippines
- Leighton Contractors Pty Ltd - Australia
- Iligan Light & Power Inc, Philippines
- Eastern Energy - Thailand
- London Commodity Brokers - England
- Bukit Baiduri Energy - Indonesia
- Kepco SPC Power Corporation, Philippines
- Jindal Steel & Power Ltd - India
- International Coal Ventures Pvt Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Aboitiz Power Corporation - Philippines
- Uttam Galva Steels Limited - India
- Bangladesh Power Developement Board
- Manunggal Multi Energi - Indonesia
- Wood Mackenzie - Singapore
- European Bulk Services B.V. - Netherlands
- Bukit Asam (Persero) Tbk - Indonesia
- Vedanta Resources Plc - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Orica Mining Services - Indonesia
- Aditya Birla Group - India
- The State Trading Corporation of India Ltd
- Samtan Co., Ltd - South Korea
- Bhatia International Limited - India
- Chamber of Mines of South Africa
- Central Java Power - Indonesia
- SMC Global Power, Philippines
- Baramulti Group, Indonesia
- Cement Manufacturers Association - India
- Bahari Cakrawala Sebuku - Indonesia
- Formosa Plastics Group - Taiwan
- Ministry of Mines - Canada
- Directorate General of MIneral and Coal - Indonesia
- VISA Power Limited - India
- Sakthi Sugars Limited - India
- Parliament of New Zealand
- Star Paper Mills Limited - India
- SMG Consultants - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Coal and Oil Company - UAE
- Alfred C Toepfer International GmbH - Germany
- New Zealand Coal & Carbon
- Malabar Cements Ltd - India
- Africa Commodities Group - South Africa
- LBH Netherlands Bv - Netherlands
- Independent Power Producers Association of India
- Energy Development Corp, Philippines
- Semirara Mining Corp, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Karaikal Port Pvt Ltd - India
- Australian Commodity Traders Exchange
- PowerSource Philippines DevCo
- GVK Power & Infra Limited - India
- Sarangani Energy Corporation, Philippines
- Intertek Mineral Services - Indonesia
- Electricity Authority, New Zealand
- Bharathi Cement Corporation - India
- Central Electricity Authority - India
- AsiaOL BioFuels Corp., Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Mercuria Energy - Indonesia
- Rashtriya Ispat Nigam Limited - India
- OPG Power Generation Pvt Ltd - India
- Riau Bara Harum - Indonesia
- Bhoruka Overseas - Indonesia
- CIMB Investment Bank - Malaysia
- Medco Energi Mining Internasional
- Timah Investasi Mineral - Indoneisa
- Kaltim Prima Coal - Indonesia
- Ministry of Finance - Indonesia
- Energy Link Ltd, New Zealand
- Xindia Steels Limited - India
- Binh Thuan Hamico - Vietnam
- Planning Commission, India
- Antam Resourcindo - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Agrawal Coal Company - India
- Tata Chemicals Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Price Waterhouse Coopers - Russia
- Sical Logistics Limited - India
- IEA Clean Coal Centre - UK
- Gujarat Sidhee Cement - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Electricity Generating Authority of Thailand
- Petron Corporation, Philippines
- Merrill Lynch Commodities Europe
- Global Coal Blending Company Limited - Australia
- PNOC Exploration Corporation - Philippines
- Kalimantan Lumbung Energi - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Makarim & Taira - Indonesia
- Straits Asia Resources Limited - Singapore
- Rio Tinto Coal - Australia
- CNBM International Corporation - China
- Parry Sugars Refinery, India
- MS Steel International - UAE
- Meenaskhi Energy Private Limited - India
- Jaiprakash Power Ventures ltd
- Pipit Mutiara Jaya. PT, Indonesia
- Chettinad Cement Corporation Ltd - India
- Coalindo Energy - Indonesia
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