Course Outline

Overview:

• What is a sanction?
• Why are they utilised?
• Assessing sanction risk
• Understanding local requirements
• Why the traditional ‘blacklist’ approach may not be effective

Understanding the scope and powers of the different trade sanction regimes:

• The United Kingdom – OFSI – Office of Financial Sanctions Implementation (UK) (2016)
• The United States of America – OFAC – Office of Foreign Assets Control (USA); The ‘Entity List’ (export control); Specially Designated Nationals  (SDN) list (US)
• Case Study – Commerzbank (March 2015)
• The United Nations
• The European Union
• OECD
• ASEAN
• JCPOA
• Asset freezes
• Anti-money laundering (AML)
• Bans and prohibitions (military and ‘dual-usage’ equipment)
• Case Study: Examining sanctions on North Korea; Syria
• Case Study: The sanction consequences on maritime trade of Russia’s invasion of Ukraine

Identifying Red Flags:

• AIS manipulation/interference – ‘spoofing’ examined
• Route information – origin/destination; indirect routing; ‘masking’ port calls; unscheduled deviations; transhipment of cargo through 3rd party countries
• Electronic warfare and cybersecurity – deliberate disruption/attack/attempting to safeguard against
• Alteration of vessels physical identification (name; livery; IMO numbers); obtaining a ‘shell identity’
• Falsifying documentation – documentation relating to both cargo and vessel – certificate of origin; insurance documents; packing lists; route history (last ports of call); bills of lading; invoices; customs and exportation documentation, etc.
• Ship-to-ship (STS) operations/activities – location of anchorage (proximity to sanctioned countries); night operations; identity of counterparty
• False flags/flag hopping
• Opaque and complex business structures – ‘masking’ true beneficial owners; transfer and movement of vessels between companies that are owned by the same principals

The issue of anonymity of ship ownership – ‘Corporate Camouflage?’

• ‘Piercing the Corporate Veil’
• The range of ‘corporate mechanisms’ -The ‘Shell company’; the ‘Shelf Company’ and the ‘Front Company’ (Corporate ownership); Trusts; International Business Corporations and Foundations examined; Private and Public Limited Companies; Limited Liability Companies (LLC’s)
• Layering’; professional intermediaries and 3rd parties – the issue of ‘indirect control’
• ‘Open Registers’
• Some common methodologies of obfuscation/concealment – bearer shares; nominee directors/shareholders; corporations as ‘nominee directors’
• Multi-jurisdictional exploitation – deepening the shadows
• ‘Linked’ territories

Developing a sanctions compliance programme

• Understanding the challenges and threats
• Engagement with sanctionable parties – contract termination provisions
• Risk mitigation – creating an appropriate set of controls
• Confidential reporting mechanisms
• Whistleblowing and retaliation
• Auditing a SCP
• Stakeholder engagement strategy – owners; charterers; operators; management
• Key factors of a SCP – compliance with international standards; trained and competent personnel; monitoring AIS; monitoring cargo loading/discharge; examination/confirmation of relevant documentation (such as B/L)

Conducting a Due Diligence programme

• Vessel and AIS history
• Details of vessels ‘beneficial owner’
• Documentation check – export licenses; shipping documentation; B/L’s; certificate of origin; cargo destination, load port documents; port logs; ullage documentation (‘headspace’ in tanks) etc.
• Voyage details – vessel; route; cargo; port of origin/destination; parties to contract
• Updating contractual provisions – particularly regarding STS operations
• Long range identification tracking (LRIT) to supplement AIS
• Supply chain monitoring

Drafting sanction compliance provisions in contracts:

• Warranties that no parties; cargo interests or associates (i.e.; sub-charterers) are subject to sanctions; that any charterparty will not be using the vessel contrary to any sanctions
• Targeted sanction clauses – specifying origin and details of a particular cargo is not subject to sanctions
• Clauses that cover the entire contractual performance (i.e.; the CP or any sub-charter party)
• Termination provisions in case of sanction breach – e.g.: The BIMCO AIS clause (July 21)
• Case Study: Islamic Republic of Iran Shipping Lines v. Steamship Mutual Underwriting Association (Bermuda) Ltd
• Provisions dealing with sanctions arising mid-contract – e.g.: refusal of STS – actions and redress mechanisms (i.e.; economic loss and damages)
• Case study: Some examples of contract sanction clauses examined (including P&I Club’s perspective)