Maritime Trade Sanctions Compliance (VIRTUAL) - MTS

Maritime Trade Sanctions Compliance (VIRTUAL) - MTS

Course Summary

There is little doubt that maritime trade represents the majority of international business trade contracted 24/7 globally. Cargos of every conceivable type are in continuous movement; providing the lifeblood for the beating heart of commercial commerce. Some actors upon this global stage however, may be governments and regimes that are considered unethical in their policies or behaviours and as a result, face sanctions as a punitive mechanism from the wider international community in an attempt to change such policies and behaviour. International criminal interests and terrorists may utilise the flow of maritime trade to further their own ends – perhaps by laundering money or to raise capital for funding. The sheer volume of maritime trade poses a double-sided conundrum. On one hand, like-minded governments may draft and ratify international sanctions, whilst on the other the implementation and enforcement of them is another matter wholly. This problem is further exacerbated for those who must ensure that they do not fall foul of sanction compliance requirements, whilst there are others who will seek to circumvent and avoid any such sanction measures. This course has been designed to provide the delegate with an in depth understanding of the components and issues that form this complex web of activities. The focus is on interactive dialogue throughout; problem solving and the examination of case studies. 

On completion of this course, delegates will:

• Understand what a sanction is and why they are utilised in international maritime trade
• Become familiar with the scope and powers of the various international trade sanction bodies and regimes
• Recognise the key ‘Red Flags’ to look for in sanction evasion/non-compliance 
• Know what ‘Piercing the Corporate Veil’ means and why it is so important to sanctions compliance
• Gain awareness of the methodologies utilised to make ship ownership anonymous
• Be able to develop a sanctions compliance programme
• Understand the due diligence process and what to look for
• Have awareness of the different types of contractual sanction provisions that are commonly utilised internationally

Course Content

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)