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European banks resolve Mozambican bond offerings matter
On October 19, multiple agencies—the DOJ, SEC and UK’s FCA—announced a coordinated resolution with a European bank related to debt offerings for entities in Mozambique. (See here and here.) In total, fines to U.S. and U.K. authorities reached almost $475 million, and the institution also agreed to forgive $200 million of the debt.
In a related action, a London-based subsidiary of a Russian bank (bank) separately agreed to pay over $6 million to settle SEC charges related to its role in a second 2016 bond offering. According to the SEC’s order, the second offering as structured by the bank and reespondent permitted investors “to exchange their loan participation notes (LPNs) for a direct sovereign bond issued by the Republic of Mozambique” in an earlier bond offering. However, the SEC alleged that the offering materials distributed and marketed by the respondent and bank “failed to disclose the full nature of Mozambique’s indebtedness and, relatedly, its risk of default on the notes.” Furthermore, the SEC alleged that proceeds from the financing from the respondent and bank were supposed to be used exclusively for maritime projects, but in reality, without the bank’s knowledge, only a portion of the loan proceeds was applied towards maritime projects while the rest was diverted to pay kickbacks and make improper payments to Mozambican government officials. Mozambique later defaulted on the financings after the full extent of “secret” debt was revealed.
OFAC sanctions Columbian drug trafficker
On September 16, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to the Foreign Narcotics Kingpin Designation Act against a leader of a Columbia-based international drug trafficking organization. OFAC noted that the designated individual “strategically located maritime corridors in northern Colombia and collects a per kilogram tax from narcotics traffickers for protection and safe passage of multi-ton shipments of narcotics through the [organization’s] area of control.” OFAC also designated three individuals and two entities closely related to the organization’s leader for providing material support to the narcotics trafficking activities. As a result of the sanctions, all property and interests in property belonging to the sanctioned individual subject to U.S. jurisdiction are blocked and must be reported to OFAC. U.S. persons are also generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons.
OFAC sanctions entities for assisting North Korean coal exportation
On December 8, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Orders 13687, 13722, and 13810 against six entities related to the alleged transportation of North Korean coal. OFAC also identified four vessels as blocked property. According to OFAC, by engaging in activities prohibited under UN Security Council resolution 2371, the six sanctioned entities have assisted North Korea’s continued efforts to circumvent UN prohibitions on the exportation of North Korean coal. As a result of the sanctions, “all property and interests in property of these targets that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC.” OFAC noted that its regulations “generally prohibit” U.S. persons from participating in transactions with the designated persons, and warned foreign financial institutions that if they knowingly facilitate significant transactions for any of the designated individuals or entities, they may be subject to U.S. secondary sanctions. OFAC also recommended all relevant jurisdictions review a global advisory issued last May by the U.S. Departments of State and Treasury, along with the U.S. Coast Guard (covered by InfoBytes here), which warned the maritime industry of deceptive shipping practices used by Iran, North Korea, and Syria to evade economic sanctions.
OFAC revokes Venezuela-related general license
On July 2, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) revoked and archived Venezuela-related General License 37 “Authorizing the Wind Down of Transactions Involving Delos Voyager Shipping Ltd, Romina Maritime Co Inc, and Certain Vessels.” Additionally, OFAC removed eight companies from the Specially Designated Nationals and Blocked Persons list.
Global advisory addresses illicit shipping and sanctions evasion practices
On May 14, the U.S. Departments of State and Treasury, along with the U.S. Coast Guard, issued a global advisory warning the maritime industry of deceptive shipping practices used by Iran, North Korea, and Syria to evade economic sanctions. The “Sanctions Advisory for the Maritime Industry, Energy and Metals Sectors, and Related Communities” expands upon previously issued advisories and discusses due diligence approaches that entities, including financial institutions, should employ to monitor illicit activity and mitigate the risk of potentially engaging in prohibited activities or transactions. Among other things, the advisory provides a list of general compliance practices that may help entities “in more effectively identifying potential sanctions evasion.” These include: (i) institutionalizing sanctions compliance programs; (ii) establishing Automatic Identification System (AIS) best practices and contractual requirements to monitor for manipulations and disruptions, which may be an indication of potential illicit or sanctionable activity; (iii) monitoring ships throughout the entire transaction lifecycle, including those leased to third parties; (iv) knowing your customers and counterparties; (v) exercising supply chain due diligence; (vi) incorporating these best practices into contractual language; and (vii) engaging in industry information sharing of challenges, threats, and risk mitigation measures.
See here for previous InfoBytes coverage on global shipping advisories.
OFAC sanctions Iranian petroleum shipping network
On September 4, the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order (E.O.) 13224 against a complex shipping network “that is directed by and financially supports the Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) and its terrorist proxy Hizballah.” According to OFAC, the IRGC-QF managed to obfuscate its involvement in moving hundreds of millions of dollars’ worth of Iranian oil over the past year through the use of the sanctioned shipping network for the benefit of illicit actors. The sanctioned shipping network includes 16 entities and 10 individuals, as well as 11 vessels identified as “as property in which blocked persons have an interest.”
As a result of the sanctions, “all property and interests in property of these entities that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC.” OFAC noted that its regulations “generally prohibit” U.S. persons from participating in transactions with the designated persons, and warned foreign financial institutions that if they knowingly facilitate significant financial transactions for any of the designated entities, they may be subject to U.S. correspondent account or payable-through account sanctions. Additionally, OFAC issued a reminder that “the purchase, acquisition, sale, transport, or marketing of petroleum or petroleum products from Iran is sanctionable pursuant to E.O. 13846,” and released a new shipping advisory warning the maritime community of these types of schemes and the sanctions risks associated with blocked persons.
Danish company pays approximately $33 million to resolve bribery allegations
A Danish company that makes protective coatings used in maritime environments announced on March 4 that it had settled bribery allegations with the Danish State Prosecutor for Serious and International Crime by paying a $33 million fine. The company self-reported what it called “illegal sales practices found in Germany, other countries in Europe, and in Asia” in April 2017.
OFAC sanctions target North Korea’s shipping and trading industry
On February 23, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) imposed additional sanctions targeting the North Korean shipping and trading industry. The sanctions include the designation of 27 entities, 28 vessels, and one individual consistent with the Countering America’s Adversaries Through Sanctions Act of 2017. Treasury Secretary Steven T. Mnuchin stated, “Treasury is aggressively targeting all illicit avenues used by North Korea to evade sanctions, including taking decisive action to block the vessels, shipping companies, and entities across the globe that work on North Korea’s behalf. This will significantly hinder the Kim regime’s capacity to conduct evasive maritime activities that facilitate illicit coal and fuel transports, and erode its abilities to ship goods through international waters.” All property or interests in property held by the sanctioned individual and entities within U.S. jurisdiction must be blocked, and transactions between the designated persons and Americans are also prohibited.
Separately, OCAC issued a global shipping advisory in conjunction with the U.S. Department of State and the U.S. Coast Guard to, among other things, (i) outline methods employed by North Korea to facilitate illicit transactions to evade sanctions; (ii) list due diligence steps companies should employ to monitor illicit North Korean activity and mitigate the risk of potentially engaging in prohibited activity or transactions; and (iii) provide an overview of penalties associated with violating U.S. or UN sanctions.
See here for previous InfoBytes coverage on North Korean sanctions.