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Democratic People's Republic of Korea (DPRK) : Sanctions Enforcement Update

This circular from the International Group provides an update on sanctions enforcement against North Korea following a recent UN report. The report found that North Korea continues its nuclear program in violation of UN resolutions and has raised revenue through illicit petroleum imports and coal/sand exports. Non-North Korean vessels are being used to evade detection through ship-to-ship transfers of unlawful cargo. Shipowners are advised to exercise high due diligence to avoid sanctions violations like transporting goods to or from North Korea, as this could result in loss of insurance coverage and designation by enforcement authorities.

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Lazaros Karapou
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28 views

Democratic People's Republic of Korea (DPRK) : Sanctions Enforcement Update

This circular from the International Group provides an update on sanctions enforcement against North Korea following a recent UN report. The report found that North Korea continues its nuclear program in violation of UN resolutions and has raised revenue through illicit petroleum imports and coal/sand exports. Non-North Korean vessels are being used to evade detection through ship-to-ship transfers of unlawful cargo. Shipowners are advised to exercise high due diligence to avoid sanctions violations like transporting goods to or from North Korea, as this could result in loss of insurance coverage and designation by enforcement authorities.

Uploaded by

Lazaros Karapou
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Friday, 1st May 2020

Democratic People’s Republic of Korea (DPRK): Sanctions 
enforcement update 
This Circular issued by the International Group is an update on the Democratic
People’s Republic of Korea (DPRK) sanctions enforcement circular that was
published on 14 January 2019. It has been updated following the recently
published 2019/2020 UN Panel of Experts of North Korea Sanctions Report.

Background 
The report notes that the DPRK regime has not taken steps to end its nuclear
programme, which continues in violation of UN Security Council resolutions.
Stringent sanctions measures have therefore remained in force. According to the
Panel of Experts, the DPRK regime has continued to raise revenue for its ballistic
missile programme through the illicit import of refined petroleum and export of
commodities such as sand and coal. Maritime activities have been identified as
facilitating this revenue stream for DPRK.

The message from the UN and national enforcement agencies is clear.


Shipowners are strongly advised to take note that sanctions monitoring, and
surveillance continues at a pace and through the co-operation of UN Member
States more evidence is being collated and reported where there has been such a
breach.

Evidence of use of non‐DPRK vessels 
The report notes a continuing use of non-DPRK flagged vessels that are used to
perform illicit ship-to-ship (STS) cargo transfers at sea. The report further notes
that DPRK has changed its trading methods to evade detection using STS
transfers between non-DPRK flagged vessels in international waters and
subsequent delivery of unlawful cargo direct to Nampo. Such vessels have
conducted operations several times over before they are detected. These
operations have amounted to the DPRK receiving almost three times the UN
specified total cap of 500,000 barrels of refined petroleum (paragraph 5 of
resolution 2397 (2017)). With the assistance of a UN Member State, 14 vessels
were designated, though none are entered with an International Group Club. To
conceal the true identification of the ownership and financial interests behind the
vessels carrying out these activities, it was reported that most of the vessels’
registered owners were dissolved or struck off company registers or were
operating under false or fraudulent flags.
The Panel noted the need for regulators, enforcement agencies and the maritime
industry to remain vigilant and maintain proper and effective due diligence. Tanker
operators in particular should make every effort to identify and confirm the true
intended destination of cargoes carried on board. STS transfers frequently take
place at night with the automatic identification systems (AIS) being disabled and
subsequent transfers of cargo are made to smaller vessels without IMO numbers.

The report notes that the DPRK is continuously innovating and adapting to avoid
detection of its activities and a further trend reported by the Panel was the
exploitation of the scrap vessel market where onward sale of vessels of larger
bulk carriers (destined for scrap) were being used to transfer coal, as opposed to
the previous use of smaller vessels.

Exercise Caution when fixing contracts 
On 3rd May, 2019, the United States Treasury Department’s Office of Foreign
Assets Control (“OFAC”) published a “Framework for OFAC Compliance
Commitments” (the “Compliance Framework”), which sets out OFAC’s views of
the essential elements of an effective sanctions compliance programme.

All Clubs in the International Group issued a circular at the time drawing attention
to its publication emphasising the importance for any shipowner, charterer or
trader to adopt measures that mitigate the risk of breaking sanctions.

In the light of the most recent UN report, the Club once again advises all members
to continue to apply the highest level of due diligence to mitigate the risk of
performing activities with a DPRK nexus. The penalties for doing so could result in
designation, asset freezing and listing by the UN, OFAC and other enforcement
agencies. Any trade with a North Korea nexus will be subject to surveillance and
scrutiny by monitoring agencies, including vessel movements, using AIS and long
range identification tracking, satellite imagery and other assets. Vessels that are
suspected of breaching sanctions against DPRK may be listed by national
authorities and/or subject to search and detained at ports whilst investigations are
carried out.

Ramifications on club cover 
Any activity assessed to be in breach of sanctions will result in the withdrawal of
insurance cover. Even if it were possible to undertake legitimate trade with North
Korea and North Korean interests, Members should consider that an International
Group Club is unlikely to be able to support vessels trading to North Korean ports,
with payment of claims and fees and the provision of security liable to be delayed
and perhaps completely prohibited.

All Club Members are therefore strongly urged to mitigate the risks of undertaking
any business with North Korea, including but not limited to STS operations, and
exercise the fullest possible due diligence to ensure that they do not knowingly or
inadvertently perform prohibited activities with North Korean entities.
All International Group Clubs have issued a similarly worded circular.

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