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The HC Commodities Podcast
Seizures, Search Warrants, and Sanctions: The blockade of Venezuela’s Dark Fleet Webinar by Deep Blue Intelligence
00:55:35
For a special episode we have the recording of a webinar where David Tannenbaum, the Director of Deep Blue Intelligence, and Carmella O’Hanlon from Blank Rome, discuss the US Coast Guard’s seizure of the Skipper, a Dark Fleet vessel, the legal basis underpinning it, and how the administration can enact a “blockade” of Venezuelan oil. They also discuss examples of typologies and red flags relating to Venezuela’s Dark Fleet, a what comes next. Please note: This taping occurred prior to the administration’s seizure of the Centuries and Bella 1, two other Dark Fleet tankers, on December 20th and 21st respectively.
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Transcript47 lines
- [00:00]
A
With that, I think we can get started. I think we got a fair amount of people. And look, just to everyone who is dialing in, you know, a huge thank you. It's been a very interesting week or two in the world stage and for the sanctions community. And so, you know, we're hosting this webinar just to give an idea to people. We've gotten a lot of questions. Can, can the US Legally seize vessels? You know, what would a blockade look like? What should we be doing with Venezuela? And so that's the purpose of this presentation. We're going to start off by talking about some of the legal issues behind seizures and what the US Government can and cannot do. And then we're going to talk a little bit about just the Venezuelan Dark Fleet, how their ownership works, some major threat actors within the fleet, and what some of their spoofing looks like and things to look for. And so my name is David Tannenbaum. I'm the Director of Deep Blue Intelligence. We are tasked with following sanctions evasion on the high seas, certainly the dark Fleet, as well as figuring out how they're evading sanctions and developing countermeasures to it. And so, Carmel, do you want to introduce yourself? We're very fortunate to have her aboard because she actually has some firsthand experience with seizures as well.
- [01:21]
B
Hello, everyone. It is a rainy day in New York, and so I'm so excited to be talking about this with all of you. My name is Carmelo Hanlon. I'm an associate at Blank Rome in the Maritime Group. I'm based in New York office. As I just mentioned, my practice specializes in domestic and international litigation and arbitration, with a focus on the shipping, logistics and commodities industries. But I also regularly advise clients, largely also in the shipping and financial services industries, on U.S. economic sanctions. And I assist companies with navigating dealings with ofac, the Department of Justice and other regulators. Oh, David, I think you're on mute.
- [02:07]
A
Apologize. Sorry. Yeah, so. So, yeah, I think we'll get started, right? I'll just bring everyone up to speed, and then Carmel is going to walk you through kind of what happens in one of these cases for asset forfeiture. Just as a reminder, we do actually have a Q and A tab. So if you do have questions, I will be monitoring them throughout the program. You know, I may hold on to some for the end, but if there's one that's very pertinent to something that's coming up or that we're talking, you know, feel free to put it in there and I can Definitely raise it. Because chances are if you have that question, other people do as well. So just to kind of give you up to speed as to where we are, you know, the US has been continually applying pressure against Venezuela under this administration, whether it's through certain designations. You know, I'm trying to tie the Maduro regime to drug trafficking organizations, organizations, these airstrikes. And of course last week dropped the bomb when we seized the skipper. You know, in an ordinary day, absent that context, I think the skipper's seizure would be a two hour headline and then would go below the fold. But with everything else that's happening, you know, it is a major escalation on the pressure campaign against Venezuela. This week the president did tweet out that we are imposing a blockade on Venezuela. It's important to remember that the tweet is just the tweet at this point. It is having psychological effects for sure. But as we'll explain, you know, a blockade is a much more complicated thing, both from a legal and implementation basis. And that has not actually been implemented yet. So that's kind of where we are. We don't know where this crisis is going to head. It could escalate. People could back down. But you know, I think the purpose of this webinar is to keep everyone prepared so that you can react to current events which may be major. So with that, I'm going to hand it over to Carmela, who's going to walk us through sort of the seizure process, what happened here, what's normal about it, and what was a little bit different about this. So on to you.
- [04:17]
B
Thanks, David. So a civil forfeiture is a legal proceeding where the US Government initiates proceedings against property that was derived from or used in connection with criminal violations of U.S. law. And so the U.S. government can use civil forfeiture for near in connection with nearly every crime, but most of will hear, including sanctions violations and terrorism. No criminal conviction is required for the government to initiate civil forfeiture proceedings, but they must prove that the subject property was linked to criminal activity. And so as what happened with the scpr, as part of these proceedings, the government can request a warrant for the seizure of property that is subject to forfeiture. And they often do so, as was with the scpr, on an ex parte basis or without notice to the owner of the property. The standard for issuing a warrant is probable cause, which means the government needs to have reasonable grounds to believe the property is subject to forfeiture, which is not a very high bar. It's a Pretty, it's not a very challenging standard to meet. Once property is seized, it can be sold in an interlocutory sale under the supplemental rules. And so the actual property itself doesn't need to be held for the civil forfeiture proceedings. It can be the asset. The proceeds of the sale can be the subject of the proceedings, and those proceeds would be held in an interest bearing account while the proceedings are ongoing. In a forfeiture proceeding, the government's the plaintiff, the property is or the proceeds of property, or the defendant, and any persons with a claim or interest in the property can contest the forfeiture. By filing a claim, the government will need to prove by preponderance of evidence that the property was used to commit facilitator was involved in an offense. And once it's actually in the forfeiture proceedings, they need to prove that by a preponderance of the evidence, which is a higher standard. It's more like greater than 50%. And owners or people connected to property can challenge the forfeiture on the basis of an innocent owner defense. So they have to show it's their burden to show that they either did not know the conduct or that they took all steps reasonably expected to terminate the property's use in the criminal activity. The government needs to give notice to claimants and publish notice for a specified period of time for potential claimants of its civil forfeiture proceedings. And typically, once assets are forfeited, they are distributed to victims of the crimes. For example, there is a victim of terrorism fund that often forfeited assets are put into. But here, looking at the actual process for the seizure of the scpr, the warrant lists several statutes that were the basis of the seizure. And most notably, 18 USC 981 A1G1 authorizes the seizure of foreign assets located anywhere, domestic or foreign, that were used in connection by foreign terrorist organizations that have engaged in acts of terrorism against the United States or its citizens. This statute is commonly used in forfeiture actions, particularly recently to seize oil that was determined to be the property of the irgc. But interestingly, over the summer, the Trump administration also designated the Maduro regime as a foreign terrorist organization. And so that is another basis for authorization of the seizure on the scpr. If you actually look at the warrant, which was unsealed, it's heavily redacted. So we will not know for some time, likely until it's unsealed, what the actual basis of the seizure for the skipper was. But both are fair game. We know the skipper has been connected to the dark fleet and transporting rainy oil. And the skipper was seized after departing Venezuela. So there's also arguably a connection to the Maduro regime there as well.
- [08:16]
A
Yeah. And I mean, so my understanding, correct me if I'm wrong, like, so under 233. 2B. Right. Like, that is what allowed that most asset forfeiture has to have a US Jurisdiction, but if it's related to terrorism, then it provides that extraterritorial nature for it. Right. And could you tell us, like, a little bit about what was different about the skipper from, say, even some other dark fleet vessels that might have sort of facilitated the seizure as well?
- [08:45]
B
Sure. So one thing I think that is interesting about the skipper is that, well, it was actually operating without a flag. It was falsely flying under the flag of Guyana, but Guyana had noted that it had delisted the vessel. And so what's interesting about the seizure of the skipper is, and I guess I'll back up, most other seizures, when they're conducted, they are either conducted in the territory of the state. So the United States has authority to seize vessels that come in its territorial waters. Other countries can do the same. And when it's not in the territory waters of the United States, it can only seize a ship if it has the consent, or it can only take actions with respect to a ship if it has the consent of that ship's flag or if the ship was seized lawfully by another country and turned over to the United States. So traditionally, seizing a vessel in the middle of the ocean without authorization from the flag state or help another country may not seem kosher. But here the skipper was flying without. Was sailing without a flag. And so arguably, the US had grounds to seize it or visit it under the law of the convention of the law of the seas if it was on the basis of the lack of flag.
- [10:05]
A
Okay. And I mean, you noted that the order is redacted. And I think we're going to all be very interested to see what is in the redacted portion of the order. But another thing I noticed about the skipper. Right. Is that it was under. Is designated for as especially designated global terrorists. Right. So, like, it was designated for terrorism specifically as opposed to other vessels. And that's similar to, like, other cases that we've worked together. Right. You know, where if you go in and read the complaint, so here's one against Unicius and $47 million of oil that they have. Like, the DOJ is going very out of its way to say, like, look, this, this, this Oil is the property. The irgc. The IRGC is especially designated global terrorist, which conforms to this definition, you know, in 23032B. Right. That. That's that forfeiture law site. So, like, I think so. I mean, I guess one of my questions would be, right, so I did look at it. There's 124 vessels that are SDGTs, according to OFAC. Right. You. Would that be the only pool of vessels that we could target in seas? Or, you know, is there a broader pool out there that, like, they could make a case that, hey, under certain Iran EOs, they could go after that? I don't know. I mean, do you have any thoughts on that at all or.
- [11:31]
B
For sure. I mean, like I said earlier, just violations of sanctions can be grounds for civil forfeiture. So it doesn't have to be connected to terrorism. But I think that the terrorism nexus gives the US More leeway, and the assets don't have to be located in the United States at the time, or the property doesn't be located in the United States at the time of the seizure.
- [11:51]
A
Yeah. So, I mean, so, I mean, I think that might be a takeaway, right? That, like, they're saying they're going to seize all these vessels, but they do have to go and get a warrant. Right. And the D.C. district Court has original jurisdiction. And I think, like, a lot of off on this. Warren, you know, Zia, he's, he's very well known in sanctions land. Right. He's, he's an expert practitioner, and I don't think he tolerates BS either in his courtroom. Right. So, I mean, I think like, there, there is going to be that barrier that the Trump administration has to climb if they want to see something that they do need to have a warrant, they do need to convince a judge that, yes, we want to do this. Right. Are there any other aspects like that you're thinking of, Carmela, as far as, like, hey, if the administration does want to start seizing these vessels, you know, what would be some of the next steps that they need to start taking? And is there anything from kind of like the viewer point as we're looking at it, you know, any triggers to say, oh, crap, this, this, this activity is going to start scaling up beyond them seizing another vessel? Right. You know.
- [13:06]
B
Well, one thing that I think the skipper was a perfect test or first, because again, it is unquestionably connected to the Dark Fleet. It is well documented, but the Trump administration has not been shy about being aggressive on its pursuit of Iran of The maximum pressure. And even as we can see, in the rapid escalation of its actions against Venezuela. And so one thing that kind of stuck out for me, especially with the basis potentially of the justification of the lack of flag or what the pretext was for seizing the vessel, is that when vessels are designated by ofac, almost immediately the flag state delists them and deflags them. And so one concern that I had or that kind of popped into my head, especially with recent rush of designations, is the government could time the seizure and the designation announcement to target vessels almost immediately after their announcement, because if they don't have a flag, they can get them immediately. And so while that can be a good tool for the government, there's also room potentially for abuse. What if vessels are wrongly designated? And again, like you said, I think this process, it does have to go through a judge and there is a warrant and there is some. There are checks on this. And again, DC Judges are more than qualified to evaluate if the basis for a seizure is there. But those are just kinds of things that pop into my head of ways this can go.
- [14:38]
A
No, absolutely. I mean, that makes a lot of sense. And like, and a lot of the Venezuela Dark fleet related Dark fleet still isn't under sanctions. So like, I think OFAC has a ways to go here too, as far as that one, two step. But yeah, I mean, that's something that, like we were talking about last night, right? Is that also because forfeiture laws give D.C. original jurisdiction, the administration can't go off to a court in Texas or Louisiana and get one of these. Otherwise, like, the seized person could actually like, file suit back and say that this, this actually circumvented this area of US Law and therefore wasn't a lawful seizure as well. So I think this is where treating Judge Boasberg nicely might give the administration more, more leeway to do this than continue down this path. So. Okay, so, and by the way, you know, if anyone does have questions, like, we, we are here to sort of, you know, we're here to answer it. That's the whole point of the session, is that we want to give you information to fully understand what's happening and that you can make plans for your organization and your compliance department to say, what do we need to be doing? So if you do have questions, let me know. I guess one question this is coming from Chase, you know, is that if, you know, for clarity, US would, the US Would be limited to a tanker with a terrorism nexus, which is Iran. But with the new terrorism Designations, I guess does that give, you know, if, if they make like the Maduro government an fto, right. Would that make that that entity conform to, you know, that definition under 2332, you know, in the AEDP? Or is that, do they need to go through a very specific process to designate them as like an sdgt? I don't know if you have any thoughts on that at all or I.
- [16:44]
B
Think the question reflects like just kind of the, how far it can go. And with the kind of expansion of the designation of so the cartels, you can see kind of the room for, I don't want to say beat, but like where does it stop?
- [17:03]
A
And yesterday we had like that men declaring Fenital as a weapon of mass destruction. Right. So like I'm still trying to figure out the game of chess that they're playing because that doesn't necessarily convey an FTO thing. And you know, phenotype is a controlled substance which falls under the civil forfeiture laws, but that it requires explicitly a US jurisdiction. So it's sort of like, I don't know. That had me racking my brains yesterday as to like how does this fit in here? Right. You know, it may make sense in three days, but you know.
- [17:38]
B
On that point, like for if, if these, if there's a connection, there's a US dollar nexus, like you can still go after ships. Doesn't have to have the terrorist nexus as well. Like if, you know, bunkering with like if there is a US dollar nexus where it caused a US person to violate sanctions, that can also be kind of the hook. But again, especially the dark fleet, they're obviously not operating in US dollars.
- [18:06]
A
Yeah, for sure. Absolutely. Yeah. And Chase also asked, and I'll just answer this, you know, does Venezuela oil itself give a terrorism nexus or if it's Iranian oil? And the answer is yes. In fact, a lot of the Iran related forfeitures have focused on the oil. So if we go back to like this unicious indictment, the target of the, or the, the complaint, not the indictment, you know, the target of it was the oil. Right. So in other cases that like say Carmel and I have worked, you know, the DOJ is going out of its way to be like, this oil is Iranian, this oil is produced by, you know, nioc, which is understate, you know, irg. And so yes, like, and that's actually like, I don't know, I mean on your, I think you were alluding to this when you're talking about Carmel, that like most of these seizures are targeted towards the cargo. And the ship owner wakes up one day with like an email from the FBI saying, like, you're holding on to our cargo. You know, please cooperate. Or we have these things called silver bracelets, right? You know, this. We actually have like a miss team fast roping onto the vessel. Right? You know, which. That's, I think, what was very different in this case. So.
- [19:16]
B
Agreed. The spectacle was very different.
- [19:21]
A
Yeah, it was. I mean, there was the propaganda video, like, not more than a few people, like, texted me that day, being like, we look like the Houthis. I'm not gonna lie. So speaking of fast roping onto vessels, right, you know, Trump has threatened sort of this blockade on Venezuela, and we don't know what that looks like. As I said, there is not legally a blockade right now. In fact, there is not a blockade, as we'll see. Vessels are not moving quickly out of Venezuelan waters. I think some of these tank runners are worried about getting pinched themselves, so they seek comfort in Venezuelan territorial riders right now. But we kind of sat down yesterday and said, like, if we were to impose a blockade, what would this look like? Because that's one of the questions that we've gotten a lot of, particularly from, like, say, media inquiries and stuff like that. And I think there's sort of three different models that, that we've done historically. So the first is basically a military blockade, right? And that is an active war. Like, explicitly, it is an active war. And the two big military blockades that we've implemented in modern times with sort of our modern laws are one of Cuba during the Cuban Missile Crisis and two of Vietnam. Right? And the Cuban Missile Crisis wasn't technically a blockade. The chief of Naval operations actually issued a memo in the middle of it saying that a quarantine and preventing offensive weapons going to Cuba is not the same as a blockade, and we can do it. Right. But one of the things that those actions had in common was they had the consent of both Congress and other parties. So in the case of Vietnam, I mean, for better or for worse, the Gulf of Tonkin Resolution allowed us to conduct military operations against North Vietnam, and that allowed the U.S. navy to blockade it. Right. In the context of Cuba during the 13 day crisis, Congress never explicitly authorized this, but the year prior, they had passed the Cuba Resolution, which basically was a go get them, tiger to JFK to say, you need to do what you need to do with Cuba. And there was consent there, you know, so that's one thing. And also in the Cuban Missile Crisis, we also obtain consent from the Organization of American States, as there was a multilateral support within at least this hemisphere for it. That's not going to happen here. Right. Congress is not going to authorize a war against Venezuela. They've made that clear. And the OAS surely is not going to get on board either. Right. So that's going to constrain this administration sort of desire to do a military policy blockade. The next model is kind of based on Iraq in 1991, where after the war we had a sanctions embargo on Iraq and the legal side was administered by ofac, while the military, the Navy administered sort of the physical side of that. The big difference between the Iraq embargo and here is that that was actually in support of UN Security Council resolution. So this was a order from the UN and it was approved and therefore we'd also been at with Iraq. And that's also not going to happen here. So I think what it leaves the administration with is implementing sanctions in a clever way to maintain a blockade. Right. And the most straightforward way, and I'd like to get your thoughts on this, Carmelo, as well, is like, is through twea, which is the Trading with Enemy act, but which would allow for a blockade like that. But it was amended in 1977 so that the President can only use it basically at a time of war. So they can't declare a national emergency and say we're doing it like they can with ia. Right. And that would give the administration broader power. So I guess one of the questions is like, could the administration petition Congress to change this part of twea, Right. Or, you know, what would that look like? And then the other one is like, okay, if we can't use twia, but we are able to use other statutes like IPA or the aedp, you know, what would sort of this blockade look like? What would the government need to go through? So I don't know. Carmela, do you have any thoughts on that at all or.
- [23:58]
B
Yeah, to your first point on, you know, petitioning Congress, I don't think that this administration has the patience to go through that process. But IPA is very broad and IEBA has been used broadly. It's been expanded largely in the sanctions space to kind of COVID all sorts of national emergencies. I mean, just recently, like the Trump administration expanded declared national emergencies on like, drugs. And so I think to your previous slide, the just sanction. I think that would be the most, probably the most effective way to go forward.
- [24:34]
A
Yeah, I think they would need to sanction these vessels and then you know, I mean, they would need to probably set something up with the D.C. courts to get these warrants quickly. I wouldn't be surprised if the FBI is like already filed attestations for all the other vessels there as well. Right. So I guess one other way they could potentially do it is with the consent of the flag. Of like, if they are under a major flag, you know, asking the flag to strip it. Right. And then going in there, you know, if the flag leaves Venezuela, the vessel leaves Venezuelan waters, then it automatically procs that warrant. So. But I think, like, they're going to have to be clever to do this legally. We do have a question, you know, is law even relevant? That is from a listener, you know, I mean, we'll find out. Every presidential administration has pushed the boundaries of ipa. This one has push them really hard. Right. So I think that's also where Congress could step in. And that also raises an interesting question that like the President can declare a national emergency under ipa and the NEA allows Congress to override that national emergency, but they have to pass a bill to do it. Right. Like it has to, you know, be veto proof by the, you know, and so it's sort of like at what point do both political parties agree to say like, no, we're not doing this and what are the triggers for that? Right. You know, I think if people are worried about Iraq 2.0, but in the Caribbean, you know, then that, that may come to pass. I don't know. I'm an internal optimist here. Like, you know, and then that we had another question. Is there a legal basis just to seize the tanker? And yeah, if it's, if it's under, if it's designated. Like that's exactly what happened with the Skipp, Right. As opposed to the, some of the other ones that we've seen where, where the cargo was actually aboard non sanctioned, non parties that didn't want to evade sanctions and stuff like that. So I don't know anything else. Any other thoughts on this, Carmel, at all or. Okay, yeah, like, we apologize that like we don't have the solution of exactly what the administration does. And I guarantee you any of our guesses will be 100% wrong. Right. You know, like, but this, this gets, I mean the idea behind this is to give everyone a framework of like, hey, you know, what should we be thinking about? And when we pick up the paper, like, what should we be freaking out about versus what is actually kind of more ordinary. And I think the US or the world is now getting a masterclass lesson in maritime, that maritime sanctions are very different than how like OFAC has implemented sanctions with banks and stuff like that. So, so I think we're going to close up a little bit on just talking about Venezuela's dark fleet. And you know, Carmelo, feel to, feel free to jump in at any time on here, like I'm just going to go through it. But you know, there, there are a couple of things to know about the Venezuela related dark fleet. So first off, there is no Venezuela specific dark fleet. A lot of are operating in particular for Venezuela for a while. Basically tankers were bringing Iranian refined products down to Venezuela to give them and then they were taking heavy oil aboard their tankers and bringing it off to East Asia, primarily China. Right. So straight up like that's already a cross programmatic nexus and that's exactly how the skipper, which was designated for Iran, wound up getting seized while supporting Venezuela. But of the tankers that we see going in and out, there's at least 150. That number is the floor, it is not the ceiling, particularly if other tankers are jumping through. But it also doesn't mean all 150 are actively working on Venezuela at one time. Some might be off to Russia, some might be off to Iran, some might, you know, have probably not gone legitimate, but they're doing something else with their lives. Right. And then one of the things that drives the Venezuela dark fleet is there's three key threat actors that comprise about 50% of the fleet. And we're going to go over one of them as to what they look like, but they're all of a fairly similar typology and they're all doing the same thing, but they are a distinct network. So if you can crash on those, you're already tackling the dark fleet. OFAC is not designated much of these. For example, the one that we're about to see, there's 20 vessels in this network of which now three are under sanction. So that, that, that should give you an idea as to. There's a lot of room to grow here. I don't know. Any thoughts on this at all or.
- [29:33]
B
You can keep going?
- [29:34]
A
Yeah. Just to give you an idea, you know, in prep for this, we did look at activity at Jose Terminal just to see what are they doing. That's been a popular question. We're seeing the similar amount of vessels. Yes, some come in, some leave. One vessel, the Azure Voyager, which I had actually originally thought might have been the one that got pinched, but it was the skipper snuck in ISIS choice for the captain of the vessel. But hey buddy, like it's your vessel, your time I guess, right? You know, but here is an image from 4December. So this preceded the activity and this one's from the 15th of December and you can see it's a fairly similar number of vessels there. You know, our thought is that some of the vessels are afraid to leave Venezuela because of this. So, so yeah, that is like one of the issues that, that are one of the things that we're seeing there now what some of these threat actors look like. They tend to have complex networks. They operate a lot on one ship companies and the biggest jurisdictions that we're seeing are Turkey, China and Hong Kong. Right. And particularly a lot of these Hong Kong companies actually go back to a Chinese party. But this one is one that's particularly complex. So there is a individual that was recently under sanctions. I can't unmask it right now because the investigation is pending. But his company maintained 12 vessels that were then all transferred within a two day period to Seychelles special purpose vehicles that had the word Trident in them. And all of those vessels were being managed by a Turkish shipping company. So this was around 2020. At this point the fleet broke into two halves. So six of those vessels went off to companies within Singapore and then went off to a intermediary which was a Belizean company whose employees were in Turkey called Cislana Technik. These have all been struck off the record, so I could unmask them for you. But all of these vessels were engaged in sanctions evasion. The other half actually went off to a different Turkish company or two of them and start dealing in Russian crude. So we actually see that this fleet is not just serving Venezuela, but they're also servicing Russia as well. So we're seeing this cross programmatic nature. But I think this is just a good sort of diagram as to, hey look, this is how these networks move. And even since moving to those companies they've then done a switcheroo and sent companies to two different new front companies that they're using. And we wouldn't be surprised for them to keep company hopping. So I mean this is a fairly common structure. The other fleets are very similar to this. They might be a little bit more federated than this model. But all told, this is about 60 or 70 of the 150 vessels that we know are circumventing Venezuela related sanctions. So. And then as far as, you know, what the vessels are doing when they're picking up cargo spoofing is all you know is their Main primary advanced deceptive shipping practices. One thing to note about Venezuela related spoofing is that what we see in Iran tends to be tactical. It tends to be a couple of days at a time here. This activity can go on for months. Right. You have long loading times at Jose terminal. And what they will typically do, you know, the more sophisticated tracks will pretend that they're off the west coast of Africa for a long period of time. And then when the vessel begins loading, they actually start bringing that track in, as you can see here. And then once they're ready, once the track gets to the Caribbean, they'll typically spoof around, make it do geometric signs or move in, you know, patterns that lack economic purpose around the ABC Islands and Trinidad. And then after they load the cargo, the vessel will actually come out and intercept itself AIs track. And at that time they kill the spoofing script and they start their transponder. So this typically happens kind of where that green circle is. It's actually quite fun to see in real life when they do it because you can also see from the source of the transponder that like one of it is coming from Venezuela. And then all of a sudden now they're on a real, you know, a real transponder. But this is fairly typical of what we see. You know, we see some of them that they're just pretending to be off the ABC islands for six months. In our question slide you'll see another very egregious and funny case. Right. You know, but this is something to keep a lookout for, right. That if a vessel has not visited a port in six months or seems to be loitering for a long period in a certain area around here, then this typically is associated with Venezuela related evasion and stuff like that. So I don't know. Carmelo, do you have any other thoughts or just move on to the next slide or.
- [34:52]
B
I was just gonna say, I mean even we've even seen just like the spoofing getting more sophisticated recently with just even the hijacking of other vessels signals and the. Coupled with also forging of documents to kind of fake looking like legitimate vessels and so just constantly evolving and just need to keep.
- [35:15]
A
Yeah. Diligent. Yeah. I mean like at a certain point spoofing is going to be so realistic that you know, it's, it's going to be hard to tell without other factors as well. So it's. Yeah, we, we've had some fun cases recently. So I guess, I don't know. Do you want to take the, the Potential for retaliation or I could just do it and you do the.
- [35:37]
B
Yeah, I was just going to say, I mean in all past, in most recent seizures you've seen some form of retaliation from countries that were impacted. So for example, after the seizure of the oil aboard the Suez Rajan, Iran later wound up reseizing the vessel, even though it was renamed at the time the St. Nicholas. And I believe that's still being held in Iran. And so it just kind of raises the question of like what is going to happen here? Like will Venezuela, like what is Venezuela doing? I think they've been escorting there some of the ships leaving with their warships. Will Iran get involved? Will Russia? Like who else? Because a lot of countries supply like rely on Venezuelan oil and shipping products to Venezuela. And so I think just kind of what I think everyone's kind of eager waiting to see what will happen next.
- [36:26]
A
But yeah, for sure. And I mean in Venezuela's heavy crude is also a very specific one as well. So like certain markets have a reliance on it too. So yeah, I mean I think like these things do tend to be a tit for tat and you know we, we feel that, oh, we're big and powerful, we can, you know, mainland dialogues, you know, the weak will suffer what they must but at the same time, you know, Venezuela's options, they can start hijacking vessels themselves as you said, Iran does that. Or they could make the Caribbean at least their little area of the Caribbean the next Red Sea. Right. I mean they do have, they're not the strongest military in the world but they have an 800 mile coastline with great typography that will make bombing them very difficult. Right. And they can hold that area at risk, you know, so I mean these things do have consequences. Right. You know, and I have no love for the Maduro regime as well. But you know, just because we topplate doesn't mean it's all roses, you know, and we got stuck in Iraq for 10 years and then Libya is another model where that was a righteous uprising. You know, Gaddafi was a really bad person. But it's not the greatest spot right now. Right. You know, so I mean don't be over eager to, to rely on military power and think that everything is going to be fine. So you know, so some of the red flags that your compliance officers can look at that we would recommend the first is complex ownership structures. So they love one ship companies. So if you start seeing one ship companies where it's a ship management company, like it's either the manager, the operator or the technical manager. So we're not talking about the registered owners, which are typically unique SPVs, but if they're only overseeing one vessel, and they tend to be in China, Hong Kong or Turkey, then that usually kind of leads to the dark fleet. And it's a very big typology for Venezuela. Right. So we saw that with the Trident Network, and the other two networks are even more federated, where they're all individual companies. Another thing that's a very easy thing to look for is if a vessel has not had a port call in three to six months, the spoofing can be long term. And if they're spoofing for a long time, then they will not show up as having a port call, even if they're doing one. And I would definitely recommend conducting EDD on any transaction that has that red flag. And similar to that. Right. You know, we. I just showed you what spoofing looks like in Venezuela. I like that chart. You know, it is an older case study that we use, but it shows everything that they do. You know, and so if you do see, like, all these tracks that show excessive loitering off the west coast of Africa, Angola is really popular. Or the ABC Islands, the ABC Islands being Aruba, Bonaire, and Curacao. You know, like, that's. That's a red flag, right? That. That generally indicates spoofing at that point. And so I don't know with that, do you want to finish us off with recommendations here or.
- [39:33]
B
Sure. So I think, you know, one of the biggest questions we get is like, what. What can you do to protect yourself? Or what can you do in the event you get kind of caught up in one of these situations? And David has already touched on the importance of, like, know your cargo, note your charter, know your buyer, know the vessel. There are things, you know, who the insurer is. There are ways kind of you can read the tea leaves and see if there are any red flags. But in terms of, like, defensive measures for yourself, I cannot. Sanctions clauses. Sanctions clauses. Sanctions clauses. And make sure that they are everywhere. This kind of goes back to my point about the innocent owner defense. For in the case of seizures, it's whether you. That you either didn't know or that you took all reasonable steps to stop the criminal activity once you found out. And if you have a sanctions clause in your. In your. In your charter or in your other agreements, you can terminate and you can take back the vessel. And so that you can show that you had the steps in place in your agreements to kind of Put in these emergency measures in the event you find out you get a. You see on a Yulani that your vessel just did an STS with a suspected dark fleet actor or any of those kinds of situations. So I cannot emphasize how important those kinds of clauses are in your agreements. And then also, David, this. James plugged. But I think we're seeing that dark fleet actors. Everything has gotten much more sophisticated. And for years now, though scanning the OFAC list is not enough. You need to kind of be doing more to. Because the, The. It's gotten more complex. And so I think investing in maritime intelligence is essential at this point, because if it's up, it's on the, like, they're, it's the obvious things aren't where people are getting in trouble now. Things have gotten much more sophisticated.
- [41:27]
A
Yeah, absolutely. And you're so right with the sanctions clause because, like, I mean, these bad guys, they're. That they got lots of Hutzfah, you know, they even, like, when you comply with the order, right. Like, okay, doj, like, yes, I am helping you seize this cargo because I don't want to go to jail. Like, they turn around and sue you to, like, arrest the vessel. And it's like. And then there's also kind of. I mean, there is this retributional aspect too, right, where if like, a third party screwed up and you had a good sanctions clause and they didn't follow it, like, we were very clear here, so we lost money. And now you're liable for those losses as well. Right.
- [42:09]
B
I mean, identification. And again, it might not fully protect you from DOJ scrutiny. Like, you still may have some explaining to do on that front, but it does help for potential litigation unrelated, like you designated the burden of conducting the diligence on the charter or et cetera, stuff like that.
- [42:32]
A
Exactly. For sure. Yeah. It gives you that legal flexibility and. Yeah. I mean, as far as the maritime intelligence goes. Right. I mean, I know it is a shameless plug. Right. You know, but I mean, these are nightmare situations. Like, these cost people millions of dollars. Like, and, and torture, you know, I mean, and knowing that, like, yes, you committed a crime, you know, going into deferred prosecution agreement, it's a horrible feeling. Not that I've ever been in it, but like, you know.
- [43:05]
B
Legal fees, reputational damage. I mean, it, it's easy when you're deciding what to be doing in your compliance program. The expense of a diligence firm or those things can seem high, but like David said, hundreds of thousands, if not millions of dollars just in legal fees. In the burden and the stress of dealing with government agencies and then dealing with the press and the reputational damage. It's a lot.
- [43:29]
A
So, yeah, for sure. We do have one question. Can you mention some quality maritime intelligence platforms? Well, there's this awesome program called Deep Blue Intelligence with Polestar. Definitely check it out. Right. Sorry. That's literally my program. So I apologize. I'm really shameless about this. You know, someone has a couple of really good questions and it's from a financial institution perspective. Right. The first one is if a ship management company is designated, you know, are their vessels blocked? Right. And it's just worth noting that OFAC considers that sanctioned property to be something that a sanctioned person has a direct, indirect or contingent interest in. Right. And so if a ship manager is managing vessels, then they definitely have a direct interest. I don't know. Have you ever experienced something adverse to that? Carmel et al. Or.
- [44:25]
B
I mean, so the. You. You'd be prohibited with dealing with them because it would be. Assuming there's like a US Nexus. Yes, it'd be like direct or indirect dealings with a sanctioned person. But the 50% rule is, in the US at least, just ownership, not control. So designation of the manager wouldn't technically block the vessel. But I've seen, you know, where the manager is designated, the flag will completely cut off. Like the, like it, it's. Yeah. So while. Not.
- [44:57]
A
Because if you're dealing.
- [44:59]
B
Yeah, yeah.
- [45:00]
A
If you're dealing with that vessel, you're providing, you're providing some financial benefit. Right. That's where that. Direct and indirect. So, yeah, it's not the 50% rule in the EU. I mean, in the UK, like, I would argue control does apply because the ship manager does have day to day control of the vessel's activity. That's. That's literally their job. Right. OFAC also gets this very weird, you know, where they will designate the special purpose vehicle, the registered owner. And I can see why they're doing that, but then they don't designate the manager. And then there's like 20 other vessels that are doing the exact same thing as the bad guy. You know, so there is a little weirdness on that. And then, you know, from a financial institution's perspective, how do you track the chain of title for vessels? You know, I mean, if you're talking about a wire or an LC or a dc, Right. You know, and you're screening it for sanctions compliance purposes, I think it's very reasonable to rely on the IMO's listed related parties. So every vessel has to report five parties, or at least for the register, ownership manager, operator, technical manager, and then the gbo, which is not a ubo, it's just a made up term by the IMO that there's a lot of O's there. But you know, and I think it's very reasonable to look at the history for there. I think if you're like a charter of a vessel or you're a commodities trader that is buying cargo and has a big financial interest on that vessel, I think your KYC obligations are higher. Right. And I think that's where our clients land is. Hey, not only, you know, are we looking at who the vessel is listing as their parties, but we need to understand who the UBO of that vessel is. And with that you're going to probably have to request like articles of incorporation or some similar document. And there are different documents, like you know, the continuous synopsis record for vessels, things like that. So. But I think from an FI standpoint, I think it's reasonable to rely on like the IMO related parties, unless if it's like an intensive investigation.
- [47:13]
B
Okay, David, I see question for you asking where vessel tracking data comes from, if not AIs.
- [47:20]
A
Oh, okay, yeah. So there's various other sources. I mean, so we use a lot of satellite imagery, right. You know, to find stuff. There's also inmarsat C that can only be done in certain legal conditions, but that is actually an area where we have the sole provision of it. We're also living in just a really interesting time where technologies that used to be only available to militaries are now like available to everyone. Right. And there's no silver bullet like RF tracking, which looks for like say the radar signals or the comms mask of the vessel to try and figure out is it the same as the reported position. You know, that's shown some promise in certain cases, not in others. Right. Whereas an imagery has been very useful in some but not very helpful in others as well. So I think it's combining those sources of intelligence, particularly to like sort of track a high risk vessel is just becoming more important and essential. So I don't know, do you have any thoughts or experience on that or. Not?
- [48:26]
B
So I use marine traffic and I Google a lot of it for. But yeah.
- [48:32]
A
Okay, so with that, I mean, I know we have like nine or 10 minutes and I think we've had a lot of great questions. So do we have any other questions? Should AIs be obsolete technology if there are better ways now, yes, it should. AIs is a completely permissive and easily doable system like it is, because it doesn't even interrogate like where the device is reporting from. Right. So you can, if you're an aggregator and you have access those devices, but that's not on sort of the line that's transmitted. There's no attribution. VDES is going to be probably a better system out there and there are some alternatives to there. The other thing is that, you know, GMDSS systems, which is Global Maritime Distress Service Systems, is based on Inmarsat C, which is older satellite technology. And a lot of these same providers have much higher bandwidth provisions that are much cheaper to run. Right. So that's another thing, you know. So, yeah, unfortunately the IMO moves incredibly slowly. You know, Russia, Iran, North Korea, they all sit on the imo. They are more than happy with the status quo. And so pushing this is very hard. Right. I think, you know, it needs to probably be done like on an individual basis from flags and stuff like that. So, yeah, there are better systems, but they're not being currently implemented, unfortunately. Charles is asking, what platform is this on the screen? This is from Purple Track and mda. The background on this is that this guy is someone who is spoofing relating to Venezuela and the vessel has been doing it for over a year. In fact, we have an annual refresh trigger that if we don't refresh a profile on dbi, then every year we have to do it. And when I looked at it, it was literally the same spoofing event as we did it in our last annual refresh of the vessel. So, Okay, do we have. So as an LC specialist and directly dealing with documents you mentioned, to look at the IMO history, can you recommend website to use research container numbers? So there's a couple and depends on what you're looking for. So there are services that can track containers. I mean, once again, shameless plug on Polestar, we actually have that, but a lot of vendors do as well. If you see a weird container number and you're looking at me like that doesn't look ordinary, right? You know, it's not a mayor's container. There is the. It's called bic, which is Bureau of International Containers. And you can put in the SCAT code for that container and it will tell you which company that container belongs to. It won't give you the tracking services of it. But you can see like, okay, this is a mayor's container. Or hey, the SCAT code that they're presenting is a fake one. It doesn't bring up anything. And we've actually seen that with the wrong context where they'll, they'll have a fake scat code either on the bill of lading or the container as well, so on. Okay. So, you know, and we're always happy to answer questions offline as well, if you have any. So I mean, I think we've hit all the questions. So, you know, look, it's, we don't know what's going to happen next. We don't have a crystal ball. The best we can do is sort of estimate. So I do hope that the session has been very helpful for people. We're here to try and give you news that you can use. I don't know. Carmelo, any parting things as to if the attendees are doing one thing in their compliance program, what would you definitely recommend that they be doing to protect from Venezuela right now?
- [52:48]
B
I would just say to be hypervigilant and I think just evaluating your maritime intelligence and what different access touch points you can get on just anyone you're doing business with, I think is just the most important right now.
- [53:02]
A
Yeah. And also, you know what jurors like.
- [53:07]
B
Where you want to be doing, doing your business to the extent you have like serious control over it.
- [53:12]
A
But yeah, for sure. And you know, to Carmel's point as well, sanctions clauses, you know, now is the time to revisit them to make them robust. And I don't think like your old sanctions clause of not on a sanctions list works nowadays. It needs to account for other things like manipulation or one thing I've seen that I really like in some clauses is like making the counterparty read like ofax guidance and saying that they will abide by it. Right. And then if they don't, like, you know, that gives you some good ammunition as well.
- [53:46]
B
Well, so I think also one final parting thought, in addition to just kind of like the sanctions prep, also just kind of disaster planning and looking kind of at your, your organization. Recently we've had clients facing sanctions events.
- [54:01]
A
Where.
- [54:03]
B
Various entities were using the same emails or the same addresses for their operations. And so it wasn't so much the government or ofac, but it was the market that was, you know, taking their own steps and cutting off, like cutting off access to those other entities. And so I think kind of ensuring you're observing corporate separateness and not because you're doing anything wrong, but in the event something happens that it doesn't have a ripple effect on your other unaffiliated entities can be something to also kind of look at when you're.
- [54:34]
A
That'S actually a great and great point because that's not something people consider as the crisis response. You know, it's something that we consider for like, ransomware. But we don't even run this for sanctions, and this would be a company crisis. Right. So, yeah. Okay, well, look, you know, these, the recording will be made available. Right. And you also everyone has our contact details. So, you know, please don't be free, don't be shy to reach out. We are here to help. And, you know, just thank you guys for attending. This was an incredibly last no notice, late notice webinar, obviously. And so, you know, we just really are appreciative for everyone that, that that showed up. So. Okay. Well, with that, I think we will close it. Have a great one, everybody.