Bunker Holding verdict highlights shipping’s sanctions compliance risk
Bunker Holding stands by convicted chief executive and rules out an appeal against the ruling that it breached EU sanctions
The judgment against Bunker Holding, its subsidiary Dan-Bunkering and its CEO Keld R. Demant offers a warning to shipping companies and the need to check downstream links to avoid sanctions compliance culpability. ‘It is no longer sufficient to screen trades against direct counterparties,’ warns convicted bunker giant
DANISH fuel giant Bunker Holding, its subsidiary Dan-Bunkering and its chief executive officer Keld R. Demant, will not appeal the conviction handed to them by a Danish city court earlier this month for breaching European Union sanctions on the sale of jet fuel to Syria.
The decision, announced in a statement issued by Bunker Holding, aims to draw a line under a case that has hung over the company since 2018.
However, the case has also highlighted the wider risk of insufficient sanctions compliance checks across the shipping sector.
On December 14 the city court of Odense concluded that Dan-Bunkering was guilty of selling more than 170,000 tonnes of jet fuel between 2015 and 2017 to Russian companies, which then delivered the fuel to Syria in breach of EU sanctions.
Mr Demant was given a fourmonth suspended prison sentence while Dan-Bunkering was fined DKr30m ($4.6m) and Bunker Holding was fined DKr4m.
“Through the entire case the companies have expected to be acquitted so we are surprised by the verdict. However, we have decided not to appeal the ruling because we want to put an end to the case,” Klaus Nyborg, vice-chairman of the board of directors at Bunker Holding, said in a statement on Wednesday.
Bunker holdings stressed that the court did not find that Mr Demant had intentionally breached EU sanctions and confirmed that he will continue as chief executive with the “full and unchanged support of the board”.
The Danish State Prosecutor for Serious Economic and International Crime (SOIK) has been pursuing the case against Dan-Bunkering since 2018, when Danske Bank first reported its suspicions of possible sanctions breaches by its client in relation to several shipments.
During the lengthy investigation that followed, SOIK alleged that Dan-Bunkering sold 172,000 tonnes of jet fuel worth DKr647m ($103m) to Syria between 2015 and 2017.
The jet fuel was delivered to tankers in the eastern Mediterranean, and deliveries began just at the time when the Russian air force entered the civil war in Syria. The court found that the fuel was subsequently used to supply the Russian planes’ bombing raids from a base near the port city of Banias.
“It says something about the seriousness of the violation that the fuel has entered the tanks of Russian fighter jets that have bombed Syria on behalf of Assad. It is of course very serious when a Danish company violates EU sanctions that have been imposed on another country on the basis of a very critical situation,” said Anders Rechendorff, senior prosecutor for SOIK, when the verdict was delivered on December 14.
Bunker Holding, Dan-Bunkering and Mr Demant had all denied the charges and pointed out that the court had not found that the companies had acted with direct intent to violate EU sanctions.
However, Bunker Holding has since conceded that the verdict highlights how difficult it has become to navigate international sanctions.
“The judgment shows that it is no longer sufficient to screen trades against direct counterparties. Rather it points out the need to check your customers’ counterparts, even including several links downstream, in order to control the usage of the product being sold,” the Bunker Holdings statement said.
The case revolved around jet fuel shipments loaded on two tankers, Truvor (IMO: 9676230), named Mukhalatka at the time of the shipment, and Yaz (IMO: 9735323) in Greece, Turkey and Cyprus and discharged in the Syrian port of Banias.
While Automatic Identification System signals were switched off at the time of the shipments, the majority of the judges found that Dan-Bunkering “must have realised that it was overwhelmingly probable that the jet fuel would be used by the Russian military in Syria”, the court judgment stated.
The case, which has been watched carefully by European financial and shipping institutions exposed to potential sanctions risk, is likely to spark a widespread review of company compliance procedures.
In the wake of the investigation Bunker Holding has invested heavily in its own systems, which it claims now checks more than 100,000 trades per year against international sanctions lists and media information while using Big Data and artificial intelligence to follow sailing patterns and the use of AIS trackers. Based on this, the system flags specific trades and can stop trades if it identifies unusual trading and payment patterns.
Bunker Holdings has pointed out that none of the counterparties that Dan-Bunkering was involved with had ever been on the EU’s sanctions list.
“The verdict highlights how difficult it has become to navigate international sanctions and underlines the importance of continuously improving internal training, systems and monitoring,” the Bunker Holding statement warned.