Panama Covid-19 update – the total alcohol ban is due to be lifted tomorrow, but only for purchasing it for consumption at home – not in bars etc or in public.  Friday is a “woman” day, and it has been suggested to me that this was chosen to prevent the shops being overrun by men desperate for their booze… Meanwhile, new cases of the virus today recorded as 137, taking us to 7.868 to date.  The last few days have seen 7 or 8 fatalities per day, with 7 more today.  There remain 85 people in ICU.  In other news, Tocumen International Airport, effectively closed to passenger flights for weeks, is due to reopen for June (to some extent anyway) and news reports show the new biosecurity equipment (heat sensors for surveying passengers etc) that has been installed.

7 May 2020


On 5 May, New Square Chambers released a podcast concerned with a review of recent decisions on the disclosure pilot running in the Business and Property Courts and a discussion of the key issues which face practitioners grappling with the procedure under the Pilot, which is just past its halfway point.



On 30 April, CMS Law published an article saying that Luxembourg has implemented EU Directive 2018/843 (the 5th AML Directive) by means of 2 laws of 25 March.  The article details the main changes to the country’s AML/CFT laws – including provisions to reduce the risks relating to virtual currencies and assets and providing for a national central register or central electronic data retrieval system to identify any natural or legal persons holding or controlling payment or bank accounts or safe-deposit boxes.



On 6 May, the Wall Street Journal reported that the Boston-based biopharmaceutical company said it reached an agreement in principle with the SEC to resolve the Foreign Corrupt Practices Act investigation. The case is said to relate to Alexion’s grant-making activities and FCPA compliance in a number of countries.



The EU Sanctions Blog reported on 7 May that North Macedonia, Montenegro, Albania, Iceland, Liechtenstein and Georgia have aligned with EU over the recently renewed sanctions involving Bosnia-Herzegovina, and that Albania, Bosnia & Herzegovina, Georgia, Iceland, Liechtenstein, Moldova, Montenegro, North Macedonia, Norway, Serbia and Ukraine have aligned with the recently-renewed Egypt sanctions regime.



On 6 May, the South China Morning Post and others reported that the gambling syndicate involved is said to have which amassed US$17.2 million in 14 months from local punters using an online casino.  Officers also froze HK$4.5 million in bank accounts controlled by members of the syndicate that had been in operation since December 2017.



On 7 May, Emerging Europe reported that, in December 2019, US sanctions were imposed on companies involved in the construction of the Nord Stream 2 gas pipeline to Europe.  It says that Akademik Cherskiy, a Russian pipe-layer vessel that is supposed to complete Nord Stream 2 pipeline has entered the Baltic Sea.



On 6 May, Reuters carried an article citing a UN report saying that Russian private military contractor Wagner Group has up to 1,200 people deployed in Libya, strengthening the forces of eastern-based military leader Khalifa Haftar, and that the Russian contractor has deployed forces in specialised military tasks, including sniper teams.  Haftar is supported by the UAE, Egypt and Russia, while the government is backed by Turkey.  There is a UN Security Council arms embargo on Libya imposed in 2011.  President Putin has said that if there are Russians in Libya, they are not representing the Russian state, nor are they paid by the state.




On 7 May, Mirage News reported the attempted shipment of 21 Australian native reptiles via Australia Post to Hong Kong and that a 35-year-old Malaysian national faces charges.



On 7 May, the Anadolu Agency reported that Turkish security forces have seized Roman-era bronze coins in the south-eastern Sanliurfa province, with some 70 Roman-era coins being found from a car stopped by gendarmerie forces.



On 7 May, Courthouse News in the US reported that a former Green Beret who has claimed responsibility for a failed military incursion into Venezuela is said to be under federal investigation for arms trafficking.  Jordan Goudreau is said to be at the centre of a plot hatched with a former Venezuelan Army general, Cliver Alcalá, to train dozens of Venezuelan military deserters in secret camps in Colombia to carry out a swift operation against Maduro.  It is alleged that men were being readied for combat at t3hree rudimentary camps in Colombia with the help of Goudreau and his Florida-based company, Silvercorp USA.  In March, Colombian authorities seized a cache of weapons thought to be linked to the operation.  Goudreau has said he was hired by Juan Guaidó, whom the United States has declared Venezuela’s rightful leader, but Guaidó refutes this.



Also, on 7 May, Bellingcat published an update on the case.



On 7 May, East Coast Radio reported that the record haul was discovered in 2 containers from Ecuador highlights the continued demand for shark fin, which is served at wedding banquets in many Chinese communities.



Zawya reported on 7 May reported that Refinitiv has released its Financial crime in Sub-Saharan Africa Report 2020, which it says highlights several noteworthy compliance trends.  The survey highlights that the crime threat continues to evolve, with techniques used by organised crime groups and fraudsters becoming more diverse and sophisticated. It is noted that only 74% of those surveyed have a KYC programme, and only 43% indicate they have a sanctions programme despite the growth in regulatory risk, especially in the area of ‘green crime’ – wildlife and environmental related.



On 5 May, an article from ACFCS is concerned with a recent report from FATF which says that the COVID-19 pandemic has created compliance stumbling blocks while opening the door to more criminal scams and laundering opportunities – including illicit entities evading customer scrutiny as banks focus more on doling out emergency stimulus loans to keep the world economy afloat.



EU Observer on 7 May reported that Chinese spies have targeted Belgian biological warfare and vaccine experts and are also targeting British pharmaceutical giant and vaccine-maker GlaxoSmithKline (GSK) in Belgium and Belgian high-tech firms, Belgium’s security service suspects.



On 7 May, Defence Web reported that Nigeria’s June 2019 law on piracy and other maritime offences is an important step in securing the country’s coastline and seas. But the article says that the legislation fails to account for the links between piracy and other crimes, especially at the transnational level.  It says that, as the first country in the region to pass an anti-piracy law, Nigeria’s effort is commendable, but maritime crime has continued unabated and there are questions about Nigeria’s capacity to implement its new law, and detect and prosecute crimes. The article notes that the law doesn’t deal with proceeds from piracy, kidnapping and armed robbery at sea – although it provides, as punishment, the ‘forfeiture to the Federal Government of Nigeria whatever the person obtained or gained from commission of the crime,’ this may not be adequate as a deterrent.



A decision of the European Court of Justice on 7 May says that organisations could rely on immunity from jurisdiction only in so far as their activities constituted an expression of the public powers of the Panamanian State.  In 2006, the vessel Al Salam Boccaccio ’98, sailing under the flag of Panama, sank in the Red Sea, with more than 1,000 people losing their lives.  Relatives brough an action against Rina SpA and Ente Registro Italiano Navale, the societies which carried out the classification and certification of the ship.



On 7 May, Reuters reported that Charles Mercieca resigned from his position within the Office of the Attorney General and turned up in court the following morning to represent Yorgen Fenech, who is charged with conspiring to murder Maltese journalist Daphne Caruana Galizia. The Justice Ministry has said Mercieca was not involved in the case as a prosecutor, but he nevertheless should not have taken on Fenech’s defence.



Scoop in New Zealand reported on 7 May that the World Bank’s Board of Executive Directors has approved a US$15 million Development Policy Operation for Solomon Islands.  Part of the money will support Solomon Islands’ businesses through promoting the establishment of a national independent commission against corruption, with accountability through the introduction of anti-corruption legislation, including support for the establishment of the Solomon Islands Independent Commission Against Corruption.



A news release from the US DoJ on 6 May advised that it has reached a settlement of its civil forfeiture cases against assets acquired by Khadem al-Qubaisi using funds allegedly misappropriated from 1Malaysia Development Berhad (1MDB), Malaysia’s investment development fund, and laundered through financial institutions in several jurisdictions, including the US, Switzerland, Singapore and Luxembourg.  It says that, with the conclusion of this settlement, together with the prior disposition of other related forfeiture cases, the US will have recovered or assisted in the recovery of nearly $1.1 billion in assets associated with the 1MDB international money laundering and bribery scheme.  This represents the largest recovery to date under the department’s Kleptocracy Asset Recovery Initiative and the largest civil forfeiture ever concluded by the DoJ.



On 7 May, Radio New Zealand reported that a Chinese businessman, Qinping Yan, is being charged for attempting to export a container of sea cucumbers from Samoa, estimated to be worth over US$3.6 million. It is said that the lucrative sea cucumber trade in China is estimated at nearly US$3 billion a year.



Online gambling operators may have been given the green light to resume operations in the Philippines but Philippine Offshore Gambling Operators will have to strictly adhere to the still in place Enhanced Community Quarantine (ECQ), which limits travel and mass gatherings of people. Meanwhile, a Bill before the Philippines parliament seeks to ban POGO, which it is said have made a mockery of the country’s AML laws.



On 7 May, US Customs and Border Protection reported that officers inspected a rail container and discovered televisions in violation of intellectual property rights regulations.  They seized 440 TV with an estimated manufacturer’s suggested retail price of $175,560 if the goods had been genuine.



On 7 May, OCCRP reported that the Philippines government has launched a countrywide investigation into possible diversion of COVID-19 emergency subsidies. A hotline was set up for the public to report those involved in the diversion of the emergency cash aid, and President Duterte offered a $600 reward to those blowing the whistle.



On 28 April, a blog post from Pump Court Chambers examined UWO in the light of the then-recent High Court decision to overturn orders and the “flaws” identified.



A release from the UN on 6 May advised that the International Criminal Court’s senior prosecutor had given a video conference briefing to the UN Security Council.  She said that Libya is still suffering high levels of violence and attacks against civilians for which perpetrators must be held to account.  She also said that — while 3 arrest warrants in the Libya case remain non-executed — the situation continues to be a priority and her office is now working on applications for several new warrants.



After the recent seizure of 9 million cigarettes at the port, a news release from the Revenue Commissioners on 7 May reported that a further 8.4 million had been seized.  The smuggled cigarettes were concealed behind pallets of frozen chicken in a refrigerated shipping container that arrived aboard a vessel from Rotterdam.



On 6 May, Insurance maritime News reported that there have been a total of 48 crew kidnapped off West Africa this year.



On 6 May, an announcement from the US State Department said that the US was to allow Iraq a 120-day sanctions waiver to allow it to continue to import electricity from Iran.



On 6 May, an article from Hogan Lovells says that there have been major developments related to US Nuclear Regulatory Commission (NRC) advanced reactor licensing reform and nuclear-related export controls. The article refers to recent news of 2 final rules, and a proposed rule, concerned with export control and regulating certain transactions involving China, Russia, and Venezuela, among others.  These, it points out, include amendments which add subcategories of nuclear-related materials processing items to the list of items subject to the military end-use or end-user requirements, and that certain technologies related to the listed equipment may be similarly restricted.



On 7 May, Reuters reported that Michael Terpin, a US cryptocurrency investor, is suing a suburban New York high school senior, accusing Ellis Pinsky, 18, of being the mastermind and ringleader of a cybercrime scheme that defrauded him out of millions of dollars in digital currencies.  Terpin accuses Pinsky and his alleged co-conspirators of stealing $23.8 million of cryptocurrency in January 2018, when the defendant was 15.



On 7 May, freight forwarders’ trade body FIATA issued a news release saying that it welcomed the US Federal Maritime Commission (FMC) new landmark guidance on its approach to assessing the reasonableness of detention and demurrage regulations and practices of ocean carriers and marine operators (MTO).  The guidance, it says, provides certainty on the need for detention and demurrage practices to be reasonable and in line with the purposes they serve. In the context of the unprecedented difficulties faced due to COVID-19.  On e of the 3 key principles of the new guidance is that importers, exporters, intermediaries, and truckers should not be penalised by demurrage and detention practices when circumstances are such that they cannot retrieve containers from, or return containers to, marine terminals, because under those circumstances the charges cannot serve their incentive function.  Demurrage charges relates to cargo (while the cargo is in a container before it is unpacked, delivered or accepted by the recipient), while detention charges relates to equipment (e.g. the empty container after it has been unpacked or before packing).




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(updated to 6 May 2020)





In a previous post I considered if shipping registries could have a role to play in ensuring that shipping is not used to circumvent not only UN (and other) sanctions, but also other export and trade controls, smuggling, human trafficking and other illicit activities[1].  Since that post was first published there been some encouraging developments, for example the Registry Information Sharing Compact (RISC) involving three leading open registries[2].  Announced in February 2020, this involved an agreement for the registries to inform one another if they de-register or deny registration to a merchant ship on suspicion that it has breached sanctions, and to pass on information if due diligence checks suggest that a violation of UN sanctions may be involved.

My point had been that, in addition to law enforcement and regulators, if other parts of what may be described as the industry’s supporting structure – including corporate service providers, lawyers and banks – have some role as “gatekeepers”, if only to prevent themselves becoming liable, then perhaps the registries also had a part to play.  After all, it is in everyone’s interest (except, of course, for the criminals, sanctions-busters and terrorist involved) to try to prevent of detect such illicit activities.

There are others involved in the shipping industry that might play a part.  In addition to the other obvious players – the owners and operators of the vessels and those supplying cargoes, passengers and crew – there are those that insure the vessels and their cargo, and the classification societies that provide guarantees as to technical and safety standards for the construction and operation of ships and offshore structures[3].

There have recently been some interesting initiatives and developments that indicate that some progress is being, or may be, made towards improving the performance of the shipping industry in the fight against criminal activity in general, and sanctions violation in particular.



Considering the insurance element, marine insurance covers the loss of ships, cargo, terminals and any transport of cargo by which the property is transferred, acquired or held between points of origin and final destination[4].

However, a marine policy typically covers only around three-quarters of the liabilities towards third parties that could arise, such as through collision, going aground or wreck removal.  To cover the remaining liabilities, in the 19th Century shipowners banded together to form what are termed Protection and Indemnity Clubs (or “P+I Clubs”)[5].

These P+I Clubs are a form of mutual insurance society where members pay a premium, which is then used to purchase reinsurance, with further calls made on members for payments should the club suffer excessive losses, though the club would seek to establish a reserve to cover such eventualities.  The club would not have a standard underwriting form, underwriters will tailor bespoke coverage for each insured, based on the nature and character of the risk, and the amount of insurance desired.  Traditionally, the clubs covered ship owners, ship operators and charterers – but membership was latterly opened to freight forwarders and warehouse operators.  The concept of P+I clubs originated in London, but the soon spread to other major shipping jurisdictions around the world.

There is an International Group of P+I Clubs, linking 13 major P+I clubs and accounting for around 90% of ocean-going tonnage.  This international grouping operates by means of a pooling arrangement, so as to provide affordable but high-value insurance and reinsurance cover.  It also provides a forum for the sharing of news and views within the sector, and as a spokesperson for the industry.  Claims up to a set level[6] are dealt with by national clubs, with claims over that level shared between the member clubs.

To take one example, the American P+I Club[7] lists the main risks for which P+I insurance would provide cover for shipowners, operators and charterers for third party liabilities encountered in the commercial operation of their vessels[8].  These include –

  • loss of life, injury and illness of crew (including repatriation costs), or of passengers and other persons;
  • cargo loss, shortages or damage;
  • fines and penalties;
  • mutiny and misconduct by the crew; and
  • vessel diversion expenses.

Coverage can include loss due to collision (other than the standard collision clause found in a traditional hull policy), removal of a wreck, stowaways and repatriation costs, damage caused to fixed or floating objects, pollution and oil spill costs and liability under towage contracts.  The P+I coverage would not extend to risks that would fall under a workers’ compensation policy.

There are other, more specialised forms of insurance relevant to the shipping industry, such as that which may be made available for yachts and other pleasure craft and fishing vessels.  Then there is “war risk” insurance for specific regions of particularly high risk, and cargo insurance, where the premium and risk depends on the type of cargo involved.  A particular type of insurance that has developed over recent years is that for kidnap and ransom, which exists to pay for the release of a ship (and/or cargo and crew) held by pirates, and which has priority over claims made under any other policy[9].



In the previous post concerning registries, I briefly mentioned the various threats that could be faced by ships and shipping, and saying that in recent years extensive evidence of the role of shipping in a wide range of illegal activities, and not just in “traditional” smuggling and perhaps obvious crimes like human trafficking, but anything from the role played in the evasion of UN sanctions on North Korea to the involvement of vessels in illegal, unreported and unregulated (IUU) fishing[10].  That list is annexed below.

In another post, I compiled a list[11] (almost certainly incomplete and with only brief outlines of the topics included) of the various crimes, regimes and requirements that the average compliance officer in a regulated business might want to bear in mind.  Whilst not all of these would be relevant to the shipping industry (online gambling, for example), many were – in addition to those mentioned above, there were the quite obvious ones of trade-based money laundering and other trade-based financial crime[12]; import, export, transit and transhipment licensing violations; exchange control violations and bulk cash smuggling; modern slavery and other human rights abuses (including of the crews themselves[13]; bribery and corruption[14]; proliferation activities linked to WMD and their means of delivery[15] and related financing[16]; terrorism-related movements of people, goods and finances; breaches of UN, EU or other sanctions controls; the shipment of counterfeit goods or blood or conflict diamonds[17]; and unreported and unregulated (i.e. illegal) fishing[18].

All of the above are in addition to the more obvious risks to shipping, through piracy, theft of vessels or cargo and threats to officers, passengers and crew.

There are huge amounts of money involved in trade-based financial crime[19], huge potential risks from terrorism and proliferation, and terrible suffering and hardship present in such things as human trafficking and slavery at sea.

The again, the ships themselves, or their cargo, may be the “tool”, benefit or value being moved in a money laundering, terrorist financing or proliferation financing arrangement.  This is obviously the case for trade-based money laundering and other trade-based financial crime, where the cargo (real, non-existent, misdescribed or misrepresented) may be the main element.

 In 2018, the case of Engelhart CTP (US) LLC v Lloyd’s Syndicate 1221[20] provided an example of a fraud involving a ship’s cargo, and which in that case resulted in an insurance claim.  The cargo, said to be 7,000 tonnes of copper ingots carried in containers, turned out to be, in fact, only slag of no commercial value when the containers had to be opened to inspect a leak.  It transpired that the bill of lading, packing lists and quality certificates were all fraudulent.  The assured claimants were not party to the fraud.  They made a claim on the open policy held for a range of commodities – but as the “copper” involved had never existed there had been no cargo to be physically damaged or lost, and so the claim failed.  The claimant also failed in seeking to take advantage of a “shortage of contents” clause, given that the goods supposedly covered were, in fact, fictitious.  The insurers rightly argued that none of the clauses of the contract provided cover for the acceptance of fraudulent documents for a non-existent cargo.  Amongst other things, this case illustrates that shipowners and others cannot rely on the mere fact of not having been party to a fraud or other illicit activity when seeking recompense.

 Another 2018 case[21] further underlined the above point.  In that case divers discovered drugs attached to the exterior of the ship’s hull (the Master and one of the officers were subsequently convicted of involvement in drug smuggling) and the ship remained detained by the authorities for 3 years, having been abandoned by its owners after 2 years.  The owners then made a claim against their insurers which ended up being rejected by the Court of Appeal and Supreme Court in the UK.  The owners had made their claim under “war risks” insurance and the courts held that the smuggling of drugs was not a “war risk”, and the “customs regulation exclusion” did apply[22].

 The UK P+I Club, for one, has a formal AML policy[23] as part of its governance code.  It says that it seeks to ensure compliance with internationally recognised practices, standards and regulation for the prevention of money laundering.  This is good.  However, I would question to what extent that or any other P+I Club is integrated into any information-sharing and consultation arrangement that might exist, for example, were it a bank or other financial institution.  My own view is that they should be included, and have an important role to play, particularly in respect of sanctions and trade-based money laundering and trade-based financial crime.

In sanctions cases, the acquisition, chartering or use of the ship might be to evade prohibitions and restrictions in place.  Currently, the most high-profile situation involving the control of shipping in respect of sanctions measures probably involves North Korea (though the US sanctions involving Iran and continuing sanctions on Syria might vie for this title) – where ships, shipowners and even a (Russian) port service company[24] have been listed in sanctions lists.

In February 2018, the US Treasury published an Advisory detailing deceptive practices employed by and for North Korea and involving shipping, and risk mitigation measures that could be adopted[25]; in November 2018 it issued a further Advisory in similar vein, but this time addressing sanctions risks related to the shipping of petroleum products to Syria[26].  In August 2018, it had once more issued a warning in respect of North Korean sanctions, reminding the shipping industry, including flag states, ship owners and operators, crew members and captains, insurance companies, brokers, oil companies, ports, classification service providers, and others of the significant risks posed by North Korea’s shipping practices.

In May 2020, the International Group of P+I Clubs issued a Circular[27] reminding members of continuing evidence of sanctions violations by and for North Korea.  It called for P+I Clubs to exercise caution when fixing insurance contracts, reminding them of the need to adopt measures to mitigate the risk of sanctions violations, and employ the highest level of due diligence.  It specifically warns that any activity assessed to be in breach of sanctions would result in the withdrawal of insurance cover.

However, the threats arising from sanctions are not new, and at least one P+I Club has suffered as a consequence in the recent past.  In May 2013, the American P+I Club reached an agreement to pay the US authorities around $350,000 in settlement for the potential liability involved in 55 violations of US sanctions on Cuba, Sudan and Iran.  These related to the settling of P+I claims and providing security by way of letters of undertaking and letters of indemnity.  This may be one reason why this P+I Club at least now has fairly comprehensive guidance for its members on how to comply with US, EU and other sanctions prohibitions and restrictions[28].

The specialist UN agency, the International Maritime Organisation (IMO), does have a focus on what is describes as maritime security.  However, its concentration is on the safety and security of ships, and the people and cargo on those ships.  It touches upon, for example, human trafficking and terrorism, but in a rather, to my mind, narrow sense.  On terrorism, it says that it aims to provide an international legal framework to deal with those committing unlawful acts against ships (and fixed platforms on the continental shelf), including the seizure of ships by force; acts of violence against persons on board ships; and the placing of devices on board a ship which are likely to destroy or damage it. Notably, it does not mention financing and laundering activities that might be linked to those activities it does mention, or which may be entirely unrelated.

In November 2018, Project Alpha at King’s College London published a paper[29] which set out to examine the interplay between UN sanctions and the rules governing the maritime sector.  The paper demonstrated that IMO rules as constituted were poorly designed to facilitate the effective implementation of sanctions. As such, the paper argued that the maritime governance arrangements run counter to international peace and security requirements.  A number of issues and opportunities were identified, with vessel tracking, the question of registration and flags, and audits highlighted.  It concluded that sanctions implementation did not appear to have been taken into account by the IMO for the purposes of the international maritime administrative structures it had established, though, in many cases, these could be adapted to make them directly supportive of UN sanctions.  Likewise, the paper concluded, it seems likely that the UN Security Council has passed Resolutions on maritime issues concerning North Korea without fully considering the mechanisms for implementing them and, as the setter of standards for the industry, the IMO is perhaps uniquely placed to include in those standards the compliance with the Resolutions.

Finally, the risk might involve frauds directed against the insurers by means of the actual or purported total loss or vessel and/or cargo – a crime as old as the marine insurance industry, or even of shipping itself – and one to which the insurance industry might be expected to be most acutely attuned[30].

Currently, when a country is evaluated by FATF or one of its regional affiliates, the evaluation does not directly touch upon that country’s shipping registry (it would probably not be on the evaluation team’s visit schedule), and would likely only touch upon any shipping insurance element in the context of the overall insurance sector.  However, any scandal affecting shipping linked to the country can colour the evaluation and the outside perception of the integrity of the jurisdictions.  Furthermore, any such scandal would be likely to spill over, if not directly implicate, other business sectors (lawyers, corporate service providers etc).

In April 2019, it was announced that the IMO was to begin work on official guidance to combat maritime corruption.  An article at the time said that more than 28,000 individual incidents of corruption (predominantly bribery and so-called facilitation payments) had been reported since 2011[31].  The IMO also announced the setting up of a maritime anti-corruption agenda by its Facilitation Committee, and would draw upon the principles of the UN Convention Against Corruption – then the only legally binding international instrument combating corruption.

A vessel involved in illegal activity, be it smuggling, sanctions violation or some other crime, also face the risk of being detained and seized by national authorities.  2019, for example, saw the seizure by US authorities of a North Korean ship detained in Indonesia for violation of US/UN sanctions and a large containership operated by the MSC shipping line found to be carrying a huge quantity of cocaine[32].



It appears to me that there three ways in which the shipping sector as a whole, including the P+I Clubs and their agents could help to improve the prevention and detection of crimes –

  • increase awareness of the risks, and possible indicators – there are bodies already in existence that track threats from piracy, and the International Maritime Bureau of the International Chamber of Commerce is an important one[33];
  • improve the availability, exchange and dissemination of information between all parties involved – between insurers, between agents, amongst shipowners, and establish channels of (two-way) communication between these and law enforcement and financial intelligence units;
  • enable or require other parties to also be aware of the risks, carry out checks and generally exercise appropriate due diligence – this could apply to all the agents, charterers and representatives used[34]

The third of these bullet points is that which I suggest would be the one that the shipping sector could most usefully take on board and implement.  Taken together with the other two, there should also be –

  • an improvement in (or even just implementing) “know your customer” and due diligence checks – on an ongoing basis and not only when taking on a new customer, client, supplier etc; and
  • each business or organisation needs also to undertake meaningful risk assessments of areas of business.

If these measures were put in place, they could not only help to prevent or detect illicit activity, but may well benefit the business or organisation directly by providing some degree of protection against allegations of not doing enough to prevent bribery, corruption or involvement.

What might be a significant assistance for insurers, in February 2020 details were released[35] about a information-sharing agreement between the 3 largest open registries (which together account for 41% of the world’s merchant shipping tonnage), then joined by 4 smaller registries[36] in March, to inform one another if they de-register or deny registration to a merchant ship on suspicion that it has breached sanctions, and to pass on information if due diligence checks suggest that a violation of UN sanctions may be involved.

The Registry Information Sharing Compact (RISC) is said to address the requirement set out in UN SCR 2321 (2016)[37] that “all Member States shall de-register any vessel that is owned, controlled, or operated by the DPRK, and further decides that Member States shall not register any such vessel that has been de-registered by another Member State”.

It has been suggested that RISC would provide more benefit, and hence reassurance, to smaller registries which may be more vulnerable to exploitation by the like of North Korea.  Indeed, it may be that the existence of RISC would drive use of those registries not party to the agreement, or will stimulate greater, or more complex, evasion techniques.

It would obviously be useful if the information that might be shared between registries could inform the risk assessment and intelligence activities of the insurers.  However, the initial agreement only catered for cooperation between registries, and not other third parties.



In April 2019, it was reported[38] that the International Maritime Organization (IMO) has announced it will begin work on official guidance to combat maritime corruption.  The article says that more than 28,000 individual incidents of corruption – predominantly bribery and “facilitation payments”, where shipping operators pay onshore officials to accelerate or circumvent administrative processes – have been reported since 2011.  The IMO has agreed to include the formation of a maritime anti-corruption agenda in the work programme for its Facilitation Committee in response to requests from several states, with support from the International Chamber of Shipping (ICS).  The proposed maritime anti-corruption agenda is expected to draw on the UN Convention Against Corruption (UNCAC), which came into force in 2005 and has been adopted by 186 countries.  The UNCAC is currently the world’s only legally binding instrument combatting corruption.



As with the shipping registries, it appears to me that the role or roles that the P+I Clubs in particular could play in combating serious trade-based crime, and especially sanctions violations and proliferation activities has been under-appreciated in the past.  They need to be included in any discussion, and any information-sharing arrangements.  The May 2020 initiative of the International Group of P+I Clubs is a welcome start and, hopefully, an indication of proactive movement and not just a knee jerk reaction to increasing US pressure.

The increasing spread of anti-bribery and anti-corruption legislation, and of legislation seeking to penalise human rights abuses – with the EU (pre-Covid-19) having made noises about extending environmental, social and governance requirements, all of which can have extra-territorial effect (or might apply anyway because it is the law of the flag state of the vessel concerned) presents a threat to insurers and their clients and members of P+I Clubs.

Whether or not FATF and similar bodies directly addresses the activities and shortcomings of shipping registries and the marine insurance sector, there remains the real risk of problems in those areas, or spilling over from those areas into others which are evaluated by FATF and others, affecting evaluations, ratings and perceptions of a jurisdiction.

Therefore, if only from the purpose of self-protection it appears to make sense for businesses and organisations involved to examine, revise and upgrade (or implement) controls and procedures.

It also appears important, from a jurisdiction’s point of view, to ensure that the shipping sector as a whole is included in any national risk assessment, and in any consultative and information-sharing arrangements.


Ray Todd

18th August 2018

Updated 7 May 2020




These can be many and various, and include –

  • Violating UN or EU (or US or regional bodies’) sanctions that can impose such things as arms embargoes or more general trade embargoes[39]. They can also restrict or prohibit the use of a country’s vessels in trade with a country or entity – the obvious current example involves the DPRK[40], though in July 2019, King’s College London published a report and case study showing that despite US and EU sanctions, Iran and Russia have been transferring oil and refined petroleum products to Syria, with some western companies and western-flagged vessels were wittingly or unwittingly involved in oil and jet fuel transfer to Syria[41].  In November 2019, it was announced that the US would target shipping companies that are in breach of sanctions and aggressively enforce measures across the globe to clamp down on such practices[42].  P+I Clubs have warned that any activity assessed to be a breach of sanctions would result in the withdrawal of insurance cover[43];
  • Smuggling of goods into or out of a territory – smuggling has a long history and still goes on and can include the illicit removal of goods as well as the illicit supply; such as the removal of oil from territory controlled by ISIS in Iraq during the conflict there. Almost anything may be smuggled, from the traditional alcohol and tobacco to arms and military equipment, endangered species, timber, currency, gold, oil, coal etc.  The Italian authorities used to regularly detain small coaster-type vessels involved in the contraband cigarette and tobacco trade around the Mediterranean.
  • Drugs trafficking – perhaps the most high-profile of smuggling activities. Sometimes the entire vessel may be used, particularly smaller pleasure craft or fishing vessels.
  • Human trafficking – of higher profile in recent years due to the migrants attempting to reach Europe from North Africa. It may be people smuggling of those who want, and pay, to make the journey, or the trafficking of those effectively enslaved to be used in providing sexual services or enforced labour.
  • Illegal Unreported and Unregulated (IUU) fishing and illegal fishing – the UN Food and Agriculture Organisation (FAO) estimates that perhaps 30% of all catches are composed of IUU fishing. It is neither a new phenomenon, nor confined only to the high seas[44].  The FAO also says that those involved need not be using flags of convenience but says that the root cause of IUU fishing is a lack of effective flag State control.  Since 2010, EU operators who fish illegally anywhere in the world, under any flag, risk substantial penalties proportionate to the economic value of their catch, which deprive them of any profit[45].  IIU fishing may also the use of enforced labour (see below).  Illegal fishing is defined by the UN Office for Drugs and Crime as encompassing all fishing activities conducted in contravention of national and international laws, as well as agreed regional fisheries management and conservation measures[46], such as fishing beyond allowable catch limits, taking of juvenile fish and prohibited fish species, and fishing during closed seasons or in closed areas[47].
  • Use of enforced labour – the exploitation of seafarers has a long and depressing history. The UN International Labour Organisation (ILO) defines enforced or forced labour as meaning where persons are coerced to work through the use of violence or intimidation, or by more subtle means such as manipulated debt, retention of identity papers or threats of denunciation to immigration authorities[48]. In the present day, the most oft cited example is connected to IUU fishing (see above)[49].  Under US law, the importation of anything produced using forced or indentured labour is prohibited and other countries will have similar laws.[50]  The UN and individual countries, notably Canada, are promoting “social responsibility” laws that impose on businesses in one country responsibility for human rights and other abuses carried out by them, or on their behalf, in other countries.  The so-called “Ruggie Principles” comprise the responsibility of the state and the company to ensure human rights are protected[51].
  • Environmental crime – this could involve the unauthorised disposal of oil[52], waste or other unwanted materials by a ship. It could overlap with smuggling (as well as bribery and corruption), where the unauthorised disposal involves dumping the material in a place where this was not allowed (such as in the infamous Ivory Coast incident in 2006)[53].  IUU fishing above could also be considered an environmental crime.
  • Bribery and corruption – may be connected to any of the above, and in the US, UK and increasingly elsewhere, involvement in bribery or corruption anywhere in the world can be an offence under your own domestic law. Not only that, as in the UK, failure to have adequate processes in place to prevent and detect bribery and corruption within your organisation can constitute an offence, with very recently the first conviction in the UK for such an offence[54].
  • Money laundering – this too may be connected to any of the above – the vessel may be bought with, or otherwise financed by, the proceeds of the illegal activities. The classic example may be the pleasure craft bought with the ill-gotten gains of its owner.  However, one should bear in mind that trade-based money laundering, and other trade-based financial crime, is thought to far exceed “normal” money laundering, and that the ship, its operations and cargo may be an intrinsic part of the crime itself[55].
  • Tax evasion (or avoidance), which may then be linked to money laundering, is also a factor to be considered. Even where the registry involved has done nothing wrong under maritime law, it can be tainted if it is then revealed that there was something amiss in the purchase, ownership, management or operation of the vessel.  A good example occurred in late 2017, then the Paradise Papers alleged that certain wealthy individuals had benefitted from an advantageous VAT arrangement on the acquisition of business jets in the Isle of Man[56].  Doubts were also expressed about arrangements involving yachts.  Though the ones mentioned in the report did not fly the flag of the Isle of Man, the Island nevertheless has a sizeable number of expensive pleasure craft on its register and doubts and suspicions do not always need evidence.
  • Terrorist financing – as with money laundering, this may be connected to any of the above, in that they were a means of raising funds for the terrorist body, or were (as was the case with the shipment of oil from Iraq by ISIS) an essential element of the body’s activities.
  • Proliferation of weapons of mass destruction (WMD) and delivery systems – it would be a mistake to think that this heading only applied where UN sanctions applied, such as in respect of DPRK. In fact, prevention of proliferation of WMD and their delivery systems (such as missile systems), can not only fall under the heading of sanctions, but also that of smuggling in general, or be linked to potential use by terrorists.  It also links with export and trade controls below, and involve dual-use items and technology as well as actual components or the finished objects themselves.
  • Export and trade controls – like with several other of these headings, this overlaps with several of the foregoing. Export (and import) controls, including licensing requirements and outright prohibitions, with the avoidance, evasion or ignoring of them are obviously closely linked to what might be considered to be smuggling.  Trade controls exists in several countries, including the UK, and extra-territorial effect, requiring a licence from the home state of the owner and/or shipper for movements between two other countries[57].  An example of the effect of this requirement is the need for those providing armed anti-piracy security on British ships to obtain a licence from UK authorities (which covers the movement of the weapons and related equipment required)[58].
  • Piracy and armed robbery at sea[59] – this seems self-explanatory[60] and is more generally seen as a risk of being a victim of the sort of maritime piracy such as that seen off Somalia, the Gulf of Guinea and South-East Asia[61]. On the other hand, the pirates must get their vessels from somewhere.  It is notable that there exists specific guidance[62] for kidnap and ransom insurance and the payment of ransom[63].

Any or all of the above could or would involve organised crime or terrorist organisations, and some may also involve state actors in the form of unscrupulous states, officials or official bodies.

[1]  https://wordpress.com/post/raytodd.blog/3168

[2]  Panama, Liberia, and the Marshall Islands.

[3]  Classification societies set technical rules based on experience and research, confirm that designs and calculations meet those rules, survey ships and structures – both during construction and commissioning and periodically thereafter – to ensure that they continue to are in accordance with the rules.

[4]  For a fuller description of marine insurance and its scope see https://thelawreviews.co.uk/edition/the-shipping-law-review-edition-5/1170842/marine-insurance

[5]  2019 saw the 150th anniversary of the UK P+I Club being celebrated: https://www.ukpandi.com/uk-pi-150th-anniversary/message-from-the-chairman/ For a brief history of P+I Clubs, see: https://www.hellenicshippingnews.com/what-is-protection-and-indemnity-insurance/

[6]  Currently $10 million.

[7]  https://www.american-club.com/

[8]  It is worth noting that the American P+I Club paid a (reduced) $350,000 penalty to US authorities in 2013 to settle 55 apparent violations of US sanctions against Cuba, Sudan and Iran, having settled claims and provided letters of undertaking and letters of indemnity.  While this seems to have alerted that particular club (see below), one would have thought that it would also have highlighted sanctions violations as another pertinent risk for other clubs too.

[9] Under English law at least, the payment of ransom to pirates is not, in itself, illegal, and there is anyway a strong moral argument to do to secure the release of any individuals held.  However, it should be noted that care has to be taken not to breach any relevant sanctions measures involving terrorist groups as, in essence, pay outs may be made to criminals, but not to or for terrorists.  For example, see https://www.gov.im/news/2015/aug/07/united-nations-and-european-union-sanctions-ransom-payments/

Modern piracy is by no means as rare as one might think; see https://www.icc-ccs.org/piracy-reporting-centre/live-piracy-map for a map detailing attacks made in 2018.  See also guidance on www.maritimeglobalsecurity.org, a stakeholder in which is the International Group of P+I Clubs.

[10]  The EU Regulation to prevent, deter and eliminate IUU fishing entered into force on 1st January 2010.  The European Commission reports that it is working actively with all stakeholders to ensure coherent application of the IUU Regulation.  Meanwhile, Greenpeace has issued lists said to contain the names of irresponsible fishing operators and the companies behind them – http://blacklist.greenpeace.org/home

[11]  https://wordpress.com/post/raytodd.blog/3429

[12]  See https://www.gov.im/media/1348726/notice-1000-man-trade-based-money-laundering-july-18.pdf

[13]  Seen as a particular risk in IUU fishing; see http://www.ilo.org/global/topics/forced-labour/policy-areas/fisheries/lang–en/index.htm

[14]  Even more of a risk given the extra-territorial reach of such legislation as the Bribery Act 2010 in the UK and the Foreign and Corrupt Practices Act in the US.  The UK P+I Club has an anti-bribery policy, for example, to meet the requirements of the Bribery Act: https://www.ukpandi.com/about-us/corporate-governance/compliance-regulatory/anti-bribery-policy/

[15] Including procurement and transport of materials, components, fuel etc and delivery systems, such as rockets and missiles, and their components, guidance systems etc.

[16]  See https://www.gov.im/media/1352777/notice-1008-man-proliferation-and-proliferation-financing-risks-2-jul-18.pdf

[17]  See https://www.gov.im/media/80563/sanctions-notice-27-kimberley-process-certification-scheme-imports-and-exports-of-rough-diamonds-27-10-16.pdf

[18]  Aka IUU fishing.  In May 2019, the captain and 2 crew from a “notorious” IUU fishing vessel were fined and sentenced to prison in Sao Tome et Principe in a case that shed light on the little publicised scourge, and which was said to illustrate how difficult it was to bring maritime criminals to justice – the ship flew a Nigerian flag but was owned by a Spanish investor and operated through a shell company in Panama. It had changed hands many times over the years: http://adf-magazine.com/maritime-trials-and-tribulations/

[19] $950 billion in 2014, according to the Global Finance Initiative.

[20]  https://www.shlegal.com/insights/shippingbulletin—november-2018#fraudulentdocuments

[21]  Navigators Insurance Company Ltd and others v Atlasnavios – Navegacao Lda, The “B ATLANTIC”

[22]  Interestingly, in its report of the case, Stephenson Hardwood made the point that: “Although the smuggling was a wrongful act done intentionally without just cause or excuse, it was not ‘malicious’ within the meaning of insuring clause 1.5. In the context of war risks insurance policies, ‘malice’ has to involve spite, ill-will or the like which is directed towards property or persons. Drug smugglers do not intend for a vessel to be detained or for any other property or persons to be lost or damaged. To the contrary, they intend that the drugs avoid detection, that the vessel, property and persons remain unharmed and therefore that the intended recipients get what they have paid for.”: https://www.shlegal.com/insights/shippingbulletin—november-2018#fraudulentdocuments

[23]  https://www.ukpandi.com/about-us/corporate-governance/compliance-regulatory/anti-money-laundering-policy/

[24]  Sanctions imposed in August 2018 by the US Treasury on Profinet Pte, which provides services at Nakhodka, Vostochny, Vladivostok, and Slavyanka, were thought to be the first time such sanctions had been imposed on a port services operator (its director was also designated by the US Treasury).  This perhaps indicates that the reach of such measures continues to expand into new and hitherto largely unaffected areas.

[25]  https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Documents/dprk_vessel_advisory_02232018.pdf

[26]  https://www.treasury.gov/resource-center/sanctions/Programs/Documents/syria_shipping_advisory_11202018.pdf

[27]  https://www.igpandi.org/article/democratic-peoples-republic-of-korea-dprk-sanctions-enforcement-update

[28]   https://www.american-club.com/

[29]  https://projectalpha.eu/discussion-paper-un-maritime-sanctions-and-the-international-organisation/

[30]  A classic case was that of the scuttling of the supertanker Salem in 1980, a case that also involved sanctions-busting with oil being delivered to apartheid South Africa.  The story is an amazing one, and well worth reading.  The architect of the scam, jailed for 35 years in the US in 1985, but then escaped from prison 3 years later.  See http://archives.datapages.com/data/phi/2004/85.htm

[31]  https://www.governmenteuropa.eu/maritime-anti-corruption-agenda/92958

[32]  For a summary of US laws on the seizure of vessels, see: https://www.americanshipper.com/magazine/daily/?year=2019&month=7&day=12&page_number=4&via=asdaily

[33]  Established in 1981 (in the wake of the Salem scandal), it is a non-profit making organisation that acts as a focal point in the fight against all types of maritime crime and malpractice.  It has MoU with both the World Customs Organisation and Interpol, and the International Maritime Organisation has urged governments, all interests and organisations to co-operate and exchange information with each other and with the IMB with a view to maintaining and developing a co-ordinated action in combating maritime fraud.  The IMB provides an authentication service for trade finance documentation. It also investigates and reports on a number of other topics, notably documentary credit fraud, charter party fraud, cargo theft, ship deviation and ship finance fraud.

[34]  With the increase in such systems as the EU’s Authorised Economic Operator (AEO) scheme and security requirements for the pre-clearance of cargo entering the US, such requirements could be built into agreements with third parties – which would no doubt be useful when applying for AEO status or the equivalent.  It would also be of use to defend one’s position if implicated by another’s nefarious activities – the UK Bribery Act, for example, provides for a defence if a business has adequate arrangements in place to prevent bribery taking place.

[35]  https://www.hellenicshippingnews.com/the-registry-information-sharing-compact-is-a-major-step-forward-in-sanctions-enforcement/

[36]  St Kitts and Nevis, Comoros, Honduras and Palau.

[37] https://documents-dds-ny.un.org/doc/UNDOC/GEN/N16/407/50/PDF/N1640750.pdf?OpenElement

[38]  https://www.governmenteuropa.eu/maritime-anti-corruption-agenda/92958

[39]  In November 2018, Project Alpha at King’s College London published a paper examining the interplay between UN sanctions and the rules governing the maritime sector, showing how the sanctions impose requirements on shipowners, shipping companies that go beyond the rules of the International Maritime Organisation (IMO).  The paper also argues that the IMO rules do not permit the effective implementation of sanctions, and it identifies a number of issues and opportunities for changes to be made to the rules. See https://projectalpha.eu/discussion-paper-un-maritime-sanctions-and-the-international-organisation/

[40]  In April 2019, Lloyds of London issued Market Bulletin Y5246 to advise that existing due diligence and monitoring procedures should be reviewed and validated in relation to marine cargo and hull exposures in the light of North Korean, Syrian and Iran sanctions risks, including proliferation risk.

[41]  The case study involved the supply of oil and jet fuel to Syria and involved Russia as well:  https://www.kcl.ac.uk/news/sovfracht-indictment-and-oiljet-fuel-transfer-to-syria

[42]  https://www.hellenicshippingnews.com/u-s-sets-sights-on-shipping-companies-for-sanctions-evasions/

[43]  https://www.igpandi.org/article/democratic-peoples-republic-of-korea-dprk-sanctions-enforcement-update

[44]  http://www.fao.org/fishery/iuu-fishing/en

[45]  https://ec.europa.eu/fisheries/cfp/illegal_fishing_en

[46]  https://www.unodc.org/documents/organized-crime/GPTOC/Issue_Paper_-_TOC_at_Sea.pdf

[47]  In May 2019, there occurred a rare victory against IUU fishing when the captain and 2 crewmen from a “notorious” vessel were fined and imprisoned in Sao Tome et Principe, a small state that relies on fishing.  An article on the case illustrates the current difficulties in bringing such maritime criminals to book: http://adf-magazine.com/maritime-trials-and-tribulations/

[48]  http://www.ilo.org/global/topics/forced-labour/definition/lang–en/index.htm

[49]  In May 2018, the Indonesian authorities detained a Togo-flagged vessel described as a “slave ship” http://www.straitstimes.com/asia/se-asia/indonesia-seizes-alleged-slave-ship-wanted-by-interpol

[50]  It prohibits the importation of merchandise mined, produced or manufactured, wholly or in part, in any foreign country by forced or indentured child labour – including forced child labour. Such merchandise is subject to exclusion and/or seizure, and may lead to criminal investigation of the importer(s).

[51]  http://www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf

[52]  In 2011 it was claimed that up to 810,000 tons of oily waste is intentionally and illegally dumped into the world’s oceans by commercial vessels.

[53]  In 2006, a ship registered in Panama, chartered by the Singaporean-based oil and commodity shipping company, offloaded toxic waste to an Ivory Coast waste handling company which disposed of it at the port of Abidjan, giving rise to a health crisis in the country.

[54]  On 21st February 2018, Skansen Interior Limited was found guilty of failing to prevent bribery under section 7 of the Bribery Act after the jury were unconvinced that the company had adequate procedures in place to prevent bribery.

[55]  For more information on trade-based money laundering see https://www.gov.im/media/1348726/notice-1000-man-trade-based-money-laundering-29-sep-17.pdf

[56]  https://www.icij.org/investigations/paradise-papers/offshore-gurus-help-rich-avoid-taxes-jets-yachts/

[57]  The classic example, would be a licence required from the UK for a UK company to ship arms from South Africa to India.

[58]  For more information see https://www.gov.im/media/814275/notice-279t-man-trade-control-licensing-27-10-16.pdf and https://www.gov.uk/government/publications/open-general-trade-control-licence-maritime-anti-piracy

[59]  See The Shipping Law Review: https://thelawreviews.co.uk/edition/the-shipping-law-review-edition-6/1195084/piracy

[60]  Piracy is defined in Article 101 of the UNCLOS as ‘any illegal act of violence or detention … committed for private ends by the crew … of a private ship … directed … against another ship … or against persons or property on board such ship’ on the high seas or in a place outside the jurisdiction of any state.

[61]  Although an attack on an Italian vessel in the Gulf of Mexico was reported in late 2019.

[62]  I am aware of such in the UK, and was personally responsible for drawing up such guidance in the Isle of Man, see: https://www.gov.im/media/1362739/terrorism-and-the-financing-of-terrorism-final-sept-2018-v2.pdf

[63]  The rule of thumb is that one can pay “ordinary” criminals, but not terrorists.


On 7 May, World Trade Controls reported that the EU Commission is conducting a public consultation as part of the ongoing review of EU Regulation 2019/125, the EU Anti-Torture Regulation containing measures to control and prevent the trade in certain goods that could be used for capital punishment or torture  or other cruel, inhuman or degrading treatment. The EU Regulation requires that a review of the operation of the Regulation be carried out by July 2020. Responses are required by 13 May.




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On 29 April, Henderson Chambers issued an Alerter that set out to provide a guide for practitioners to approaching director’s disqualification orders at a time when the HSE, Environment Agency and other regulators show a growing appetite to prosecute individuals.




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On 7 May, an article from Foley Hoag LLP reported that the DoJ had filed charges in the federal District Court of Rhode Island against 2 men for conspiracy to make a false statement and conspiracy to commit bank fraud in connection with loan applications made under the federal government’s Payroll Protection Program (PPP).  It is alleged that they misrepresented that they were seeking to use over $500,000 in PPP loans to pay wages to dozens of employees at 4 different business entities, but federal authorities discovered the loan applications were a sham.





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On 7 May, the Irish Times reported that the health services feared it was about to fall victim to fraud during a €7.5 million purchase of 350 ventilators from a company in the Far East, and made a complaint to the Garda, according to a report to the Policing Authority.  It is said that the payment has not been transferred and the investigation remains ongoing. The Irish-based company that was acting as an agent in the transaction has now begun a breach of contract case against the health services in the High Court after it discontinued its planned purchase of the ventilators.



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On 5 May, the Gibraltar Government’s AML/CFT National Coordinator has published a consultation draft of the revised 2020 National Risk Assessment for Money Laundering, Terrorist Financing and Proliferation Financing, which has been circulated to all regulated entities for information.  Responses are requested by 5 June.



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On 6 May, Charles Russell Speechlys released a podcast, and accompanying article on economic substance laws which require ‘relevant entities’ carrying on ‘relevant activities’ to show economic substance in their jurisdiction of incorporation.  The aim is to counteract the effects of zero tax and preferential tax regimes.  The jurisdictions affected are Anguilla, the Bahamas, Bahrain, Bermuda, the BVI, the Cayman Islands, Guernsey, the Isle of Man, Jersey, the Marshall Islands, Turks and Caicos, the UAE, and Vanuatu.





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