UK publishes Red Alert on Shadow Fleet Sanctions Evasion and Avoidance Network

The UK National Crime Agency (NCA), Office of Financial Sanctions Implementation (OFSI), and Foreign Commonwealth & Development Office (FCDO) have issued a joint Red Alert providing information to assist financial institutions and others operating in Russia’s oil and gas sectors in identifying potential sanctions evasion in relation to the sale of Russian oil and gas.

The Alert identifies how Russia’s sanctions evasion and avoidance network is split between two sides and known to its affiliated traders/brokers as “blue” and “red”. The “blue” side is said to work with entities in the West, including banks, insurers and trading platforms. The “red” side of the network is said to deliberately obscure ownership structures and operate front companies designed to be replaced with ease if they are subject to Western sanctions.  The purpose of the alert, and insofar as being relevant to the Club’s Members, is in raising awareness of deceptive practices that are used to evade sanctions, and to enable business to remain on the right side of the law. The Alert makes specific reference to a number of individuals and companies that have been sanctioned by the UK, but which are continuing to attempt to evade UK sanctions through these networks.

The Alert identifies a number of red flags that businesses should be alive to:

• Companies with limited trading history very quickly trading large volumes of oil;
• Limited information on ownership, directors or beneficiaries;
• Multiple transfers between obscure companies;
• Companies registered or operating in known jurisdictions of high risk, including those where shadow fleet entities are known to operate;
• Companies having limited online presence with no company website or contact information. If a website does exist, generally it will contain generic stock photos, and no details on the individuals operating the company.

Members should consider and if appropriate take steps to incorporate reference to these red flag indicators within their own sanctions compliance programmes, as doing so may enable them to avoid participating in activities which could expose them to sanctions risks.