Moving Energy Forward
Compliance with Sanctions
Ensuring adherence to sanction requirements is a crucial pillar of the broader compliance culture of Gunvor. As a significant participant in the global commodities markets, Gunvor takes its sanctions obligations responsibly.
Modern sanction restrictive measures are varied in scope and applicability, however, commonly designed to support foreign policy and national security objectives of the implementing states and entities. Sanctions could be either comprehensive or selective, i.e., either prohibiting all transactions with sanctioned persons and goods or only prohibiting certain types of business and still accepting others. Depending on particulars of each transaction, various sanction compliance regimes of different countries may apply separately or simultaneously.
In addition, the year 2022 alone showed unprecedented, coordinated sanction efforts of numerous states in response to the war in Ukraine and other emerging geopolitical situations around the world. These measures resulted in thousands of designated individuals and entities as well as sanctioned vessels. Furthermore, strict export and import control measures as well as price restriction have been implemented on different commodity markets.
To address these challenges and the complexity of ever-emerging restrictive measures, an effective and well-designed sanction compliance program is indispensable for global firms like Gunvor. It is inspired by the Framework for US Office of Foreign Assets Control Compliance Commitments and focusses on continuous compliance with UN, USA, EU, UK, Swiss and Singapore sanctions.
The culture of compliance to sanction is persistently implemented through management commitment, internal controls, dedicated policies and procedures, risk assessment as well as though periodic and ad hoc trainings.
Some of the key elements of Gunvor Group’s sanction compliance program are addressed hereinafter.
1.Sanction Policies, Procedures and Guidance
The Economy Sanctions Policy is the cornerstone of the sanction compliance culture of Gunvor. The Policy outlines general principles, processes, risk indicators, and focal points to ensure compliance with applicable sanction laws and regulations. The policy is complementary to the Anti Bribery and Corruption & Anti Money Laundering Policy, the Counterparty Due Diligence Handbook, and the Vessel Screening Guidance and Process, each of which further enhances sanctions compliance efforts by requiring sanction screening of chartered vessels and commercial counterparties (including without limitation owners, controlling persons, and directors). Due to extremely dynamic nature of sanctions, updated guidance is communicated to relevant stakeholders on an ad hoc basis.
The Economy Sanctions Policy is continuously improved and enhanced to align to the changes of the global sanctions landscape, including, without limitation revisions in 2014, 2017 and 2021. Current version of the policy effectively addresses key sanction red flags and compliance principles, which remain consistent with the most recent regulatory guidance of 2022.
The Economy Sanctions Policy outlines:
- General background and types of sanctions
- Relevant sanctions regimes, including, without limitation UN, USA, EU, UK, and Singapore, as well as regime specific sanction compliance guidance
- Principles of sanctions compliance, procedures, and red flags
- Consequences for breach of sanctions
- List of high-risk countries and territories subject to sanctions
- Links to external regulatory resources.
- Draft sanction compliance clauses for typical contracts.
2. Sanctions Due Diligence
Gunvor Group sanction due diligence includes not only assessment of the counterparties but also verification of the transactions relying on the risk-based approach.
In addition to the wider Know Your Counterparty (KYC) process, a specific sanction KYC assessment is performed in relation to counterparty as such, its managers, directors, direct and indirect owners, controlling persons, and geographical location of place of business operations.
In particular KYC is performed based on official corporate documentation and independently verifiable commercial data from commercial registers. Names of all relevant stakeholders are screened via dedicated software database against the lists of designated and associated persons in the main jurisdictions of compliance concerns.
In addition to initial sanction verification of the counterparty at the on-boarding stage, Gunvor sends all its active business counterparties, including relevant associated individuals and parent entities, to an external service provider to perform daily sanction screening.
Complementary to KYC, a sanctions assessment is performed under the Know Your Transaction (KYT) process for higher risk transactions, for instance when the trading pattern of the counterparty is not in line with standard trading practices.
Depending on circumstances, KYT may include verification of customs classification of the goods, terms of the transaction, and even the identities of all counterparties within the supply chain up to the producer of the goods.
Combined Sanction Due Diligence
Where necessary, Gunvor Group engages external vendors to provide in-depth reports on countries, counterparties or particular regions from a sanction compliance perspective. For instance, when there is reasonable suspicion concerning possible hidden ownership or control by sanctioned persons in a current or prospective counterparty, an external Enhanced Due Diligence report may be requested to independently assess and resolve such concerns. Alternatively, or complementary, an independent external legal opinion may be sought to address these concerns.