Archive for the ‘Somalia Sanctions’ Category


Jul

6

Somali Pirate Ransoms Alleged to Be Winding Up in Terrorists’ Hands


Posted by at 5:34 pm on July 6, 2011
Category: Piracy on the High SeasSomalia Sanctions

SomaliaA report originating from Reuters states that United Nations officials are alleging that ransom payments made to Somali pirates are going, at least in part, to Somali militants, raising the possibility that shipping groups and insurance companies making these payments might be breaching economic sanctions targeting Somalian militants. The report went on to say that in February the Somali militant group al-Shabaab had seized a number of pirate leaders and forced them to agree to pay 20 percent of all future ransoms to al-Shabaab. Reuters then cited its own investigations showing these instances in which ransoms were diverted to the militant group:

• Feb. 25: $200,000 from the release of the Japanese-owned MV Izumi after pirates received a $4.5 million ransom.

• March 8: $80,000 from the $2 million release of the St. Vincent & Grenadines-flagged MV Rak Africana.

• March 9: $100,000 after the Singapore-flagged MV York was freed for $4.5 million.

• April 13: $600,000 from the release of the German ship Beluga Nomination after a $5.5 million ransom was paid.

• April 15: A $66,000 share of the $3.6 million ransom handed over for the Panama-flagged MV Asphalt Venture.

• May 14: $100,000 from the release of two Spanish crew of the Spanish-owned FV VEGA 5.

According to Reuters, the payment of these amounts was “corroborated” by pirates, al-Shabaab and Somali residents.

Al-Shabaab is listed on the Treasury Department’s List of Specially Designated Nationals and Blocked Persons, but payments made by shipping and insurance companies to pirates that wound up in the hands of the group would not violate Treasury regulations unless the payments were made knowing that they would wind up in the hands of al-Shabaab. Al-Shabaab is also listed by the State Department as a Foreign Terrorist Organization. Because of that designation, 18 U.S.C. § 2339A prohibits the provision of money to al-Shabaab “knowing or intending” that the money be used for the commission of certain terrorist crimes enumerated in the statute. It seems hard to argue, even given the alleged 20% take agreement, that payment of ransom to the pirates satisfies the standards of that statute.

In an earlier post on Somali piracy, I noted that OFAC agreed that its rules only forbid payment to individual pirates and pirate groups that had been designated but recommended that, nonetheless, ship owners and insurance companies consult with OFAC before making ransom payments to Somali pirates. The Reuters story suggests that some companies have been consulting with OFAC prior to ransom payments even though that is not legally required:

Michael Frodl, a Washington lawyer and head of C-level Maritime Risks, … said the U.S. Treasury’s Office of Foreign Assets Control (OFAC) carried out reviews of all potential ransom payments to determine if the pirate group in question had ever handed over part of a ransom to al-Shabaab.

“Most times OFAC has authorized payment because it has found no link,” Mr. Frodl said. “But if there is indeed a 20% ‘tax’ being applied by Shabaab against pirate ransoms in Haradhere, a major pirate hub it now controls, then things could change.”

Yes, things “could” change, but only the 20 percent tax is actually occuring and the person making the payment was aware of it. Even then, where the payment is not going directly to al-Shabaab and is necessary to end an imminent threat to the life and safety of crew members, OFAC may be in a difficult position arguing that the payment to the non-designated pirates is a violation of its rules.

UPDATE: As commenter Josh points out, al-Shabaab is on the SDN list. In my original post, I was unable to find them. My guess is that there was a typo in my search request. The post has been updated to reflect the designation of al-Shabaab as an SDN

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Apr

22

(Ran)Somalia Payments and OFAC


Posted by at 7:57 pm on April 22, 2010
Category: OFACPiracy on the High SeasSomalia Sanctions

SomaliaLast week I posted on the new Somalia “smart” sanctions and noted that the concerns by the maritime industry that the new sanctions would prohibit ransom payments were unfounded. The industry was concerned that language in the executive order, which permitted designations of persons engaged in piracy off the coast of Somalia, would prohibit payments of ransoms to pirates.

Most marine hull insurance covers piracy as does Institute Cargo Clause A. Even under Cargo Clauses B and C, insurers may still be required to contribute to ransom payments under the general average rule. Accordingly, because shippers and vessel owners have insurance coverage paid for and available to pay the ransom, they are anxious not to lose that benefit (or their crews or goods) as a result of any interference by OFAC with ransom payments.

I indicated that these concerns were unfounded because the executive order forbids payments to parties already designated for piratical activities. If a pirate demanding ransom hadn’t been designated yet, nothing in the order would forbid payment of ransom to that pirate or pirate crew. (Of course, it is a little surrealistic to imagine that a vessel owner would demand the pirate’s name and run it against the SDN list before making a ransom payment.)

On April 16, during a meeting with maritime industry officials, a senior government official confirmed my position, namely, that only payments to designated individuals were prohibited by the order. Nothing in the order prohibited ransom payments to pirates in general.

But the bad news is that the official indicated that vessel owners should consult with OFAC before making any payment where the order “might” apply. Because the pirates demanding ransom presumably don’t give their names (or even aliases such as Blackbeard or the like), the order “might” apply to any proposed payment of ransom to pirates.

The utility of meeting with OFAC in such cases certainly doesn’t outweigh the increased danger to crew lives caused by the consequent delay. This is particularly true given that OFAC is unlikely to agree that it won’t pursue criminal or civil penalties should one of the pirates turn out to be a designated individual.

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Apr

15

Sanctions on Somalia Announced


Posted by at 8:33 pm on April 15, 2010
Category: OFACSomalia Sanctions

MogadishuIt is not only birds that return in springtime. Calmer weather on the Indian Ocean guarantees a springtime efflorescence of Somali pirate skiffs and attacks on commercial shipping off the coast of Somalia. Pirates have already grabbed a supertanker (with $170 million of crude oil) and some profoundly stupid Somali pirates attacked a Navy cruiser last week. (Buh-bye, little pirate boats!)

Whether or not the timing of yesterday’s announcement of new smart sanctions on Somalia was prompted by the recent uptick in piracy or whether the timing was coincidental is impossible to say. In any event, the White House issued Executive Order 13536, which imposed new blocking sanctions on eleven Somali militants. The militants had so many aliases that the new designations led to 211 new entries on the Specially Designated Nationals (“SDN”) list. And the Executive Order authorizes future designations by the Treasury Department’s Office of Foreign Assets Control (“OFAC”) of anyone that threatens the security and stability of Somalia by, inter alia, delivering arms to Somalia or interfering with the Djibouti Agreement, peacekeeping missions in Somalia (such as AMISOM), or the delivery of humanitarian aid in Somalia.

The Executive Order additionally allows designations of parties engaged in piracy off the coast of Somalia on the grounds that these activities also threaten the security and stability of Somalia. This has led some reputable sources, such as Business Week, to speculate that the Executive Order prohibits the payment of ransoms to Somalia pirates.

“The wording could definitely be construed to make payments of ransoms illegal,” [a New York lawyer] who negotiated a ransom payment with Somali pirates for a U.S. owned ship hijacked in 2008 said in a telephone interview. “The wording is just vague enough to give the Treasury some flexibility in how they apply it.”

Er, no. Absolutely not. The order only covers payments to persons who have been specifically designated by OFAC on the basis of a determination that those persons have previously engaged in piracy. Paying ransom to an undesignated pirate isn’t covered or prohibited by the order. The language here not only is not vague but also it follows the well-established pattern of similar orders which only cover individuals after they have been designated by OFAC and placed on the SDN list.

What is the chance that Treasury would issue such a designation between the time that a ship was hijacked and a ransom was paid? I think it is quite small. OFAC’s goal here seems to be more to prevent Somali pirates from using their ill-gained assets once obtained rather than to risk destruction or loss of commercial vessels by interdicting the ransom payment in the first place.

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