Shipping Management Company Settles for $1.125 Million on Violations of Burmese Sanctions
The Treasury’s Office of Foreign Assets Control reached a $1.125 million settlement with Eagle Shipping International for 36 violations of U.S. sanctions against Burma, OFAC said in a Jan. 27 notice. The ship management company, which has headquarters in Connecticut, illegally transported “sea sand” for Myawaddy Trading Limited, a company on OFAC’s Specially Designated Nationals List, the notice said. Eagle Shipping allegedly provided transportation services from Burma to Singapore for a “land reclamation project” for Myawaddy that involved transactions worth about $1.8 million.
Eagle Shipping -- a subsidiary of Eagle Bulk Shipping, a corporation in the Marshall Islands -- voluntarily disclosed the violations after it filed for bankruptcy in 2014 and new ownership discovered the violations. In 2011, the new owners said, the company’s Singapore affiliate agreed to a chartering agreement to carry sea sand from Burma to Singapore. Before Eagle Shipping began performing services under the contract, the sand buyer, a Singapore company, sent sample shipping documents to Eagle Shipping, including a bill of lading and an export cargo manifest, that listed Myawaddy as the shipper. After Eagle Shipping’s affiliate in Singapore asked for clarification about the shipper, the Singapore company sent the affiliate another bill of lading that listed an “alternate shipper.”
Eagle Shipping management accepted the change, OFAC said, and told the captain of the Eagle Shipping vessel to sign the documentation. The captain refused to sign the documents after discovering that other documentation, including an export declaration, also listed Myawaddy as the shipper. The Singapore company sent the captain a revised set of documents that removed references to Myawaddy and listed an alternate shipper, OFAC said, but the captain “warned” Eagle Shipping management that the alternate shipper did not sell sea sand in the region. The captain also told management that the “Burmese government had a contract only with Myawaddy and only Myawaddy was the shipper.”
That same day, the Singapore company sent a message to Eagle Shipping saying that delays in the shipment would lead to “negative repercussions with the Burmese government,” OFAC said. In addition, Burmese officials took the Eagle Shipping crew’s passports and “refused to clear the vessel for departure.” Eagle Shipping “immediately” applied for an OFAC license, but before it heard back, the company signed the revised documents and delivered the shipment to Singapore, citing “crew safety concerns,” OFAC said.
About a year later, Eagle Shipping applied for a new license to authorize Eagle Shipping vessels to carry more sand cargo from Myawaddy. OFAC denied the license application, but Eagle Shipping continued shipping sand from Myawaddy, the notice said. The former president of Eagle Shipping received a denial letter from OFAC but “allegedly failed to forward it to others within” the company.
OFAC said the violations constituted an egregious case, which calls for a base civil monetary penalty of $4.5 million. Eagle Shipping settled for $1.125 million due to several mitigating factors, including the fact that the company had not received a penalty notice within the last five years, provided “substantial cooperation” with OFAC under its new management and undertook “significant remedial measures” through an “internal lookback investigation.” As part of the settlement, Eagle Shipping agreed to appoint a dedicated compliance officer, implement a formal sanctions compliance program, provide sanctions training to employees, improve screening procedures and develop a contingency plan for a situation wherein the company “identifies the interest of an OFAC-blocked or -prohibited party after cargo is loaded on an Eagle vessel.”
Aggravating factors included the company’s “reckless disregard” for U.S. sanctions, the fact that the former president approved the sand-shipping documents, the fact that the violations “conferred significant economic benefits” to Burma’s military and the fact that Eagle is a “commercially sophisticated shipping company.”
OFAC said the settlement highlights the importance of “risk-based compliance measures” for companies doing business in “high-risk industries,” such as international shipping. Companies involved in international business should pay close attention to “sanctions-related warning signs,” including any information that goods were supplied from an entity subject to U.S. sanctions. In addition, the “failure to adhere to formal responses from OFAC,” such as denial letters, “can represent serious sanctions infractions,” OFAC said.
In a Jan. 27 filing with the Securities and Exchange Commission, Eagle Shipping said the settlement payment will not have a “material impact on the Company’s consolidated financial statements.“