Related News

US slaps sanctions on Dubai trader and EU subsidiaries over terror links

HFW hires sanctions partner in London

Know your cargo: US to use sanctions enforcement powers “robustly”

UK to toughen sanctions regime with new enforcement unit

Friendshoring takes hold as geopolitical tensions weigh on trade flows

Singapore-headquartered commodity trader Winson Group appears to be a “key node” in an oil import network used by North Korea to bypass UN sanctions, researchers allege, following a detailed investigation into vessel activity and corporate structures.

The claims – which are strongly denied by Winson Group – come in a report authored by two security-focused non-profit organisations, C4ADS and RUSI.

The report, titled ‘Black Gold’, says North Korea is using “increasingly sophisticated and previously unseen” tactics to avoid detection and sidestep sanctions on petroleum imports, relying on networks of motherships, feeder ships and direct delivery vessels carrying out ship-to-ship (STS) transfers at sea.

It argues that there is evidence North Korea far exceeded UN caps on oil imports in 2020, for the third consecutive year.

Winson Group, it says, has “links to several shipping and oil trading companies in the region, as well as businesses registered in secrecy jurisdictions, through which it has connections to possible STS transfers of fuel that ultimately end up in North Korea”.

The company “potentially plays a key role in North Korea’s illicit oil supply chain”, it adds, claiming that “in several cases… fuel transfers appeared to trace back, either directly or indirectly, to the Winson Group’s vessels, companies, employees, properties, and associates”.

Several of the claims centre on Diamond 8, a vessel previously found by the UN Security Council to have delivered oil to North Korea.

The report says Diamond 8 appears to have links to Winson Group and other associated businesses, and has been spotted conducting ship-to-ship transfers with other tankers “either managed by entities in the Winson Group or that overlap with it operationally”.

When the trader’s Taiwan-based shipping entity was approached by The New York Times – which also carried out a related investigation into Diamond 8 – the company said the allegations “are unfounded and false”.

In a statement provided to GTR on March 24, Winson Group executive director Crystal Tung adds: “We consider it unfair and deny all the allegations about Winson Oil. We have engaged our US lawyer to provide an independent legal report which will address all the allegations after investigation and should become available shortly.”

Tung says the company has a “strict internal compliance policy”, including around STS transactions, and is “firmly committed… not to take any actions in violation of applicable sanctions against North Korea or any sanctioned countries”.

The company also “remains financially sound and liquid”, Tung adds.

After it was approached by reporters from The New York Times, Winson Group’s Taiwan-based shipping company changed its registered name to Zheng Yu Shipping.

Another Singapore-based entity, Winson Oil Shipping, has also changed its name in recent weeks, GTR can reveal.

Records held by the city state’s corporate regulator show it was renamed Astar Marine on March 9. The same name was previously used by another vessel charterer that has been inactive for around a decade.

 

Vessel activity

Since 2019, the report from C4ADS and RUSI says at least 13 foreign-flagged vessels have made direct deliveries to North Korea, most of them more than once, in violation of UN Security Council resolutions capping the country’s fuel imports.

Satellite imagery reviewed by the organisations shows mothership tankers that hold large volumes of fuel on the high seas. That cargo is then transferred onto smaller ships that deliver directly to North Korea, sometimes via intermediary feeder vessels.

In many cases, it says, the identity of the owners and operators of those vessels “is hidden behind a veil of corporate secrecy”.

Diamond 8 is the largest of those 13 tankers by capacity, and according to an expert panel at the UN Security Council, had delivered refined petroleum to North Korea at least three times before March 2020.

The report says it has now identified three more potential STS transfers involving Diamond 8, all of which involved mothership tankers with links to Winson Group in Taiwan.

The first of those vessels, Super Star, was managed directly by Winson Group. The other vessel, Ever Grandeur, was managed by Glory Sparkling – a company with the same address as Winson’s Taiwan shipping company and that previously managed Diamond 8.

Diamond 8 itself also has historical ties to Winson Group, having been managed by its Taiwan shipping company between March 2011 and July 2016 under its previous name, Angel 22.

After July 2016, its management was transferred to Glory Sparkling, before being moved onto Double Profit Enterprise – another company registered to the same Winson address.

As of press time, Diamond 8’s registered owner is an Indonesian national who – according to The New York Times – denies any relationship to the vessel. The report says his involvement “remains unclear”.

 

Financial sector warned

The scale of North Korea’s alleged sanctions evasion is significant, the report suggests.

Since December 2017, the UN Security Council has limited North Korea to importing 500,000 barrels of refined petroleum and 4 million barrels of crude per year. However, UN experts believe fuel imports far exceeded those caps in 2018 and 2019.

The C4ADS and RUSI report estimates that pattern continued in 2020, having identified at least a hundred instances of deliveries to oil facilities in the country. Even if the vessels involved were half-empty the UN caps would still likely have been breached, it says.

When added to reported deliveries from China and Russia, and assuming vessels were 75-90% laden, the report estimates North Korea imported between 1.4 million and 2.3 million barrels of oil last year.

“At the highest estimate, this would represent over four times the amount permitted,” it says.

For financial institutions involved in Asia’s commodity trading sector, that heightens the risk of inadvertent exposure to sanctioned activity – whether through trading activity itself or through attempts to move the proceeds of sales through the financial system.

Report author James Byrne tells GTR that North Korea “generally pays for oil through complex networks of front companies, often trading in dollars”.

“Often, the accounts these dollars sit in are Chinese banks – in the name of a non-North Korean national or company – with correspondent accounts with US institutions,” says Byrne, a senior research fellow at RUSI.

“In the case of North Korea, many banks continue to unwittingly process funds and move money on behalf of North Korean interests, sometimes even on behalf of designated entities behind the DPRK’s nuclear weapons programme, military and intelligence agencies.”

Though oil is often transferred onto delivery vessels at sea, it still originates from refineries outside North Korea, and typically involves ships active in the bunkering market.

That means it is “very likely that this oil is bought and sold in US dollars”, Byrne says. “Banks and other financial institutions should clearly be cognisant of these risks and due their own due diligence on these regional supply chains.”