A UN panel investigating violations of sanctions against North Korea has alleged fresh links between Singapore oil trader Winson Group and illicit oil exports to the authoritarian state.

Under UN sanctions, North Korean imports of refined petroleum are capped at 500,000 barrels per year, but the UN panel of experts that investigates evasion of sanctions on the country has found that it has regularly exceeded the cap through illicit imports and is likely to do so again this year.

Researchers from think tank RUSI and investigative non-profit C4DS alleged in a March 2021 report that Winson was a “key node” in attempts by Pyongyang to import oil. The company hotly denied the claims.

The report by RUSI and C4DS included allegations that vessels linked to Winson met a vessel named the Diamond 8 several times and likely supplied it with oil through ship-to-ship transfers, after which the Diamond 8 sailed to North Korea.

In its most recent report, made public earlier this month, the UN panel says after those findings were published it began an inquiry “into transactions related to the sale of gasoil and the subsequent ship-to-ship transfer” between the Diamond 8 and the Super Star, a vessel linked to Winson.

The UN inquiry received financial and trade documentation from Winson, which told the panel that the oil cargoes in question were purchased by a company called Sino Global Trade Co. Ltd. That company also time-chartered the Super Star from a Winson Group company, it said.

Sino Global Trade Co. Ltd then sold parts of the oil to a company named Zfullboto Co. Ltd, whose owners the UN was unable to identify, which took delivery via the Diamond 8.

Winson told the panel that it conducted due diligence on Sino Global and even included a clause in the sale contract stating: “The product of this contract will not be sold to North Korea or any North Korean entity or any other sanctioned countries.”

But the panel said the lack of evidence of a prior connection between Sino Global and the oil industry should have been a “red flag” indicator of a shell company, which it has frequently warned are used to facilitate the skirting of sanctions against North Korea.

The panel also said that unspecified social media records suggest that Sino Global’s sole shareholder and director, Chien Chi-wei, is “closely related” to an unidentified senior Winson employee, who the panel said had made a vessel registration application using company contact details.

“Given these substantive links, the panel is continuing to investigate the Winson Group and its subsidiaries, as well as the owners and operators of Zfullboto,” notes the report, dated September 8, but published in early October.

Asked by GTR about the panel’s claim of a close relationship between a Winson employee and Chi-wei, a company spokesperson says: “The panel has not identified the Winson employee in its report, hence, we are not in the position to speculate who the panel was referring to.”

In its statement, the company says: “The fact that the panel has resorted to the use of alleged unidentified (and by all accounts, unverified) social media posts to draw alleged ‘substantive links’ between Winson and alleged sanctions evasion, draws into serious doubt the panel’s methodology, bona fides, and motives”.

“Winson was not aware (and could not have reasonably been expected to be aware) of how Sino Global’s customers would deal with cargoes which Winson had sold to Sino Global on an arms-length basis,” the statement says.

“Winson denies, in the strongest possible terms, any and all allegations and/or insinuations that it knowingly facilitated the illicit supply of oil to North Korea in breach of any UN Security Council resolutions, and/or that it is a ‘key node’ in North Korea’s procurement of oil or refined petroleum products,” the company says.

It is understood the panel stands by its report.

Winson says it has stopped conducting ship-to-ship transfers with tankers that it does not own or operate “in the area stretching from outside Taiwanese port limits through the East China Sea to the Yellow Sea”. A report prepared by the company’s US lawyer into the allegations in the C4DS and RUSI report has been completed, but the company declined to release it.

Winson was founded by Chinese businessman Tony Tung in 1998. Spanning trading, shipping and bunkering, the company describes itself as “one of Asia’s major international energy trading companies”.

It is reportedly currently facing a lawsuit in Singapore’s High Court by shipping firms Maersk and Scorpio, which have been hit with claims from Chinese banks following the collapse last year of Singaporean oil trader Hin Leong amid fraud allegations.

Panel probes financing networks

Commodity traders and financiers are likely to feature in future reports by the panel, which says it is conducting an “ongoing… review of trade financing related to maritime sanctions evasion activities”.

It says the review has found that North Korea is continuing to exploit shell companies in “low transparency” jurisdictions which do not make beneficial ownership information publicly available or do not verify it.

Alastair Morgan, a former UK ambassador to North Korea who coordinated the panel of experts from 2019 until earlier this year, said, without referring to any specific case, that it can be tricky to determine whether involvement by commodities traders in sanctions violation “is unwitting or witting, and if it is unwitting whether it should have been witting”.

While the panel has previously reported on cases that suggest intentional involvement “it has also reported on inadequate customer due diligence in relation to various maritime violations of sanctions”, Morgan tells GTR.

“Clearly, commodity traders in products known to be involved in sanctions violations – refined petroleum products, for example – involved in trade in those products in regions where such violations are known to occur, and especially in any case where there’s an unknown or a ‘red flag’ warning in a due diligence process, should be diligent,” he says.

Basic due diligence by financial institutions which finance seaborne commodities trading includes checking whether vessels are designated under sanctions regimes maintained by the UN and the US.

However, no vessels suspected to aid North Korea in sanctions evasion have been sanctioned by the UN since 2018, despite the panel of experts frequently providing vessel names to the so-called , an organ of the UN Security Council that oversees the sanctions on North Korea.

“I think it is regrettable that the 1718 committee has not acted on well-evidenced and documented recommendations to make designations,” Morgan says.

“Not to have done so risks undermining the sanctions agreed unanimously by the UN Security Council. Indeed, the panel’s reports, including the report just published, continue to provide evidence that vessels recommended for designation continue to be involved in sanctions evasion.”

But even a UN designation does not always thwart the use of a ship in sanctions evasion. Criminals have been able to shake off designations by “laundering” the identity of vessels and securing clean registration details from the International Maritime Organisation, according to a recent report by C4DS.