FCC ESSENTIALS

Explore our latest FCC (Financial Crime Compliance) Essential article as Christopher Stringham, Global Account Manager at Neterium, delves into his fervor for Financial Crime Compliance (FCC).

In this third edition, our focus delves into instances of violations of UN arms embargoes. These embargoes, mandated by the United Nations Security Council, serve as measures to curtail the provision of weapons and military equipment to specific countries or entities. They are enacted in response to concerns regarding conflicts, human rights abuses, or threats to international peace and security.

While much attention has rightly been given to unilateral sanctions programs, it is crucial to underscore the significance of multilateral sanctions imposed by the United Nations. These measures are not to be overlooked, as they are initiated and collectively agreed upon by the Security Council, comprising parties that may often find themselves in disagreement. Given the diverse composition of the Security Council, the enforcement of these multilateral sanctions should be amplified, making them more effective.

This article will delve into the accuracy of this perspective, examining whether the enforcement of UN multilateral sanctions is indeed proportional to their potential impact.

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Much attention has been paid, justifiable, to unilateral sanctions programs. That does not mean however that multilateral sanctions from the United Nations are unimportant. Considering that these programs are initiated and agreed upon by the Security Council, including parties that are otherwise frequently at odds with each other, these regimes should be subject to greater enforcement and therefore more effective. This is unfortunately not often the case. In 2011, following the outbreak of the Libyan civil war, the Security Council passed Resolution 1970. In addition to asset freezes and travel bans against members of the Gaddafi government and family, the resolution also enacted an arms embargo to prevent the exportation of weapons to Libya. Unfortunately, the Panel of Experts called this embargo "totally ineffective" in 2021.

The annual Panel of Expert reports provide amazing information regarding the efforts and methods for evading and circumventing the embargo. These also highlight the challenges faced by both the public and private sectors regarding conducting due diligence, identifying potential crimes and eventual bringing criminal proceedings. One of the cases highlighted in the 2021 Final Report relates to the "Project Opus" private military intervention. This involved a well-funded private military company that was controlled and managed by persons from Australia, the UK and South Africa. One of the goals of the operation was to procure military goods, such as aircraft and surveillance equipment, for General Khalifa Haftar, a warlord described as the "biggest single obstacle to peace in Libya."

To accomplish this, the group established at least three shell companies in the United Arab Emirates and attempted to procure surplus military helicopters from Jordan. However, Jordanian officials learned of the plan and suspended the auction for the aircraft prompting the group to search for alternatives. In addition to helicopters procured from South Africa and the UAE, three fixed wing aircraft were also purchased from companies based in Bermuda, Bulgaria and Austria. All three of these companies were controlled by a single American citizen, who was resident in Austria. This American was previously known for his involvement with other private military companies, specifically in Iraq, and his sister was a member of Donald Trump's cabinet. The UN experts were able to determine that he had been involved in making the group's proposal to General Haftar and was directly involved with and knowledgeable of the Project Opus operation.

Despite the teams' efforts to obtain equipment for General Haftar, he was "unimpressed with the replacement aircraft procured for the operations and made threats against the team management." This resulted in a Hollywood-style evacuation of twenty of the group's operatives. The evacuation resulted in a 36-hour, 350 nautical mile trip from Benghazi to Malta on two rigid hulled inflatable boats, one of which needed to be abandoned during the trip. They landed in Malta at 13.00 and told Malta police that they "were from an oil field operation and needed to leave Libya quickly because of deteriorating security concerns."

The efforts used typologies that will be recognizable to AML specialists. In addition to founding multiple companies, these were used in ways to increase the "opacity of the operation" such as contracting goods and services with one company and paying invoices with another. In a later UN report, the experts mention an interview where someone close to the American explained that he "protected himself from litigation by not owning companies, and by controlling them through debt ownership or security pledges he would receive material or financial benefits in other ways." The team also prepared counterfeit documentation to help justify and support the shipments of the equipment, but these were often obviously "cut and paste".

While the UN gave this case a significant amount of attention in their reports, it was a 2016 investigative news report about the American and his activities in Austria that led to legal action. According to the report by The Intercept, the American had taken a 25% ownership stake in a specialist aviation company near Vienna. The employees at the company would refer to him as "Echo Papa" and they would make extremely specific modifications to aircraft, such as adding surveillance and targeting equipment, armoring the engine block, adding bulletproof windows, and added mounting points for machine guns. In the case documented here, the aircraft was exported from Austria and was sent to South Sudan. Despite the military modifications, the export took place without the necessary government approvals required for military equipment. And the documentation stated that the destination was Kenya.

Seven years after the report, the American is now on trial in Austria for exporting war material without a license. According to his defense attorney, the 'military' modifications are not sufficient to qualify the aircraft as 'military goods' because they were too weak and nonsense. Also, the true destination was really Kenya, and the plane only landed in South Sudan due to technical problems. While some of the participants are finally going to trial, journalists and official bodies have documented this story for years. And authorities in Malta brought charges against persons involved in this case in 2020, though they were eventually acquitted.

This case highlights the efforts that people will make to disguise their activities, but it also shows that journalists and investigators are still capable of uncovering the truth. This information helps the public sector take actions and bring prosecutions, and helps the private sector conduct due diligence to avoid supporting potentially illegal activity.

UN Resolution 1970 https://documents-dds-ny.un.org/doc/UNDOC/GEN/N11/245/58/PDF/N1124558.pdf?OpenElement

UN Press Release 2021 https://news.un.org/en/story/2021/03/1087562

Panel of Exprt Reports https://documents-dds-ny.un.org/doc/UNDOC/GEN/N21/037/72/PDF/N2103772.pdf?OpenElement

Newsweek article https://www.newsweek.com/khalifa-haftar-isis-libya-muammar-el-qaddafi-483246

Panel of Expert Report 2022 https://documents-dds-ny.un.org/doc/UNDOC/GEN/N22/334/41/PDF/N2233441.pdf?OpenElement

The Intercept Report https://theintercept.com/2016/04/11/blackwater-founder-erik-prince-drive-to-build-private-air-force/

AP News Report: https://apnews.com/article/austria-aircraft-export-trial-prince-blackwater-f2042f2ae0a3b2df5c3d15c17923f51a

Der Standard News Report https://www.derstandard.at/story/3000000195428/prozess-um-blackwater-gruender-prince-startet-in-wiener-neustadt

Time of Malta reports https://timesofmalta.com/articles/view/military-contractors-left-malta-for-secret-mission-to-libya.794309

and https://timesofmalta.com/articles/view/blunders-led-acquittal-libya-mercenaries-case.994317