One highlight of my current role is that we get the opportunity to regularly investigate issues throughout the world, and then discuss with experts on how we can collectively solve them. For instance, this month, we are in the process of organizing a series of webinars discussing Human Trafficking and Slavery, International Wildlife Trafficking, and Cybercrimes and Cryptocurrency. These types of issues force us to confront the manner in which people exploit others and the world around us. After the catastrophic explosion that occurred in Beirut several weeks ago, we, like the rest of the world, were shocked. Our first reaction was to ensure that all of our Lebanese friends and their families were safe. We quickly moved to the difficult task of separating fact from fiction and trying to understand how this could occur. Then a Lebanese friend and colleague sent me the following information:
In 2013, a fertilizer manufacturer in Georgia intended to sell industrial-grade ammonium nitrate to a company in Mozambique to manufacture explosives for mining projects. This deal for $700,000 of the material was contracted through a U.K. entity whose director was a Lithuanian woman living in Cyprus. It ended up on a ship, the MV Rhosus, which was de facto owned by a Russian businessman also living in Cyprus. The ship was Moldovan flagged and registered to a shell company in Panama. Having already been delayed in Seville due to deficiencies in the ship, the shipment had to stop in Turkey due to a dispute with the crew. There it was delayed for weeks before it made a route change to stop in Beirut to load some heavy machinery. Apparently, the owner needed the extra cash to pay the Suez Canal fees. Additionally, it has been reported that the Rhosus did not have insurance paperwork when it arrived in Beirut, which is generally required for dangerous cargo. Beirut Port officials were then forced to unload the ship as it was not seaworthy. The owner went bankrupt, abandoned the ship, and it eventually sunk at its mooring in the harbor in 2018. The ammonium nitrate was stored in a port warehouse, poorly, to be resold or disposed of by court order; however, it never was, leading years later to this catastrophe.
Clarify the grey zone – knowing who you are dealing with
Red flags abound. Was the company, along with the directors and owners who organized the sale, screened properly? Was the shell company, along with its owners and directors who owned the ship, screened properly? Why was the ship allowed to sail to Beirut if it did not have the appropriate insurance paperwork? Who abandoned the cargo in Beirut port, despite its value of roughly $700k? Most importantly, who actually owned the ammonium nitrate?
We often speak, amongst ourselves, with clients and prospects, and other industry experts about the need for strong, pragmatic, risk-based approaches for compliance programs. Whether it manifests itself in staff training, screening approaches, or dual-use commodity monitoring, ensuring that companies are constantly reevaluating risk is essential. Many steps could have been taken along the way, be it compliance, health and safety, or dangerous materials-based actions, that could have prevented this disaster. When this many opaque shell companies are operating out of high-risk jurisdictions, transparency often suffers. So, appropriate screening is even more necessary. In 2013, when the ammonium nitrate was loaded onto the MV Rhosus and then it was declared unseaworthy; or in 2014, when it was impounded by the port authority and its cargo was brought ashore; or in 2018, when the MV Rhosus, still in the Beirut Port, sunk at its mooring; or any time in between, while the ammonium nitrate sat in storage, not having been resold or disposed of, no one individual responsible for making the key decisions could have imagined that this catastrophe would occur.
Hundreds of people died, thousands have been injured, and hundreds of thousands have been left homeless in this senseless tragedy, which begs the question, what shortcomings in our processes today could lead to a catastrophic disaster seven years down the road?
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