Category Archives: News and Events

Project Alpha is Hiring: Multiple Positions to be Filled

Project Alpha (https://projectalpha.eu) at KCL works at the intersection of non-proliferation, trade control, illicit trade and emerging technology. The team’s work includes leading edge policy and academic research on these topics and training and capacity building in relation to non-proliferation trade controls.

We are looking to augment our staff through hiring for a range of positions. Initially, all of the following positions will be available through the King’s Talent Bank, but it is anticipated that postdoctoral positions will be advertised through the KCL jobs board in early 2018.

Research Associates (grade 6)

We are interested in talking to post-docs with a PhD in a relevant area about short term and potentially longer-term research roles covering topics including:

  • Archival research related to non-proliferation
  • Production of academic articles related to non-proliferation and trade controls
  • Pursuit of other research interests in line with the Alpha Non-proliferation Programme’s objective.

Note: we will be advertising longer term Post-Doctoral positions through King’s Hirewire in the near future.

 

Research Interns, Affiliates and Assistants (Grade  3, 4 and 5 pay scale)

We are recruiting for a number of positions to undertake a mix of the following tasks.

  • To collect and analyse data on issues related to non-proliferation and sanctions. In the immediate term, this will likely be related to entity information on DPRK and Iranian entities.
  • To package existing data and research into stories for web and media outlets
  • To contribute to analytical articles written by senior staff
  • To conduct archival research as directed by senior staff 

Candidates for the research intern and associate positions will be invited to discuss their research interests with senior project staff. As such, candidates should have an understanding of how their research interests fit with the project’s work.

Applicants at the grade 5 “Research Assistant” grade will have a Masters degree or equivalent experience in a relevant topic.

To apply, visit:

https://www.directtemping.com/jobs/show/7251/research-associates%2C-assistants%2C-affiliates-and-interns

Research Translators (grade 3/4)

 We are also looking to hire a small number of part time translators who have an understanding of the non-proliferation and security field to assist in our research. Desirable languages including Mandarin, Korean, Farsi and Arabic. While the work will involve translation of a small number of full-length documents, the main role of these posts will be in conducting foreign language search to retrieve news and results of relevance then summarising the findings for the research team.

To apply, visit: https://www.directtemping.com/jobs/show/7252/research-translators

 

IT Developer (Grade 7)

We are looking to hire a developer to support and improve our apache web server based software stack which uses Drupal 7 as a front end. The stack runs on an Azure virtual machine. This position could be extended for the foreseeable future and is suitable for a part time role. The tasks will include:

  • Server maintenance including installation of server updates etc
  • Addition of content to Drupal and modification of Drupal views
  • Development of new Drupal modules
  • Data visualisation

 

Discussion Paper: UN Maritime Sanctions and the International Maritime Organisation

By  Ian J Stewart & Stephen Osborne

ABSTRACT

This paper examines the interplay between sanctions adopted pursuant to Chapter VII of the UN charter and rules governing the maritime sphere. This paper demonstrates that UN sanctions adopted on DPRK and Iran, and expanded by national measures, place requirements on maritime actors that go beyond those of IMO rules. Moreover, the paper demonstrates that IMO rules as presently constituted are poorly designed to facilitate the effective implementation of sanctions. As such, it is argued that maritime governance arrangements run counter to international peace and security requirements. In this context, a number of issues and opportunities are identified for leveraging IMO regulations.

 

INTRODUCTION

The UN Security Council has adopted a number of binding resolutions under Chapter VII of the UN charter that impose obligations in the maritime domain. These obligations are principally aimed at the programmes of countries subject to UN sanctions, which in recent years has included Iran and North Korea. However, the obligations also require that other actors in the maritime space take certain actions to deny sanctioned parties access to services. UN sanctions thus impose a global compliance obligation in the maritime space that is over and above any existing requirements set down by the International Maritime Organisation or other treaties to which states might be party.

 

The existence of such extra compliance requirements raises questions about their compatibility with existing rules. These questions include whether the sanctions are consistent with these existing rules and, if appropriate, which takes primacy. The questions also include whether IMO regulations are capable of supporting and facilitating implementation of the Security Council requirements. This paper will argue that IMO rules and regulations are presently poorly suited to implementation of UN sanctions requirements and thus that IMO rules and practices should evolve to better account for threats to international peace and security. In this paper, specific recommendations are identified to this end.

 

In order to ground these findings and recommendations, this paper proceeds as follows. First, the paper examines the scope of the maritime sanctions compliance requirement imposed through Chapter VII of the UN charter together with complementary national measures. Second, the paper examines the functioning of the IMO together with its rules and regulations in areas affected by sanctions. This is used to inform an analysis of the gaps in the system. Third, the paper identifies areas where IMO regulations and practices could improve to facilitate sanctions implementation. These recommendations consider governance opportunities beyond IMO regulations which, in practice, includes possible national actions and company-specific actions.

 

The paper draws on research into North Korean maritime sanctions evasion undertaken by Project Alpha at King’s College London. The paper also draws to some extent on research into Iranian sanctions implementation and evasion up until the nuclear deal in 2016 which saw sanctions eased.

 

REQUIREMENTS OF UN RESOLUTIONS

UN sanctions resolutions adopted against a number of countries including Iran and North Korea in recent years have increasingly imposed obligations in relation to the maritime domain.  These measures are generally targeted at the programmes, activities and vessels of the target country. However, they impose an obligation on all other states not to provide certain services or assistance to certain sectors or designated parties. In the case of North Korea, the requirement goes somewhat further as some entities linked to North Korea in third country jurisdictions have also been designated. The requirements of UN resolutions include:

  • Not to provide flag services to North Korean Vessels
  • Not to provide financial services to North Korean vessels, including financial services such as insurance and port services
  • To prevent ship-to-ship transfers
  • To stop and inspect vessels suspected of carrying proscribed goods to or from North Korea

 

RELEVANT IMO REGULATIONS

The International Maritime Organisation (IMO) is the body that regulates the high seas. It is a specialized agency of the United Nations and describes itself as the global standard-setting authority for the “safety, security and environmental performance of international shipping. Its main role is to create a regulatory framework for the shipping industry that is fair and effective, universally adopted and universally implemented.” 1 The IMO also audits states to ensure compliance with the states’ commitments to the IMO as laid down in the many conventions and treaties associated with the organisation. The IMO is thus a primary standard setter with regards to maritime issues.

The IMO has 174 members including countries that have recently been subject to UN sanctions including North Korea and Iran. There are a vast number of requirements resulting from the conventions, some relevant ones includes:

  • Vessels larger than 100 tonnes must operate an AIS (automatic identification system) transponder
  • Vessels operating in international waters must be registered with a flag state
  • All cargo vessels of 300 tonnes or more must have a unique 7-digit number issued by the IMO (I.e. IMO number) and use only this number for its entire life
  • Companies owning, managing and operating vessels must also have an IMO number (i.e. an IMO company number)

It should also be noted that the IMO is funded largely by membership fees which are calculated annually based upon the volume of vessels registered by each shipping registry; and the IMO generally takes decisions on a consensus basis in its committees and council which include all member states.

 

GAPS AND EVASION PRACTICES

As sanctions are imposed, efforts to evade them often emerge. Effective implementation, therefore, is not merely a question of enactment of legal requirements set out in a UNSCR, but also of identifying and countering sanctions evasion. In both the cases of Iran and North Korea, there are well documented examples of evasion of sanctions.  Indeed, in both cases it could be argued that there has been a widespread and systematic effort by both countries to evade the controls. Whilst these efforts have included crude physical measures, such as concealment of illicit cargoes underneath legal ones, or mis-description of goods or ports of lading on crates or manifests, there have also been ways in which the international administration of shipping has been exploited to evade sanctions. Any ship, whatever its activity, must have a flag state; must provide information to the IMO; and must provide regular position information. If ships can operate in breach of sanctions, perhaps that activity points to systemic weakness in administrative processes.

 

Flagging Issues  

The IMO requires that all vessels operating in international waters be registered with a flag state. UN sanctions require flag states not to provide flag services to vessels subject to sanctions (i.e. vessels owned or operated by North Koreans or engaged in illicit trade with a sanctioned country). In practice, however, sanctioned vessels are often able to obtain flag services through open registries. In such circumstances, the flag registry is not always wilfully non-compliant with the requirements of UN resolutions. It could be the case, for example, that the vessel manager presents false documentation to the flag registry or that the vessel becomes sanctioned after being listed on the registry. However, research at King’s College London suggests that many flag registries have in place inadequate processes and systems to conduct due diligence for potential sanctions issues. Many registries appear not to conduct a review of vessels other than at the time of registration, for example, and flag registries often do not require companies to provide registration documents to confirm their legitimacy. In many cases, open registries are run by private contractors, and the government may not have sufficient oversight in the running of the registry.

 

Presently, IMO regulations do not standardise the requirements of flag registration. Moreover, the IMO does not have a role in ensuring flagged vessels are not North Korean vessels, leaving the obligation instead to its members. Additionally, it appears that IMO audits of states currently do not check what measures states take to ensure they are not flagging North Korea vessels or indeed that the state is complying with any other aspect of UN maritime sanction. IMO regulations, while requiring vessels to have a flag, are thus not helpful in implementing UN sanctions in relation to flag issues.

 

Another phenomenon relevant to sanctions implementation, but also with wider applicability across the broader issues of lawful activity at sea, is the use of false, fake, or unauthorised shipping registries. Congo, Fiji, Samoa and the Federated States of Micronesia have all been reported as falling prey to a fraudulent registry activity.2 Previously, Mongolia and Tuvalu both contracted the services of a private company, Sovereign Ventures, to run their registry, which was reported to have ties to North Korea.3 In November 2014 the government of Zanzibar terminated its contract with the company Philtex (Belize Ltd), which it had authorised to manage its open shipping registry following allegations that Iranian oil tankers were operating under its flag. These cases are challenging for the IMO and for the relevant member state. It might be impossible for the IMO to detect the activities of a fake registry, but the IMO could take useful steps against the practice. This might include warning all mariners and other stakeholders about the prevalence of the practice; maintaining a standing request for any information suggesting such practice was going on; and acting forcefully on receipt of information to warn all stakeholders, giving full details. More strategically, the IMO could set standards for the relationship between the government and a private contractor appointed to run the registry.

 

Ownership and Management Structures  

UN sanctions can extend to individuals and entities known to be involved in prohibited activities. Generally, this requirement is limited to listed individuals and entities. However, in the case of North Korea, it extends to all North Koreans. The requirement includes an obligation not to provide financial services to individuals and entities owned and controlled by sanctioned persons. In the maritime domain this means that before any vessel can be mortgaged, insured or enter a port, confirmation is needed that the individuals and entities linked to it do not fall into this category.

 

In practice, this obligation can be partially met through the use of software that screens the entities associated with a vessel against the lists of sanctioned parties. Such software is increasingly being used by maritime flag service providers. Here, again, IMO regulations appear inadequate. An IMO service provider issues company certificates for companies wishing to be listed as the owner of a vessel. However, presently, it does not appear that the IMO requires sanctions screening at this stage, leaving the responsibility to member states.

 

Additionally, the entity legally responsible for a ship is the beneficial owner, sometimes seen as the group beneficial owner or ultimate owner. It appears that IMO regulations do not require information on beneficial owners and most databases that draw on IMO data to provide details of ship ownership do not include details of the beneficial owner. In the case of those that do offer group beneficial owner as a data field, this information is rarely available. It appears that either the IMO does not collect such data, or that it does not make it available either on a free or subscription basis.

 

A result of this is that, in the case of North Korean-owned ships, the data trail often leads only as far as a one-ship company. As one of many such examples, the North Korea-flagged Dai Hong Dan (IMO 7944695) is given in databases as owned by Daihongdan Shipping Co Ltd. Details of the ultimate owner are not available. Consequently, ship owners wishing to conceal their identity for any purpose can do so by setting up such companies. Additional layers of anonymity can be achieved by giving a care-of address, or naming a shareholder, director, or other nominated third party, as the beneficial owner. The IMO, in compiling its register, may be best placed to instigate greater transparency in the matter of ownership, by at least insisting that ultimate owner information be provided for publication.

 

Identification and Tracking (including at-sea transfers) 

A final area where tension exists between IMO regulations and UN sanctions is in vessel identification and tracking. Two separate systems for ship identification and tracking have been introduced by the IMO under Chapter V of the 1974 International Convention for the Safety of Life at Sea (SOLAS). One is the Automatic Identification System (AIS), the other is the Long-Range Identification and Tracking (LRIT) system. The two systems have different purposes, (the former being primarily for collision avoidance, the latter for security) but provide similar information. Presently, IMO regulations require every cargo vessel over 300 tonnes to report its position using LRIT at least every 6 hours; vessels of this size are generally also required to transmit using AIS.

 

A key difference between AIS and LRIT is that AIS is a broadcast system, meaning that data can be collected and made public. Access to LRIT data, on the other hand, is granted only to those authorised by contracted governments. The availability of AIS data on the internet has given rise to a number of free-to-use and subscription-based services providing near-real-time positional information. There are a number of reasons that vessels may wish to hide their position, including to avoid piracy and to evade authorities. As a result, ships may disable AIS to prevent exploitation by nefarious actors such as pirates, or to evade detection when undertaking unlawful activity; such as smuggling, illegal exploitation of natural resources, or sanctions evasion. Furthermore, insurance providers charge premiums for vessels that enter certain areas, so it has become common for vessels to disable tracking when operating in these areas. Furthermore, it is often difficult to determine whether AIS signal loss is the result of deliberate disablement or whether it is a result of signal range, or technical malfunction. Nonetheless, AIS disablement as a means of sanctions evasion is increasingly common. At-sea transfers with sanctioned vessels are prohibited but are regularly undertaken when AIS is disabled on both participating vessels. Examination of recent AIS data indicates that almost no AIS data is broadcast around North Korean ports, or from North Korean-flagged ships irrespective of location. Assuming that vessels are indeed entering and leaving North Korea, and that North Korean flagged vessels are indeed to be found in other locations, all such wilful disablement of AIS represents a breach not only of UN but of IMO requirements. Better implementation and enforcement of IMO requirements would strengthen implementation of UN requirements.

 

Given the potential justification for AIS disablement in certain circumstances such as anti-piracy, it is understandable that the UN panel of experts has been quite specific in asking commodity trading companies to ensure that their vessels transmit when operating close to Korea rather than in other areas of the world where vessel tracking is often disabled for other purposes.

 

The fact that, unlike AIS, LRIT data is only available to parties authorised by a participating government, should rule out its use by pirates, thereby removing legitimate or semi-legitimate grounds for switching it off or failing to make a scheduled or unscheduled broadcast. This potentially makes it a stronger asset to sanctions implementation in the following areas:

 

  • Flag States may request information on the location of their vessels. Either a location within an area of concern, or failure by a ship to report its position, might trigger a query being sent out to the vessel or its associated onshore companies; investigation by the flag state using other due diligence sources; reporting to the UNSC or the IMO.
  • States may request information on ships of any flag near their coasts; historical data as well as current data would be necessary to form the information picture.
  • Port States may request information on ships that have declared one of their ports as a destination; historical data as well as current data would be necessary to form the information picture.
  • Other service providers potentially involved in a transaction concerning a ship (trading companies, banks, etc.) may wish to know locational information; historical data as well as current data would be necessary to form the information picture.

 

Thus, there are some obvious opportunities to improve vessel tracking practices to aid sanctions implementation. Vessels could be required to transmit LRIT signals more frequently in areas used for ship-to-ship transfers to reduce the risks of unauthorised transfers or clandestine port visits, for example.

 

National and International Implementation

While UN sanctions and IMO regulations place obligations first and foremost on its member states, the member states in turn are required to distil these obligations through national legislation to the private sector. Given that much of the maritime sector is operated on a commercial or private sector basis rather than by governments, the question of effective implementation is central to the question of whether security council regulations can be effective.

 

A key challenge here is that neither the UN nor the IMO has set out clear guidance on what member states or service providers must do in order to comply with the requirements of UN sanctions. Indeed, while the United Nations Security Council (UNSC) has gradually provided more information and guidance on its own website, and issues implementation assistance notices, there is presently no information on the IMO website about UNSC sanctions at all. Guidance issued by the IMO, which sought to integrate sanctions compliance processes with other compliance processes, would evidently be helpful to the IMO’s members.

 

This lack of mention of UN sanctions on the IMO website, in particular, raises questions about why the IMO has not been more responsive to UNSC decisions. According to the UN Charter, it is after all the Security Council that has primacy in relation to international peace and security and its decisions are binding on all UN member states. The answer to this question is not yet fully clear. Certainly, it is apparent that the structure of the IMO, which usually requires consensus among its membership and includes countries subject to sanctions such as North Korea and Iran, does not lend itself to proactive decision making on sanctions issues. However, this would not necessarily prevent the IMO secretariat from hosting or publishing guidance from the UNSC on sanctions issues.

 

Another key challenge relates to information sharing. Presently, some governments have decided to list the vessels they have de-flagged as a result of connections with North Korea. Other governments have published examples of vessels conducting at-sea transfers. However, presently there is no requirement for member states to share information with the IMO or with other states when action is taken against a vessel or company as a result of UN sanctions. Addressing this gap would make evasion of sanctions more difficult by reducing information asymmetry between states.

 

CLOSING THE GAPS

 

Having examined the requirements of both UN Security Council sanctions and the IMO, it is apparent that UN sanctions and IMO regulations are disjointed. Sanctions are of course intended to be a limited duration event (or at least not permanent) and it might thus be acceptable that sanctions compliance requirements are not fully integrated with enduring IMO regulations. However, as the proceeding sections have highlighted, there are numerous areas where action to leverage the IMO could make sanctions compliance easier for member states. In this context, the IMO at the very least should be involved in the promulgation of UN guidance to its members.

 

There is also an opportunity to better leverage the IMO to improve sanctions implementation. These moves would likely require either a decision of the UNSC or a decision by the IMO’s own governing bodies and would thus require championing by states.

 

Vessel Tracking 

  • Vessels operating in areas relevant to sanctions could be required to transmit LRIT on a more regular basis so that flag states can identify suspicious activity.
  • States should be encouraged to investigate and report on suspicious activity by its vessels in areas relevant to sanctions.
  • Encouraging, or requiring, states that operate open flag registries to become contracting governments for the LRIT system.
  • The IMO might specifically require AIS activation at all times when vessels are outside areas agreed as being prone to piracy. This would provide the same  benefits LRIT above and would additionally permit an automated comparison of the position data from LRIT and AIS, disparity could then trigger challenge or investigation.

Flagging  

  • The IMO could improve transparency in the matter of ownership by requiring and publishing ultimate owner information.
  • The IMO should require its service provider to conduct its own due diligence before issuing company IMO numbers, including by screening the company against the UN sanctioned entity list.
  • The IMO should require its service provider to screen flagged vessels against sanctions lists and proactively raise any resulting concerns with flag states.
  • The IMO should share information among its members on vessels that have been de-flagged in connection with sanctions.

Audits 

  • The IMO should include sanctions requirements when conducting its audit of member states.

 

CONCLUSION  

 

This paper sought to examine the compatibility of IMO regulations with the requirements of UN Security Council resolutions (UNSCRs). This examination has shown that sanctions implementation does not appear to have been part of the IMO’s calculus in the international maritime administrative structures it has set up. In many cases, however, these could be adapted to make them directly supportive of UNSCRS. Likewise, it seems likely that the UN Security Council has passed Resolutions on maritime issues concerning North Korea without fully considering the mechanisms for implementing them. As the setter of standards for the industry, the IMO is perhaps uniquely placed to include in those standards the compliance with UNSCRs.

Big Data and Non-proliferation: The Alpha Proliferation Open Source Tool (Alpha-POST)

Over the last two years, Ian Stewart, director of Project Alpha, has been developing a ‘big data’ platform for non-proliferation purposes. This platform is used to inform Project Alpha’s work and acts as a test bed for big data and machine learning approaches in the non-proliferation sphere. Today, Project Alpha is publishing a paper on Alpha-POST’s design and capabilities to provide background on the platform.

The abstract of this paper, which can be downloaded HERE, reads as follows.

This paper outlines the Alpha-Proliferation Open Source Platform (Alpha-POST), developed by Project Alpha to leverage big data analysis for non-proliferation purposes. The article demonstrates how a variety of open source software tools can be fused together into a ‘software stack’ capable of ingesting, processing and leveraging vast quantities of data to aid human analysts. While Alpha-POST leverages tools such as Natural Language Processing (NLP), link chart analysis and machine learning in the non-proliferation domain, Project Alpha argues that the approaches outlined in this paper could be applied to any discipline or sphere .

A forthcoming article in the Journal of Nuclear Material Management will examine how the big data approaches developed in this platform can be used more generally in the non-proliferation domain.  Additionally, the platform will be demonstrated at the 2018 IAEA safeguards symposium.

 

 

 

 

 

 

 

Karl Lee, where is he now?

Daniel Liu, Researcher (daniel.liu@kcl.ac.uk)

Click here to access the Report: Karl Lee where is he now ?

  • Internationally sanctioned and alleged nuclear proliferator Li Fangwei (李方伟) a.k.a: Karl Lee, almost certainly remains active in Dalian China, where he continues to attempt to export Graphite and Graphene related goods internationally.
  • Li’s current most likely locations are: Songshuzhen, Wafangdian County, Dalian, Liaoning, China (中国辽宁省大连市瓦房店市松树镇), and 2501-2508 Yuexiu Building, No. 82 Xinkai Road, Xigang District, Dalian Liaoning, China(中国辽宁西岗区新开路82号越秀大厦2501-2508室).
  • Li’s network of shell companies continues to morph in corporate officers and owners to avoid sanctions scrutiny. Yet core individuals, companies’ Chinese name and physical assets remain the same. The current fourth iteration of this proliferation network is probably focused around Sinotech Carbon, a.k.a: TST Carbon, a.k.a: Dalian Zhongchuang Carbon(大连中创炭素有限公司).
  • The network is run by more than just Li Fangwei. Court records, company ownership data and local government tax records show that Li Fangwei’s family and other close associates are actively taking part in the network’s business activity. They act as sales representatives, lawyers and shareholders across many companies in the Li network. Li is also not above committing identity fraud by using the name of a deceased woman believed to be his late mother to register shareholdings.
  • From 2015 to 2016, around the time of US indictment and seizure of Li’s US based financial assets, the network has embarked on a series of highly opportunistic law suits in Chinese civil courts. This was possible done to recoup their losses. These cases typically involved using loopholes in Chinese commercial caselaw to compel Chinese companies to complete a sale to Li network companies despite their objects of proliferation risk, or intervention by local export control authorities, then requesting further damages for lost profits.
  • Yet after years of international sanctions and asset freezes, the Li network may be under strain and local government tolerance may be waning. As of September 2018, local government bodies have issued a cease and desist order on Sinotech Carbon due to environmental protection concerns.

Iran and the FATF: More Efforts Needed

Emma Scott and Jean-Annet de Saint Rapt

Public Statement Issued by the Plenary

The FATF plenary which took place on 17-19 October 2018 decided to continue the suspension of counter-measures against Iran. The Plenary said it was disappointed with the pace of Iran’s AML/CFT reforms. Iran now has until February 2019 to bring the necessary legislation into force, in line with international standards or risk a call for counter-measures.

Iran has been categorised as a high-risk jurisdiction and is one of only two countries on the FATF ‘call for action’ list (or blacklist), together with the DPRK. A call for action requests all countries to impose countermeasures against the jurisdiction. Countermeasures include, but are not limited to 1) the application of enhanced due diligence, 2) refusing the establishment of subsidiaries, branches or representative offices of financial institutions, 3) limiting business relationships or financial transactions with the identified country or persons in that country, and 4) requiring financial institutions to review and amend, or even terminate, correspondent relationships with financial institutions in the country concerned.[1] Since the FATF implemented its new monitoring system in 2008, Iran has been permanently on the black list. Although, the FATF has recognised that Iran made some efforts to comply, the risk of terrorism financing emanating from Iran remains a significant obstacle.

 

Iran Tries to Ease its Relationship with the FATF

In 2016, Tehran agreed to cooperate with the FATF financial body. Tehran’s motivation was that it wanted to escape the FATF blacklist to help it better integrate into the world economy after the signing of the Joint Comprehensive Plan of Action (JCPOA). Simultaneously, President Hassan Rouhani initiated major banking sector reforms, which aimed to contribute to the development of the economy and attract foreign investment. Transparency and regulation are key to such reforms as these would bring Iran into compliance with international norms such as the Basel Standards, International Accounting Standards (IFRS) and FATF recommendations.

To address its AML/CFT deficiencies, in 2016, the FATF set an Action Plan which Iran had to complete. Iran agreed to follow this Action Plan,[2] and in response the FATF suspended the call for countermeasures for a 12-month period but left Iran on its public statement. The FATF pubic statement currently includes a short summary of the recent actions taken by Iran in accordance with its Action Plan, and lists the remaining deficiencies, that still need to be addressed, in its ani-money laundering and combating the financing of terrorism regime. Only when all the action points are complete will Iran be in full compliance with the FATF requirements. In 2017, “In light of Iran’s demonstration of its political commitment and the relevant steps it has taken in line with its Action Plan”,[3] the FATF decided to continue its suspension.

Outstanding Issues of the FATF Action Plan on Iran
1) Criminalise terrorist financing (including removing exemptions)
2) Freeze terrorist assets
3) Ensure a customer due diligence regime
4) An independent Financial Intelligence Unit
5) Identify and sanction unlicensed money/value transfer service providers
6) Implement the Palermo and TF Conventions  
7) Verify wire transfers contain complete information
8) Establish a range of penalties for ML offense
9) Ensure legislation to provide for confiscation of property of corresponding value

In February 2018, for the same reason, the FATF prolonged again the suspension of counter-measures,[4] but in June 2018, in its public statement, the FATF expressed its disappointment with Iran for failing to implement the Action Plan. However, it maintained the suspension “Given the Iranian government’s continued efforts to finalize and pass amendments to its AML and CFT laws[5].

By this stage, the need for Iran to cooperate with the FATF became even more pressing. The U.S., under the Trump Presidency, had withdrawn from the JCPOA and decided to re-impose sanctions. Consequently, Iran’s economy witnessed a withdrawal of foreign investment and a depreciation of the rial. By complying with the FATF recommendations, Iran hopes to resolve its economic problems and minimise its differences with the remainder of the international community.

A number of pieces of legislation were sent to the Iran’s Parliament. The Parliament had already approved the Bill of Amendment to the Countering Financing of Terrorism Act, which amongst other things, lays out a legal basis for the confiscation of assets or funds to commit terrorism financing, and a Bill of Amendment to the Anti-Money Laundering Act. In September it passed a bill to join the UN Convention Against Transnational Organised Crime (i.e. the Palermo Convention), and finally, Sunday 7 October saw the Parliament pass a bill to join the 1999 International Convention for the Suppression of the Financing of Terrorism, albeit with a number of exemptions.

 

Iran’s Definition of Terrorism

The FATF Action Plan for Iran requires it to criminalise terrorist financing, “including by removing the exemption for designated groups “attempting to end foreign occupation, colonialism and racism””.[6] In Iran’s domestic legislation bringing into force the 1999 Convention for the Suppression of the Financing of Terrorism, Iran’s lawmakers carved out an exemption to article 2(b) of the Convention by stating that struggle against colonial domination and foreign occupation does not apply to the country’s definition of terrorism. The Parliamentarians further carved out an exemption to Article 6, maintaining that it doesn’t apply to the right of legitimate struggle.

That said, a number of other Middle Eastern regional states including Egypt, Jordan, and Yemen, issued reservations when joining the 1999 Convention, stating that they do not consider acts of national liberation as terrorism, and they are not on the FATF blacklist. So, that should not be an impediment to Iran’s implementation of the FATF’s standards. While the FATF may overlook Iran’s non-compliance with action point 1 if it complies with the other action points, so far, this is not been the case. The difficulty for Rouhani’s government will be to take concrete steps in freezing assets and implementing the laws passed, which is what the FATF expects.

 

Iran’s Banking Problems: Get in the Way

A broader problem for Iran is the implementation of the banking sector reform. Last March, the International Monetary Fund pointed out that the Iranian banking system had been in “distress” now for a number of years.[7] The IMF called for urgent comprehensive restructuring and recapitalisation of the banks. Since that report, the economic situation in the country has deteriorated due to the U.S. withdrawal from the JCPOA and the re-imposition of sanctions. Thus, reform has become even more critical as the monetary crisis and inflation have worsened.

The problem with Iran’s economy is that for decades, the Iranian financial sector consists not only of regulated but also unregulated financial actors, which is one of the issues the FATF has with Iran. Some of these unlicensed actors, usually affiliated with politico-religious groups, have very limited due diligence procedures on their clients and transactions. Additionally, such unregulated actors  can promise to pay high interest rates on deposits to fund credit activities, and subsequently go bankrupt resulting in significant losses for Iranian businesses and individuals. This situation also acts as a deterrent to foreign investors willing to take a risk to invest in Iran. Furthermore, international standards on credit analysis and capital requirements are not often met.

Rouhani’s reforms need to restructure the banking system in a way that will help the economy recover. The intension is to place all credit and financial institutions under Central Bank supervision, while the Central Bank intends to comply with the Basel Standards, which, for instance, set capital requirements for credit activities. For starters, in 2017, the latter issued new policies to be implemented by financial institutions.

Thus, as part of the banking reforms, Rouhani and his administration have decided to implement the FATF recommendations. The implementation of these international standards will make Iran more likely to be accepted into the international finance system. As a senior member of the Iranian government put it: “there is no guarantee all our problems would be solved if we comply […with the FATF] but I am sure that not complying would give the U.S. more excuses to increase our problems.”

 

Reaching a Consensus at the FATF: A Long Process

The decision to remove Iran from the blacklist is a FATF Plenary consensus decision. However, the U.S., holding the influential position of Chair for a one-year period, is likely to continue to push for Iran to remain on the list. The other countries may not want to keep Iran on the list if it continues its efforts to comply with the recommendations.

An on-site inspection team needs to deploy to Tehran, and report back to the Plenary on the implementation of the Action Plan, before Iran is removed from the list. The improvement of Iran’s relationship with the FATF will continue to be a gradual process as Iran slowly attempts to improve and implement a more stringent regulatory environment and reform its banking system.

Ultimately, even if Iran complies with the FATF recommendations and takes action against designated individuals or entities on UN sanctions lists, the issue of U.S. sanctions lists will remain. As a result, even with Iranian reforms, there remains the risk that any entity trading with Iran will be accused by the U.S. of sanctions evasion, and henceforth could become the target of secondary sanctions.

 

[1] The FATF Recommendations: International standards on combating money laundering and the financing of terrorism and proliferation, updated February 2018,available at http://www.fatf-gafi.org/publications/fatfrecommendations/documents/fatf-recommendations.html

[2] Outcomes of the Plenary meeting of the FATF, Busan Korea, 22–24 June 2016, available at http://www.fatf-gafi.org/countries/a-c/austria/documents/plenary-outcomes-june-2016.html#iran

[3] FATF Public Statement, 23 June 2017, available at http://www.fatf-gafi.org/publications/high-riskandnon-cooperativejurisdictions/documents/public-statement-june-2017.html

[4] FATF Public Statement, 23 February 2018, available at http://www.fatf-gafi.org/publications/high-riskandnon-cooperativejurisdictions/documents/public-statement-february-2018.html

[5] FATF Public Statement, 29 June 2018, available at http://www.fatf-gafi.org/publications/high-riskandnon-cooperativejurisdictions/documents/public-statement-june-2018.html

[6] FATF Public Statement, 19 October 2018, http://www.fatf-gafi.org/publications/high-riskandnon-cooperativejurisdictions/documents/public-statement-october-2018.html

[7] International Monetary Fund, Islamic Republic of Iran, IMF Country Report Mo. 18/93, March 2018 available at https://www.imf.org/~/media/Files/Publications/CR/2018/cr1893.ashx

Internship Opportunity

Project Alpha works to understand and counter procurement of technologies with a use in UN-restricted nuclear and missile programmes, as pursued by Iran, North Korea, and others. The Project has numerous strands that contribute to this objective, including educating industry on export controls and proliferation risks, researching the techniques used by proliferators to acquire goods illicitly, and conducting international outreach to improve the implementation of trade controls in third countries. Alpha also actively supports the work of UN organisations, the IAEA, and national governments.

The Alpha team are looking for one or more interns to work with the project for the next three to six months. The focus of the internship will be split between analytical research and administrative support to the team. Interns may also have the opportunity to conduct and publish research on issues related to non-proliferation and sanctions. Duties are as follows:

  • To conduct open source research under the direction of the project staff into illicit WMD procurement
  • To assist the project staff in maintaining the project’s online platform
  • To assist Alpha’s staff in the preparation of articles and other briefing material on proliferation-related procurement by conducting open source research and analysis
  • To work closely with Alpha staff in the preparation and running of a series of workshops

Candidates should be able to commit to working in the office for at least two half days per week, should have excellent analytical and organisational skills (with experience of event organisation and management), and should have impeccable writing skills. Additional language skills and knowledge of open source analytical trade-craft are a plus.

Interested parties should send CVs and cover letters to Emma Scott (emma.l.scott@kcl.ac.uk)

Latest Report of the UN Secretary General on Security Council Resolution 2231: Its nuclear- and ballistic missile-related provisions

On 12 June 2018 and following the United States withdrawal from the Joint Comprehensive Plan of Action (Iran Nuclear Deal) on 8 May 2018, the UN Secretary General released his fifth report on the implementation of Security Council Resolution 2231 (2015). The UN Secretary General is required to report to the Security Council on the implementation of the resolution every six months. Therefore, this 5th report provides an assessment on the implementation of the resolution since the issuance of the 4th report on 8 December 2017.

 

Key Findings included:

  • 13 new proposals submitted through the Procurement Channel bringing the total number of submissions to 37
  • 6 cases of illicit procurement activity, which would have required advanced approval by the UN Security Council
  • Component parts of missile launches fired by the Houthis at Saudi territory were manufactured in Iran, and features of the missiles were consistent with the Qiam-1

 

Usage of the Procurement Channel

There were 13 proposals submitted through the Procurement Channel to participate in or permit activities with Iran for nuclear or non-nuclear civilian end uses. This figure is up from 8 proposals submitted in the previous reporting period and brings the total number of proposals submitted since Implementation Day (16 January 2016) to 37. Of these 37, 24 proposals have been approved by the Council, 3 have been disapproved, 7 have been withdrawn by the proposing state, and 3 are currently under review.

While more frequently used than in the first year, the number of submissions demonstrates that activity in the procurement channel remains quite low in comparison to expectations, and this is partly due to a lack of awareness by sellers, and in some cases national authorities of its existence.[1]

 

Procurement of Nuclear-related Dual Use Items

Information was submitted from 2 member states (the United Arab Emirates (UAE) and the United States of America about attempts by Iran to procure apparently-controlled dual-use items outside of the authorised channels Notably four shipments were seized by the UAE while in transit to Iran. The items involved 40 cylindrical segments of tungsten, 1 inductively coupled plasma mass spectrometer, 10 capacitors, and 1 titanium rod. As these materials are control list items governed by the Nuclear Supplier Group Guidelines of Nuclear Related Dual-Use Equipment, they would have required advanced approval by the Security Council in line with the provisions of paragraph 2 of Annex B of resolution 2231 (2015).

U.S. authorities informed the Secretariat that two commodities – carbon fibre and aluminium alloys again governed by the Nuclear Supplier Group Guidelines of Nuclear Related Dual-Use Equipment had been transferred to Iran over the last year without prior approval of the Security Council as would have been required for such items.

Iran responded to the accusation by stating that it was the responsibility of the exporting state to seek approval through the procurement channel. While this is true, the response negates the fact that Iran is required to issue end user certificates for all such items before they are imported to the country so that the Iranian government cannot claim that it was not aware of the imports. As such, the statements in the UNSGs report assert that Iran has violated UNSCR2231 and the JCPOA, albeit in a relatively narrow and technical way.

 

Ballistic Missile related transfers

In examining 5 of 11 ballistic missile launches (22 July and 4 November 2017, and 19 December 2017 and 5 and 30 January 2018) by Yemen’s Houthi rebels at Saudi territory, the Secretariat found that some component parts in the debris of launches had been manufactured in Iran. Specifically, the Secretariat found that the features of the 5 missiles examined are consistent with those of the Iranian Qiam-1 short-range ballistic missile.

This latter finding supports that of the UN Panel of Experts on Yemen in January 2018, which reported that the Borkan-2H short-range ballistic missile fired at King Khaled International Airport in Riyadh, Saudi Arabia, in November 2017 “was a derived lighter version, designed specifically by the manufacturers of the Qiam-1” missile.

The Secretariat further assessed that the logo on the jet vane actuators matches that of the Iranian entity Shahid Bagheri Industries (S.B.I.), an Iranian entity linked to composite rocket fuel and missile technology.[2] The Secretariat also observed that a printed circuit board was marked with SHIG 6081, where SHIG is an abbreviation for the Shahid Hemmat Industrial Group, reportedly responsible for Iran’s liquid fuelled ballistic missiles.

 

To read the full report, please click here. The next report of the Secretary General will be issued in December 2018.

[1] Paulina Izewicz, Assessing the JCPOA Procurement Channel, The International Institute of Strategic Studies, 29 March 2018, https://www.iiss.org/blogs/analysis/2018/03/jcpoa-procurement-channel

[2] Iran Watch, Shahid Bagheri Industrial Group, last modified 1 January 2009, https://www.iranwatch.org/iranian-entities/shahid-bagheri-industrial-group

Suspected New Pakistan Enrichment Facility Nears Completion

To complement the Institute for Science and International Security (ISIS)  recent analytical report (link) on Pakistan’s growing enrichment, Project Alpha has worked with Planet Labs LLC to create a time lapse of the construction of the new Kahuta facility. This facility was first publicly identified in Project Alpha’s ‘Alpha-in-Depth’ report on Pakistan’s nuclear programme in 2016. The time-lapse shows construction since 2016 and mirrors Pakistan’s rapid build-up of nuclear weapons capabilities in recent years.

As can be seen in the higher resolution image below, the facility is close to completion, although it appears that the facility will not be operational for a number of months more given that construction of the roof has only recently been completed.

KRL facility on 2018 04 21 courtesy of Planet Labs LLC.

ISIS noted about the site:

New Centrifuge Plant?

The Institute first started receiving notice from government sources in the summer of 2015 that Pakistan was receiving specialized equipment for an extension of its centrifuge program at Kahuta and that a new building was being constructed there.

In 2016, IHS Janes in collaboration with Project Alpha at King’s College published a satellite imagery study, backed up by centrifuge-related procurement data, about this site at Kahuta.1 Although the report listed the site as a probable centrifuge plant, it also listed anomalies that pointed away from this conclusion and said little about the site’s intended purpose or ultimate enrichment capacity. 2 In combination with the Institute’s information, public information supports that more than one government has identified this site as related to gas centrifuge enrichment.

There are sufficient reasons to believe this assessment and investigate the site’s potential capacity for both civil and military enrichment purposes. However, determining its exact purpose remains difficult without more information from Pakistan or perhaps intelligence communities.

The facility, whether for military or civil purposes, will soon be completed. This timing is certain to make more complex Pakistan’s efforts to join the Nuclear Suppliers Group.

 

Can Europe save the JCPOA?

Ian J Stewart, Director of Project Alpha

Click here to access the full article: Bulletin of the Atomic Scientists

On May 8, President Trump “withdrew” the United States from a deal agreed by his predecessor to prevent Iran from obtaining nuclear weapons. US withdrawal was not foreseen when the agreement was drafted, nor was the possibility that the United States might stand in isolation from its closest international partners. Withdrawal also did not mean that the deal ended, but US actions have caused a crisis and could well result in the deal coming to an end. Some have argued that the European states might be able to save the JCPOA. It is important for them to bolster the agreement to the extent that they can, even if the tools available to salvage it are limited.

There appears to be three broad scenarios for what might happen next. The first is that Iran decides to stay in the JCPOA. The immediate response of Iranian officials has been to say that the country will remain in the agreement if the Europeans—and the other parties—can assure Iran receives the benefits it expected when the deal was concluded. A second foreseeable scenario would have Iran withdraw from the JCPOA and resume its nuclear program. There are a couple of different ways this could happen. The third path forward could see the US trigger a snapback of UN sanctions. The re-imposition of UN sanctions would put the EU in the impossible situation of having to decide between complying with the UN Charter or complying with a legally non-binding nuclear agreement with Iran. Ultimately, it will be for Iran to decide whether to continue with the JCPOA or to terminate the agreement.

The Atomic Archives and the Future of the JCPOA

By Ian Stewart and Emma Scott

On 30 April, Israel’s Prime Minister, Benjamin Netanyahu, gave a presentation in which he outlined what he claimed was a vast cache of nuclear weapons design information collected by Israeli intelligence in a raid on an ‘atomic archive’ in Iran. The video of Netanyahu’s presentation is embedded below. The US Secretary of State later also issued a statement about the matter.

Key Points:

  • The archive if real shows Iran keeping the nuclear weapons option open;
  • The presentation didn’t reveal anything about Iran’s past not already known, although the underlying documents might;
  • The presentation was clearly timed to influence President Trump on recertification of the JCPOA on 12 May;
  • It’s unlikely to sway European thinking unless something more comes to light.

The presentation (click here) fuelled an already fiery debate about the future of the nuclear deal with Iran. Some use the accusations to make the case for US withdrawal from the nuclear deal. Others claim the accusations highlight the need for the nuclear deal to ensure Iran cannot obtain nuclear weapons. Almost everyone believes the presentation and alleged new material simply highlight what was already known: that Iran had a secret nuclear weapons programme at some point in the past. If, on the other hand, the archive does in fact prove to be authentic, it will show that Iran was keeping the nuclear weapons option open.

The announcement of the materials comes at a particularly sensitive time. On 12 May, President Trump must again decide whether to certify Iran pursuant to section 1245 of the National Defence Authorisation Act (NDAA), which basically waives some of the US unilateral sanctions on Iran. In October, President Trump decertified the deal under the Iran Nuclear Agreement Review Act (INARA) citing US national security interests. In January, despite waiving the sanctions for a third time, said he would withdraw the US from the agreement unless the other parties to it, including the Europeans, agreed to strengthen its provisions in certain areas. Specifically, President Trump demanded that Iran allow immediate inspections at all sites requested by international inspectors, called on the deal to ensure that Iran never even comes close to possessing a nuclear weapon, called for provisions that have no expiration dates, and for US legislation explicitly linking Iran’s long-range missile and nuclear weapons programs.

Within this context, Prime Minister Netanyahu’s objectives, in view of the timing of the presentation, were doubtless intended to influence President Trump into withdrawing from the deal. His announcement, whether or not the so-called atomic archive contains anything new, will make implementation of the agreement much more complex.

Some of the complications include:

  • Determining whether the archive materials are authentic: Israel has said it will give the materials to the IAEA. The IAEA may then ask to visit the alleged site of the archive in Iran. It seems unlikely that Iran would immediately allow access unless the remaining materials have been removed from the facility. Even if they have, there is always a chance that the IAEA will detect particles of uranium or other materials if they had at any point been stored at a nuclear site, which would help to substantiate the authenticity of the materials Israel now holds.
  • If the archive contains new material as Israel claims, the IAEA’s task of reaching a ‘broader conclusion’ about the nature of Iran’s nuclear program during the first decade of the deal will be next to impossible. By default, a situation would then arise in which nuclear restrictions begin to be eased without the IAEA being able to confirm that all nuclear materials and activity in the country are peaceful in nature. Politically, this now seems untenable.
  • The archive materials may point to new sites in Iran at which nuclear activity is alleged to have been undertaken. Some of these sites may be military-related. The IAEA would have little choice but to request access, but Iran, however, has stated it will not allow access to military sites. An impasse could result.
  • Should the archive material contain information on clandestine nuclear cooperation with other countries, the IAEA would have to investigate. Iran is thought to have received some weaponisation information from the AQ Khan network and there have been occasional accusations so far unsubstantiated about limited nuclear weapons cooperation between Iran and DPRK. The archive material might well provide further information on either connection or on further, hitherto unknown, foreign cooperation. The IAEA would have therefore have to investigate.

What happens next?

Despite all of these points, the nuclear deal is still a solid mechanism to ensure that Iran cannot obtain nuclear weapons, at least in the medium term. The nuclear deal does have limitations, both in terms of the sunset clauses and the lack of clear provisions on missiles. The question for the international community, therefore, is whether to end the nuclear deal now or to use the time that provides to secure a more thorough accommodation with Iran. Parties to the nuclear deal other than the US appear to favour the latter course. The archived material is unlikely to sway the Europeans, who rhetorically at least, remain committed to the deal. President Trump will make his decision on 12 May.