(How Iran’s National Shipping Company Used Offshore Companies to Dodge U.S. Sanctions – Published: January 19, 2021 – www.sayari.com)
Iran’s national maritime carrier used front companies in Cyprus, Hong Kong, China, and Turkey to hide its ownership and management of four sanctioned vessels, according to public records. Our investigation demonstrates the richness of data from offshore jurisdictions, as well as the need to monitor sanctioned individuals, companies, and vessels to identify future sanctions evasion schemes.
IRISL’s China-linked sanctions evasion scheme
The Islamic Republic of Iran Shipping Lines (IRISL) is Iran’s state-owned maritime carrier and the largest shipping company in the Middle East, with over 100 vessels in its entire fleet. The U.S., European Union, and the United Nations have all sanctioned IRISL for providing logistical support to Iran’s nuclear and ballistic missile programs. Since the U.S. designated IRISL, many IRISL-affiliated subsidiaries and shell companies have also come under sanctions for facilitating IRISL’s ongoing illicit activities.
In October 2020, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) sanctioned Reach Holding Group (Shanghai) Company Ltd. and its subsidiary Reach Shipping Lines as collaborators in IRISL’s strategy to acquire four large container vessels.
Although OFAC did not identify the vessels by name, public records reveal that the four container ships are part of the sanctioned Reach fleet — we determined that the ships are named Goodreach, Fanreach, Tenreach, and Canreach. We also found that several companies and individuals associated with these container ships were previously sanctioned for ties to IRISL through other avenues.
As part of the same action, OFAC also sanctioned four Hong Kong shipping companies — Delight Shipping, Gracious Shipping, Noble Shipping, and Supreme Shipping. According to the State Department’s official press release, the four Hong Kong companies provided “significant goods or services” to Iran’s maritime sector. Our research indicates a more complex relationship among these Hong Kong companies and IRISL, given their integral role in obscuring ownership of the four Hong Kong vessels.
IRISL’s Hong Kong shell companies
First, we learned that the four Hong Kong companies were the previous owners of the sanctioned Reach fleet until selling the four vessels to an “undisclosed interest” in early 2020.
We also found that the director of the four sanctioned Hong Kong companies, Shen Yong, had worked with IRISL in the past. During his directorship of these companies, Yong also managed King Power Holdings Limited, a Hong Kong company that helped IRISL obfuscate its ownership of 19 bulk carriers in a separate sanctions evasion scheme.
How IRISL obscured ownership using offshore companies
In 2018, the ultimate beneficial ownership of the Reach fleet shifted multiple times via Cyprus and Hong Kong-based shell companies. Originally, IRISL directly owned the four Reach vessels after purchasing them from Hyundai Heavy Industries Co. Ltd. in March 2018. Three months later IRISL transferred its ownership of the four now-sanctioned Hong Kong companies to Santarosa Shipping Company Limited in Cyprus. Santarosa’s sole shareholder at the time was an Iranian national, according to Cypriot corporate records.
By the time the four Hong Kong companies appeared in the Equasis shipping registry in August, they were each listed as registered owners of the Reach fleet; this intermediary link enabled IRISL to hide its association with the fleet through Santarosa. The following month, the sole shareholder of Santarosa changed again from an Iranian national to a Chinese national based in Shanghai, thereby leaving the ultimate beneficial owner of the four Reach vessels unknown.
Fig 1: The image on the left shows that IRISL transferred ownership of the four Hong Kong-registered companies to Santarosa Shipping Company Limited in June 2018, according to the Hong Kong corporate registry. The image on the right shows how the owner of Santarosa Shipping Company Limited changed from an Iranian national to a Chinese national within a three-month period, according to the Cyprus Registry.
IRISL indirectly managed the Reach fleet via Turkish companies
In addition to IRISL’s attempts to hide its ownership of the four Reach vessels, it also pursued control over management of the vessels through a web of Turkish shipping companies.
When the four Hong Kong companies became owners of the Reach fleet in August 2018, a Turkish shipping company named Istanbul Maritime and Sea Transport (also known as Istanbul Shipping) became the commercial manager for the entire fleet. One of Istanbul Shipping’s board members is Menekşe Shipping Industry Trade — one of Menekşe’s shareholders was the deputy director of IRISL and former director of IRISL’s Hong Kong branch.
After only four months, another Turkish company named Bosphorus Transportation and Ship Management replaced Istanbul Shipping as the commercial manager of three of the Hong Kong-owned vessels (Bosphorus Transportation would assume commercial management of the fourth vessel the following year).
Bosphorus Transportation maintains ties with IRISL through a common director with Istanbul Shipping. Although Bosphorous Transportation is further removed from IRISL, its shared director with Istanbul Shipping suggests that despite changes in ship management and ownership, IRISL’s managerial control of the vessels was never entirely severed.
The Reach fleet returns to IRISL in 2020
The four Reach vessels were eventually sold again to new owners in January and February 2020, according to shipping data from Equasis. Two of the vessels — Fanreach and Tenreach — were sold to an undisclosed interest while the ownership of Canreach and Goodreach was transferred to Oghyanous Khoroshan Kish Shipping Company, a sanctioned IRISL subsidiary.
While we could not identify the undisclosed buyer of Fanreach and Tenreach, we discovered that both ships were sighted traveling from China to Iran in October 2020, according to vessel tracking data from VesselFinder. Additionally, all four vessels are now operating under the Iranian flag and have assumed new Persian names since their sale. The changes in the vessel name and flag state are both common techniques employed by illicit shipping networks to evade sanctions and obscure ownership.