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Friday, May 15, 2020
Fraudulent International Ship Registration Scandals hit Pacific Islands
By Michael Hansen @ 6:05 AM :: 1193 Views :: Ethics, Jones Act, Law Enforcement

Fraudulent International Ship Registration Scandals hit Pacific Islands

by Michael Hansen, Hawaii Shippers’ Council, May 14, 2020

According to international maritime authorities, of the four countries affected by fraudulent international ship registrations worldwide, three are Pacific Island countries, namely, the Federated States of Micronesia (FSM), Independent State of Samoa (formerly known as Western Samoa), and the Republic of Fiji.

Most recently, four men including three citizens and one foreign person living overseas were charged in mid-April 2020 by Micronesian authorities for fraudulently operating an international ship registry under the Micronesian flag, claiming to represent the Micronesian government, the theft of government property and money laundering.

The charges were announced in a press release issued by the National Government of the Federated States of Micronesia on April 27, 2020, stating that it had filed a 260-page criminal indictment (Criminal Case No. 2020-501) on April 17th, 2020, with their Supreme Court’s Trial Division in the national capital of Palikir, State of Pohnpei.

The defendants in the Micronesia case are accused of fraudulently operating what is known as an open or international ship registry, which allows foreign shipowners to register their vessels under another country’s flag for international trade purposes only and is commonly known as a Flag of Convenience (FoC). An open ship registry typically doesn’t impose domestic ownership and crew requirements but prohibits the vessels from engaging in the domestic trade of the flag country.

The opposite of an open ship registry is what is known as a closed, national or domestic registry that typically imposes domestic ownership, crewing and other requirements and permits the vessel to engage in the flag country’s domestic trade in addition to international trade.

FSM and Fiji laws do not provide for establishment of an open ship registry and only allow a closed national ship registry. Samoa attempted to establish a legal international ship registry, but contracted with a fraudulent administrator.

In addition to registering ships, the international registries issue mariner documents to seafarers sailing on their flag ships typically on a back-to-back basis with documents issued by the seafarer’s home country.

Developing countries hosting an international ship registry typically contract with a private company domiciled in an overseas commercial center, known as an “administrator,” to represent them and operate their registry as a commercial business.

This is true of the largest open registries in the world including Panama, Liberia and the Republic of the Marshall Islands (RMI). As of January 2016, there were reported 41,674 oceangoing ships of 1,000 gross ton and greater in the world fleet of which 6,156 were registered in Panama, 2,969 in Liberia and 2,661 in RMI.

In contrast to legally-operated international ship registries, there is the phenomena of fraudulent, or what has been labelled “fake” and “rogue,” open ship registries that are not authorized by the flag government and illegally operated by unscrupulous persons. These persons establish a private company that falsely claims to be the flag country’s international ship registry administrator, issues fraudulent documents to shipowners, vessels and seafarers, and charges and retains all the associated registration and administrative service fees and charges.

The regulatory body overseeing international shipping is the London, United Kingdom-based International Maritime Organization (IMO), a specialized agency of the United Nations (UN) founded in 1948. The IMO purview includes compliance by the world’s ship registries with the international maritime conventions regulating international shipping.

The Maritime Executive reported on October 30, 2019, “ In response to a spike in fake flag registrations, the . . . IMO is seeking to combat "rogue" [inter-] national flag registries which are operating without the knowledge of governments they claim to represent, according to the insurer Standard Club.  In recent years, IMO has received reports that 73 vessels were unlawfully flying the flag of the Democratic Republic of the Congo, 91 vessels were illegally registered under the flag of Fiji and 150 vessels were unlawfully registered under the flag of the Federated States of Micronesia. . . . The vessels involved are typically smaller, older cargo vessels, according to IHS.”

In addition, IHS Safety at Sea, reported on October 18, 2018, “Of the four countries known to have vessels fraudulently registered for international trade when the International Maritime Organization (IMO) began considering the issue in 2015, Samoa has seen 17 vessels illegally using its flag so far this year.”

The existence of fraudulent international ship registries poses significant safety, security and law enforcement issues for the worldwide maritime sector especially the IMO.

IHS Safety at Sea reported on October 31, 2018, “When the . . . IMO’s legal committee met for its 105th session in April, the subject of fraudulent ship registrations was a hot topic. The reason it had been made a priority was because several member states had informed the IMO Secretariat over the last several years that their flags were being flown illegally, beginning with the Democratic Republic of the Congo (DRC) in 2015.”

“‘The problem is getting worse,’ IMO legal affairs director Frederick Kenney told IHS Markit. ‘When you look at countries like Micronesia, the DRC, and Fiji, and the number of vessels involved, it’s alarming from both a safety and security standpoint. We’ve had ships with a completely fraudulent set of certificates that look real, and if a port state control officer isn’t aware that the registry is fraudulent, they may well let the vessel pass. God only knows what safety deficiencies might be on board, or even what those behind the fraudulent registry could be up to.’”

The Samoa Observer (Apia, Samoa) reported on August 8, 2018, that Ascent Naval responded in May 2017 to a fresh Samoan government invitation to tender seeking proposals from international ship registry administrators to establish and operate a Samoa International Maritime Authority (SIMA) leading to a new controversy involving Afamasaga Su’a Pou Onesemo, Chief Executive Officer, of the Samoan government’s Ministry of Works, Transport and Infrastructure (MWTI) and the exchange of acrimonious charges. 

The Observer reported, “...Onesemo, has rejected allegations of corruption leveled against him by a former Member of Parliament of the Government of India, Sh. P. K. Bansal. In his capacity as the Executive Director of a company called Ascent Navals, Mr. Bansal had written to the Chairman of the Public Service Commission on 28 May 2018, alleging ‘corrupt and illegal practices’ by the Chief Executive Officer.’’

The IMO reported in 2019 that 91 international vessels had been fraudulently registered to Fiji over the past several years.

The first media report of the Fiji fraud appeared in the Fiji Sun on February 1, 2017, “The Fiji Police Force Acting Chief of Intelligence Investigations, Acting Assistant Commissioner of Police . . .  Semisi Bokadi has confirmed that they have started investigations on ships claiming to be registered in Fiji using falsified documents.”

Subsequently, the Maritime Safety Authority of Fiji (MSAF) issued a press release on August 2, 2017, stating, “’Fiji has a closed Registry and is not an open registry and as such foreign ships claiming Fiji is their Flag State are doing so fraudulently,’ said MSAF CEO, John Tunidau.”

Dateline Wellington, New Zealand, Reuters reported on September 14, 2017, “South Pacific island nations are scouring shipping records for vessels with links to North Korea after Fiji said it had identified 20 falsely flagged ships it suspects the isolated regime is using to evade United Nations sanctions.”

The charging documents in the Micronesian case state the conspiracy started with “a common scheme among the defendants beginning in 2015 and concerning the Micronesia International Ship Registry (MISR).”

There seems to be broad agreement the central corporate entity in the Micronesian scheme (and in Samoa) was Ascent Navals Thailand Company (which has been variously referred to by the abbreviations NA, NAT and NATCo) and claims to have offices in several countries including Thailand and India.

In addition to Sharma, two other overseas men also of apparent Indian nationality were involved in the Micronesia scheme but have not been charged.

The Kaselehlie Press reported in December 2016, that “with a brochure prominently featuring the seal of the FSM, Micronesia International Ship Registry [MISR] had a booth in Dubai [United Arab Emirates (UAE)] at the International Ship Suppliers & Services Association’s Convention from October 31 through November 2 [2016]. With the brochure was a business card for a Captain Inder Jit Singh also featuring the FSM seal. The card said that Singh is the Director for Maritime Security.”

Also identified was “Padmanabhan Krishnan as the Director (Admin) and the Regional Maritime Administrative Manager (for Maritime Administration & Safety Management) of the Micronesia International Ship Business Registry (MISBR).”

The Pacific Daily News (Guam) reported on April 28, 2020, “The charging documents state in 2015, Sharma met with Lukner Weilbacher . . . to establish an open, international vessel registration system within FSM. . . . Lukner Weilbacher signed a letter of intent in October 2015 with Sharma, documents stated.

Jano helped Sharma get an office in Kolonia, Pohnpei, and Renwick Weilbacher provided office management . . . “

“Using Lukner Weilbacher's purported authorization, Sharma set up Micronesia International Ship Registry and invited large commercial ships to register their vessels in the FSM. The FSM justice department learned of this and contacted the FSM telecommunications corporation to take down the website as it was advertising illegal services. Sharma set up a new website advertising the same services, documents said. ”

According to the Guam Daily Post, “Renwick Weilbacher [is] a former quarantine officer and nephew of Lukner Weilbacher.”

The Pacific Daily News reported further, “In January 2016, Sharma approached the FSM justice department and proposed to allow the Micronesia International Ship Registry to conduct its activities, but the justice department rejected the proposal. They continued to issue registration on behalf of the FSM violating the law, the charging documents stated.”

“In March 2017, Sharma and Jano presented then-President Peter Christian with a $100,000 check payable to the FSM justice department.  They said it was intended to represent FSM's ‘share’ for the revenue the ship registry company collected, according to court documents. ‘No explanation was made as to how this 'share' was calculated. Upon the advice of DOJ Secretary Gallen, the FSM government rejected the check and returned it defendants Sharma and Martin Jano, court documents stated.’ “

And concluding their reporting, the Pacific Daily News noted, “The FSM Justice department estimated that the defendants received $627,000 for fraudulent vessel registrations between 2015 and 2017, according to the charging documents.”

Note: A full report of the same title (file reference: HSC-1130a) is available on FaceBook HERE.

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PDF: Article including Footnotes and Photos

Related: Lyon Connection? Micronesia Acts Against Fake Shipping Registry

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