1016-00007 · Client 1016 · Closing

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PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP 400 Park Avenue, 28th Floor New York, New York 10022

CLOSING MEMORANDUM

TO: Marcus Whitfield, Senior Vice President & General Counsel, Dunmore Energy Holdings Ltd. Derek Huang, Chief Compliance Officer, Dunmore Energy Holdings Ltd.

FROM: Priya Anand, Partner Leila Nazari, Associate

DATE: February 28, 2024

RE: Closing Summary — OFAC Voluntary Self-Disclosure, Case No. VS-1014-00001 C&H Matter No. 1016-00007

This memorandum is protected by the attorney-client privilege and the work product doctrine. It contains confidential legal analysis and advice prepared by Calderwood & Harkness LLP for the exclusive use of Dunmore Energy Holdings Ltd. and its officers, directors, and advisors with a need to know. This memorandum should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP. Inadvertent disclosure does not constitute a waiver of any applicable privilege.

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I. MATTER SUMMARY

Calderwood & Harkness LLP ("Calderwood & Harkness" or the "Firm"), with offices at 400 Park Avenue, 28th Floor, New York, New York 10022, was engaged on August 14, 2023, to represent Dunmore Energy Holdings Ltd. ("DEH" or the "Company"), a Cayman Islands exempted company limited by shares, registered at 4th Floor, Harbour Place, 103 South Church Street, George Town, Grand Cayman KY1-1002, with its principal United States office located at 1200 Travis Street, Suite 3400, Houston, Texas 77002 (EIN 98-1347562), and its wholly owned subsidiary, Dunmore Trading International Ltd. ("DTI"), a private company limited by shares organized under the laws of England and Wales (Companies House No. 12849371), with its registered office at 25 Finsbury Square, London EC2A 1PQ, United Kingdom.

The engagement concerned the preparation, filing, and prosecution of a voluntary self-disclosure ("VSD") to the Office of Foreign Assets Control ("OFAC") of the U.S. Department of the Treasury in connection with apparent violations of U.S. sanctions regulations. The matter was assigned OFAC Case No. VS-1014-00001 and was opened internally at the Firm under Matter No. 1016-00007.

The subject matter of the VSD involved five physical fuel oil sale transactions between DTI and Caspian Star Commodities DMCC ("Caspian Star"), a DMCC Free Zone Company organized in Dubai, United Arab Emirates, with its registered address at Unit 4412, Jumeirah Business Centre 1, Cluster G, Jumeirah Lakes Towers, Dubai, UAE. Caspian Star was owned or controlled by Timur R. Kadyrov (date of birth: September 7, 1971; nationality: Russian Federation), an individual designated by OFAC as a Specially Designated National ("SDN") on March 18, 2022, under SDN Entry ID 47218, pursuant to the sanctions program designated RUSSIA-EO14024. The designation was made under Executive Order 14024 of April 15, 2021, titled "Blocking Property With Respect To Specified Harmful Foreign Activities of the Government of the Russian Federation," on the basis that Kadyrov was determined to be operating or having operated in the technology sector of the Russian Federation economy and to have been involved in sanctions evasion networks.

At the time of the subject transactions, Caspian Star's nominal Managing Director, Farid Mammadov, was listed in all know-your-customer ("KYC") documentation as the sole one hundred percent (100%) owner and managing director of the entity. Kadyrov's beneficial ownership of Caspian Star was not publicly identified by OFAC until the May 12, 2023 SDN List supplemental update, at which time OFAC amended its SDN List annotations to expressly identify Caspian Star Commodities DMCC as an entity owned or controlled by Kadyrov.

The five subject transactions occurred between September 12, 2022 and January 23, 2023, with an aggregate transaction value of $4,726,500. All five transactions involved the sale of Low Sulphur Fuel Oil 380 CST ("LSFO 380 CST") on a free-on-board ("FOB") basis at the port of Fujairah, UAE. All payments for the subject transactions were made in United States dollars via wire transfer processed through Ridgeline National Bank, N.A. ("Ridgeline"), located at 700 Louisiana Street, Suite 4800, Houston, Texas 77002, from Caspian Star's account at Emirates Gulf Commercial Bank in Dubai. The routing of these payments through Ridgeline, a U.S. financial institution, established U.S.-person jurisdiction under 31 C.F.R. Part 594, which implements Executive Order 14024.

DEH is majority-owned, with a sixty-eight point four percent (68.4%) equity interest held by Grandview Capital Partners LLC ("Grandview"), a Delaware limited liability company with offices at 600 Lexington Avenue, Suite 2200, New York, New York 10022, through Grandview Energy Fund IV, LP, a Delaware limited partnership. DEH reported fiscal year 2022 revenue of approximately $2.14 billion and employs approximately 3,800 individuals worldwide. The Company's operations include upstream and midstream oil and gas assets across the Gulf of Mexico, West Africa, and Southeast Asia, as well as a growing portfolio of solar and wind energy projects in the U.S. Southwest.

DTI's principal activity is the physical trading of crude oil and refined petroleum products. DTI's Managing Director during the period in question was, and remains, Gregor Albrecht.

The scope of Calderwood & Harkness's engagement encompassed the following:

(a) conducting a comprehensive internal investigation into the circumstances surrounding the five subject transactions;

(b) preparation and filing of the VSD with OFAC pursuant to 31 C.F.R. § 501.806;

(d) advisory services related to compliance remediation, including development and implementation of enhanced sanctions compliance measures; and

(e) representation of DEH and DTI in all enforcement proceedings before OFAC arising from the VSD.

The Calderwood & Harkness engagement team consisted of the following professionals:

• Oliver Mackenzie, Responsible Partner, Mergers & Acquisitions Practice;

• Priya Anand, Billing Partner, Litigation — General; lead counsel for sanctions and enforcement matters;

• Leila Nazari, Lead Associate, Tax Practice; responsible for cross-border transaction analysis; and

• Robert Jansen, Working Associate, Tax Practice; responsible for financial flow analysis and wire transfer documentation.

The Firm was retained on the recommendation of Grandview Capital Partners LLC; the initial referral was made by Helena Reeves, Managing Partner of Grandview.

II. CHRONOLOGY OF KEY EVENTS

The following chronology sets forth the material events relevant to this matter, from the initial onboarding of Caspian Star as a DTI counterparty through the final resolution by OFAC and closure of the matter.

A. Counterparty Onboarding and Initial Screening (July 2021)

July 8, 2021: Caspian Star Commodities DMCC was onboarded as a counterparty of DTI. KYC documentation was collected by DTI's compliance team in accordance with DTI's then-applicable Global Sanctions Compliance Policy (Version 3.1). The KYC documentation included a trade license issued by the Dubai Multi Commodities Centre ("DMCC") Authority, a certificate of formation, a passport copy and Emirate ID for Farid Mammadov (identified as the sole shareholder and managing director), and a bank reference letter from Emirates Gulf Commercial Bank. Mammadov was listed as the one hundred percent (100%) owner of Caspian Star in all documentation provided.

July 8–12, 2021: Initial sanctions screening was performed by Ashworth & Kline LLP ("Ashworth & Kline"), located at 10 Aldermanbury, London EC2V 7HR, United Kingdom, DTI's then-outside trade compliance counsel. The lead partner for the engagement at Ashworth & Kline was Nigel Ashworth. Screening was conducted using the HCS ScreenPro platform (Version 4.2.3), a sanctions screening tool provided by Harborview Compliance Solutions Inc. ("Harborview"), located at 2300 Clarendon Boulevard, Suite 700, Arlington, Virginia 22201. The screening covered the OFAC SDN List, the European Union Consolidated Sanctions List, and the United Kingdom Office of Financial Sanctions Implementation ("OFSI") Consolidated List of Financial Sanctions Targets. No matches or potential matches were returned for Caspian Star, Farid Mammadov, or any related parties. Caspian Star was assigned a "Standard Risk" rating under DTI's counterparty risk classification framework. It is critical to note that, at the time of onboarding, Timur R. Kadyrov had not yet been designated by OFAC or any other sanctions authority. His designation did not occur until approximately eight months later, on March 18, 2022.

B. OFAC Designation of Kadyrov (March 2022)

March 18, 2022: OFAC designated Timur R. Kadyrov as a Specially Designated National under SDN Entry ID 47218, program RUSSIA-EO14024, pursuant to Executive Order 14024. The SDN entry for Kadyrov included his name, date of birth, nationality, and passport information. However, the SDN entry did not at that time expressly identify Caspian Star Commodities DMCC as an entity owned or controlled by Kadyrov. Kadyrov's control over Caspian Star was exercised through a network of nominee shareholders that obscured his beneficial ownership interest from publicly available corporate registry data and commercial databases.

C. Subject Transactions (September 2022 – January 2023)

September 12, 2022: The first subject transaction was executed. DTI sold LSFO 380 CST to Caspian Star under Invoice No. CS-DTI-0091, for a volume of 2,500 metric tons, delivered FOB Fujairah, UAE, at a total invoice amount of $1,135,000. Payment was received via USD wire transfer through Ridgeline National Bank, N.A.

October 3, 2022: The second subject transaction was executed. DTI sold LSFO 380 CST to Caspian Star under Invoice No. CS-DTI-0094, for a volume of 2,200 metric tons, delivered FOB Fujairah, UAE, at a total invoice amount of $987,500. Payment was received via USD wire transfer through Ridgeline National Bank, N.A.

October 2022 (precise date unavailable): A delayed annual re-screening of Caspian Star was performed using the HCS ScreenPro platform. The re-screening had originally been scheduled for July 2022, in accordance with the annual re-screening interval mandated by DTI's Global Sanctions Compliance Policy (Version 3.2, effective January 1, 2022). However, the screening was delayed by approximately three months due to a staffing vacancy within DTI's compliance department in London. The re-screening did not return any matches or potential matches. The OFAC SDN List at that time did not reference Caspian Star in connection with Kadyrov's designation. Moreover, the HCS ScreenPro platform's beneficial ownership module relied on corporate registry data — specifically, data sourced from the DMCC commercial registry and other commercially available corporate intelligence databases — which continued to reflect Mammadov as the sole one hundred percent (100%) owner of Caspian Star. Beneficial ownership data linking Caspian Star to Kadyrov had not been incorporated into HCS ScreenPro's data feed at that time.

November 14, 2022: The third subject transaction was executed. DTI sold LSFO 380 CST to Caspian Star under Invoice No. CS-DTI-0101, for a volume of 1,900 metric tons, delivered FOB Fujairah, UAE, at a total invoice amount of $842,000. Payment was received via USD wire transfer through Ridgeline National Bank, N.A.

December 19, 2022: The fourth subject transaction was executed. DTI sold LSFO 380 CST to Caspian Star under Invoice No. CS-DTI-0108, for a volume of 2,300 metric tons, delivered FOB Fujairah, UAE, at a total invoice amount of $1,012,000. Payment was received via USD wire transfer through Ridgeline National Bank, N.A.

January 23, 2023: The fifth and final subject transaction was executed. DTI sold LSFO 380 CST to Caspian Star under Invoice No. CS-DTI-0115, for a volume of 1,700 metric tons, delivered FOB Fujairah, UAE, at a total invoice amount of $750,000. Payment was received via USD wire transfer through Ridgeline National Bank, N.A. No further transactions between DTI and Caspian Star were executed after this date.

D. External Audit Flag and Enhanced Review (January – June 2023)

January 30, 2023: Borwick & Thatcher LLP ("Borwick & Thatcher"), located at 1 More London Place, London SE1 2AF, United Kingdom, DEH's external auditors, issued a management letter to the DEH Board of Directors in connection with the fiscal year 2022 audit. The management letter included Caspian Star in a list of "high-risk counterparties." The flag was raised in connection with counterparty credit risk, specifically the absence of audited financial statements for Caspian Star. The flag was not related to sanctions compliance, and the management letter did not suggest or identify any sanctions-related concerns.

March 6, 2023: Derek Huang, Chief Compliance Officer of DEH, initiated an enhanced compliance review of Caspian Star. The review was prompted by the Borwick & Thatcher counterparty risk flag. Mr. Huang directed the DTI compliance team to conduct an updated review of Caspian Star's KYC documentation, corporate structure, and beneficial ownership, as well as refreshed sanctions screening.

May 12, 2023: OFAC updated the SDN List supplemental information to expressly identify Caspian Star Commodities DMCC as an entity owned or controlled by Timur R. Kadyrov. This was the first time OFAC publicly linked Caspian Star to Kadyrov's SDN designation.

E. Discovery, blocking, and Engagement of Counsel (June – August 2023)

June 2, 2023: Derek Huang, in the course of the enhanced compliance review initiated in March 2023, conducted a manual review of OFAC's updated SDN annotations and discovered the link between Caspian Star and Kadyrov. Mr. Huang immediately reported the discovery to Marcus Whitfield, Senior Vice President and General Counsel of DEH. The discovery was made through Mr. Huang's direct review of OFAC's publicly available SDN List data, rather than through an automated screening alert.

June 5, 2023: DTI blocked all dealings with Caspian Star and froze all pending transactions. As of this date, there were no pending transactions between DTI and Caspian Star; the last transaction had been completed on January 23, 2023, approximately four and a half months prior. The blocking action was taken within three (3) business days of Mr. Huang's discovery. DTI issued internal instructions prohibiting any new transactions, communications, or financial dealings with Caspian Star pending further review and legal guidance.

August 14, 2023: Calderwood & Harkness LLP was formally engaged by DEH to represent the Company and DTI in connection with the potential OFAC sanctions violations. The engagement letter was executed on this date, and the matter was opened under Matter No. 1016-00007.

F. Investigation, VSD Filing, and OFAC Proceedings (September 2023 – February 2024)

September 18, 2023: Calderwood & Harkness completed its internal investigation memorandum, which documented the findings of a comprehensive review of the five subject transactions, DTI's counterparty onboarding and screening procedures, the chronology of relevant sanctions designations, and the circumstances surrounding the delayed re-screening and ultimate discovery of the Caspian Star/Kadyrov link. The investigation included interviews of key personnel, review of transactional documents, analysis of wire transfer records, and evaluation of DTI's compliance framework.

September 25, 2023: Calderwood & Harkness delivered a Compliance Enhancement Memorandum to DEH, setting forth detailed recommendations for remedial measures designed to address the compliance deficiencies identified during the internal investigation. The recommendations formed the basis for the compliance enhancements described in Section V of this memorandum.

October 6, 2023: The VSD was filed with OFAC pursuant to 31 C.F.R. § 501.806. The filing included a detailed narrative of the apparent violations, a description of the five subject transactions, copies of relevant transactional documents, a summary of the internal investigation findings, a description of the root causes of the apparent violations, and a detailed account of the remedial measures implemented and planned by DEH and DTI.

October 18, 2023: OFAC issued an acknowledgment of receipt of the VSD and assigned Case No. VS-1014-00001. The acknowledgment was issued by the OFAC Enforcement Division.

November 29, 2023: OFAC issued a supplemental information request, communicated by Thomas W. Harrington, Assistant Director, Enforcement Division, OFAC. The request sought production and/or information in five categories:

(i) complete wire transfer details, including SWIFT MT103 messages for all five subject transactions;

(ii) a description of DTI's beneficial ownership due diligence procedures as applied to Caspian Star and similar counterparties;

(iii) confirmation of whether any prior or subsequent transactions with Caspian Star (beyond the five reported) existed;

(iv) an update on the status of compliance remediation measures; and

(v) a corporate structure chart for DEH, including all material subsidiaries and the Grandview Capital Partners ownership structure.

December 22, 2023: Calderwood & Harkness filed the supplemental submission with OFAC on behalf of DEH and DTI. The submission was filed within twenty-three (23) days of OFAC's request, seven (7) days in advance of the thirty (30) day response deadline. The supplemental submission included certified copies of the five SWIFT MT103 messages, a detailed memorandum describing DTI's beneficial ownership diligence procedures (both as they existed at the time of the subject transactions and as enhanced pursuant to the compliance remediation program), confirmation that no prior or subsequent transactions with Caspian Star were identified, a comprehensive remediation status report, and a corporate structure chart for DEH and its subsidiaries.

February 21, 2024: OFAC issued a cautionary letter resolving Case No. VS-1014-00001. The terms and implications of the cautionary letter are discussed in detail in Section III below.

February 28, 2024: Calderwood & Harkness closed the matter.

III. RESOLUTION

A. OFAC Determination

OFAC resolved Case No. VS-1014-00001 by issuing a cautionary letter dated February 21, 2024, addressed to DEH. No civil monetary penalty was imposed. The actual penalty amount is $0.

OFAC determined that the apparent violations were non-egregious, meaning that OFAC concluded that the conduct at issue did not constitute a flagrant, willful, or reckless violation of U.S. sanctions law and that the case did not present the type of egregious circumstances that would warrant the imposition of a civil monetary penalty.

B. Theoretical Penalty Analysis

Under OFAC's Economic Sanctions Enforcement Guidelines (31 C.F.R. Part 501, Appendix A), the theoretical base penalty amount for a non-egregious case that is voluntarily self-disclosed is calculated as one-half of the transaction value, capped at the applicable statutory maximum. For the five subject transactions, with an aggregate transaction value of $4,726,500, the base penalty calculation is as follows:

Base Penalty Amount = $4,726,500 × 0.25 = $1,181,625

This amount represents the statutory maximum settlement amount for non-egregious, voluntarily disclosed cases under OFAC's guidelines (one-half of the transaction value, with additional adjustments).

Under the International Emergency Economic Powers Act ("IEEPA"), 50 U.S.C. § 1705, the statutory maximum civil penalty for each violation is the greater of $356,579 (as adjusted for inflation) or twice the amount of the underlying transaction. For the aggregate transactions at issue, the statutory maximum civil penalty would have been:

Statutory Maximum = 2 × $4,726,500 = $9,453,000

The favorable resolution — a cautionary letter with no monetary penalty — thus represents a savings of $1,181,625 relative to the theoretical base penalty, and $9,453,000 relative to the statutory maximum.

C. Mitigating Factors Credited by OFAC

OFAC credited the following mitigating factors in its determination to issue a cautionary letter without the imposition of a civil monetary penalty:

1. Voluntary Self-Disclosure. Dunmore self-reported the apparent violations to OFAC promptly after discovery and engagement of outside counsel, prior to any indication that OFAC had independently identified the subject transactions. OFAC's Enforcement Guidelines afford significant weight to the fact that a party voluntarily comes forward, as self-disclosure is a critical component of OFAC's enforcement framework and promotes transparency and cooperation.

2. No Actual Knowledge. Neither DEH nor DTI had actual knowledge of Kadyrov's beneficial ownership of Caspian Star at the time the subject transactions were executed. Kadyrov's ownership was concealed through a network of nominee shareholders, and the publicly available information — including DMCC corporate registry data and KYC documentation provided by Caspian Star — consistently identified Mammadov as the sole owner.

3. Inadvertent Conduct. The subject transactions were routine physical commodity trades executed in the ordinary course of DTI's business. There was no evidence that any DEH or DTI personnel intended to evade U.S. sanctions, and the transactions were conducted openly and documented in the normal course of DTI's trading operations.

4. Prompt Remedial Action. DTI blocked all dealings with Caspian Star within three (3) business days of Mr. Huang's discovery of the SDN link on June 2, 2023. The Company took immediate and decisive action to prevent any further transactions or financial dealings with the designated entity.

5. No Direct Benefit to SDN. All payments for the subject transactions were made to Caspian Star's corporate account at Emirates Gulf Commercial Bank in Dubai. OFAC's investigation did not reveal evidence that Kadyrov personally received any of the funds associated with the subject transactions, although OFAC did not make a definitive determination on this point.

6. Comprehensive Compliance Enhancements. Dunmore implemented a comprehensive suite of remedial measures prior to and during the pendency of the OFAC proceedings, including technology upgrades, the hiring of a dedicated Sanctions Compliance Officer, policy updates, enhanced screening protocols, third-party review engagements, and mandatory training. These measures are described in detail in Section V of this memorandum.

7. Full Cooperation. Dunmore provided extensive documentation throughout the OFAC proceedings and responded to OFAC's supplemental information request within twenty-three (23) days — seven days before the thirty-day deadline — demonstrating a commitment to full transparency and cooperation with the enforcement process.

D. Significance of Timing Gap

The cautionary letter also noted, as relevant context, the timing gap between Kadyrov's initial designation as an SDN on March 18, 2022, and OFAC's public identification of Caspian Star as a Kadyrov-owned entity on May 12, 2023 — a period of approximately fourteen months. During that entire period, which encompassed all five subject transactions, OFAC's own publicly available sanctions data did not expressly link Caspian Star to Kadyrov. This timing gap was recognized as a significant factor in OFAC's assessment of the non-egregious nature of the apparent violations.

E. Legal Effect of the Cautionary Letter

A cautionary letter is not a "finding of violation" under OFAC's Enforcement Guidelines and carries no monetary penalty or formal sanction. It is an administrative communication from OFAC that puts the recipient on notice that its conduct has come to OFAC's attention and that similar conduct in the future could result in enforcement action. However, it is important to note that the cautionary letter is part of DEH's OFAC enforcement record and could be considered as an aggravating factor in any future enforcement action involving DEH or its subsidiaries.

F. Assessment of Outcome

This outcome — a cautionary letter with $0 penalty — represents the best possible outcome short of a no-action letter, which OFAC reserves for cases where no apparent violation is found. Given that five transactions totaling $4,726,500 were executed with an entity owned or controlled by an SDN, and that those transactions involved USD wire transfers routed through a U.S. financial institution, the issuance of a cautionary letter without any monetary penalty is an exceptionally favorable result. It reflects OFAC's recognition of Dunmore's good faith, cooperation, and commitment to compliance.

IV. ROOT CAUSE ANALYSIS

Calderwood & Harkness's internal investigation identified the following root causes for the apparent violations:

Timing of Onboarding Relative to Designation. DTI's onboarding screening of Caspian Star was conducted in July 2021, approximately eight months before OFAC's March 18, 2022 designation of Kadyrov as an SDN. At the time of onboarding, Kadyrov was not designated by OFAC, the European Union, the United Kingdom, or any other sanctions authority. There was, accordingly, no sanctions-related basis to decline the onboarding of Caspian Star at that time.

Limitations of Automated Screening Technology. The HCS ScreenPro platform (Version 4.2.3) did not generate an alert for Caspian Star during the October 2022 re-screening for two independent but reinforcing reasons:

(i) The OFAC SDN List entry for Kadyrov did not at that time reference Caspian Star or identify it as a Kadyrov-owned or Kadyrov-controlled entity. The SDN List is a primary data source for all sanctions screening platforms, and the absence of an express link between Kadyrov and Caspian Star in the SDN List meant that the platform had no basis to flag the counterparty.

(ii) HCS ScreenPro's beneficial ownership module relied on corporate registry data — principally, data sourced from the DMCC commercial registry and commercially available corporate intelligence databases — which continued to reflect Mammadov as the sole one hundred percent (100%) owner of Caspian Star. Kadyrov's beneficial ownership was exercised through a network of nominee shareholders that did not appear in publicly available corporate filings. Beneficial ownership data linking Caspian Star to Kadyrov was not incorporated into HCS ScreenPro's data feed until after OFAC's May 12, 2023 SDN supplemental update.

Delayed Re-Screening. DTI's Global Sanctions Compliance Policy (Version 3.2, effective January 1, 2022) required annual counterparty re-screening. The re-screening of Caspian Star was scheduled for July 2022 — the anniversary of Caspian Star's onboarding — but was delayed until October 2022 due to a staffing vacancy in DTI's compliance department in London. While the delayed re-screening did not ultimately affect the outcome (as the October 2022 re-screening did not return any matches for the reasons described above), the delay reflects a procedural deficiency in DTI's compliance operations that has since been addressed through the remedial measures described in Section V.

Absence of Independent Beneficial Ownership Verification. DTI's compliance procedures at the time of the subject transactions did not include independent verification of counterparty beneficial ownership beyond reliance on (a) self-declarations provided by the counterparty in KYC documentation and (b) automated screening against commercial databases. There was no process for manual cross-referencing of counterparty ownership against intelligence reports, adverse media, or non-public data sources. This gap meant that Kadyrov's concealed beneficial ownership of Caspian Star could not have been detected through DTI's existing compliance framework, absent express identification by OFAC or another sanctions authority.

Indirect discovery Through Audit Process. The Borwick & Thatcher audit flag issued on January 30, 2023 was related to counterparty credit risk, not sanctions compliance. However, the credit risk flag prompted the enhanced compliance review by Mr. Huang that ultimately led to the manual discovery of the Caspian Star/Kadyrov link in June 2023. This indirect discovery pathway highlights the importance of cross-functional information sharing between audit, risk management, and compliance functions.

Concealment by Kadyrov. Caspian Star's corporate records and all widely available commercial databases did not reflect Kadyrov's beneficial ownership at any point prior to the May 2023 OFAC update. Kadyrov exercised control over Caspian Star through nominee shareholders whose identities did not trigger sanctions screening alerts. This deliberate concealment by a designated individual was a material contributing factor to the apparent violations.

V. COMPLIANCE ENHANCEMENTS IMPLEMENTED

During the course of this engagement, DEH and DTI implemented a comprehensive suite of remedial measures designed to address the root causes identified in Section IV and to strengthen the Company's sanctions compliance framework. All of the following measures were described in detail in the VSD filing and supplemental submission to OFAC, and OFAC credited these enhancements as a significant mitigating factor in its resolution of the matter.

1. Screening Technology Upgrade

DTI migrated from HCS ScreenPro Version 4.2.3 to Version 5.0, the latest version of the Harborview Compliance Solutions screening platform. Version 5.0 includes a significantly enhanced beneficial ownership module that incorporates third-party corporate intelligence data feeds from Meridian Corporate intelligence Ltd. ("Meridian"), a London-based corporate intelligence firm, for independent verification of beneficial ownership against all applicable sanctions lists. The upgraded platform also provides real-time alerts when ownership structures of screened entities change, enabling immediate reassessment of counterparty sanctions risk without waiting for scheduled re-screening cycles. The migration to Version 5.0 was completed and became effective on August 1, 2023.

2. Third-Party Manual Review

DTI engaged Omnivael Global Advisors LLC ("Overwatch"), located in Arlington, Virginia, to conduct quarterly manual reviews of all counterparties rated "Elevated Risk" or higher under DTI's counterparty risk classification framework. Overwatch's scope of work includes independent verification of beneficial ownership, adverse media screening, and cross-referencing of counterparty information against non-public intelligence databases maintained by Overwatch and its network of corporate intelligence partners. This engagement provides a critical layer of human review that supplements automated screening, particularly in cases where beneficial ownership is concealed through nominee structures or other obfuscatory mechanisms. The Overwatch engagement became effective on September 15, 2023, and the first quarterly review was completed in the fourth quarter of 2023.

3. Dedicated Sanctions Compliance Officer

DTI hired Kira Petrossian as its dedicated Sanctions Compliance Officer, based in the London office. Ms. Petrossian has extensive experience in sanctions compliance, having previously served in senior compliance roles at two major international commodity trading firms. Ms. Petrossian reports directly to both the DTI Managing Director (Gregor Albrecht) and the DEH Chief Compliance Officer (Derek Huang), ensuring clear and direct lines of accountability and escalation. Ms. Petrossian commenced her role on October 2, 2023.

4. Policy Updates

DTI updated its Global Sanctions Compliance Policy from Version 3.2 to Version 4.0, which became effective on November 1, 2023. The updated policy incorporates the following key enhancements:

(a) Quarterly Re-Screening: The counterparty re-screening interval has been reduced from annual to quarterly, ensuring that all active counterparties are rescreened against updated sanctions lists at least four times per year.

(b) Annual Beneficial Ownership Re-Certification: DTI now requires mandatory re-collection of beneficial ownership declarations from all counterparties at least annually, regardless of whether a change in ownership has been reported by the counterparty. This requirement addresses the risk that counterparties may fail to disclose changes in ownership structure.

(c) Mandatory Escalation Protocol: Any counterparty flagged by auditors, compliance analysts, external advisors, or any other internal or external source for any risk-related reason — including, but not limited to, credit risk, reputational risk, or regulatory risk — must undergo an immediate enhanced sanctions review. This protocol ensures that risk signals from non-sanctions functions are promptly assessed for potential sanctions implications.

(d) Documentation Requirements: All screening results must be documented with date and time stamps and must include the analyst's sign-off, creating a comprehensive audit trail for regulatory examination and internal quality assurance purposes.

(e) Board-Level Reporting: DTI is required to deliver quarterly sanctions compliance reports to the DEH Board of Directors, providing the Board with direct visibility into the Company's sanctions compliance posture and any emerging risks or issues.

5. Training. Mandatory sanctions compliance training was completed for all DTI trading desk personnel, compliance staff, and senior management — a total of fifty-six (56) employees — between August 14 and October 31, 2023. The training program was developed in consultation with Calderwood & Harkness and covered the following topics:

(a) Overview of OFAC sanctions programs, with particular emphasis on the RUSSIA-EO14024 program and the OFAC 50 Percent Rule (i.e., the principle that any entity that is fifty percent or more owned, directly or indirectly, by one or more SDNs is itself treated as blocked, regardless of whether the entity has been expressly listed on the SDN List);

(b) Red flags for sanctions evasion, including the use of nominee shareholders, shell companies, and layered corporate structures;

(c) Beneficial ownership risks in physical commodities trading, including risks specific to trading counterparties organized in free trade zones and jurisdictions with limited beneficial ownership transparency; and

(d) Internal escalation procedures, including the obligation of all employees to report potential sanctions concerns immediately to the Sanctions Compliance Officer or the Chief Compliance Officer.

Annual refresher training has been instituted and will be conducted on a recurring basis each calendar year.

6. Centralized Recordkeeping

DTI initiated the implementation of a centralized compliance recordkeeping system for all counterparty onboarding files, screening results, re-screening logs, escalation records, and training certifications. The system is designed to consolidate compliance documentation that was previously maintained across multiple platforms and filing systems, enabling efficient retrieval and comprehensive audit trail functionality. The target completion date for full implementation was December 31, 2023, and implementation was completed on schedule. All records are to be maintained for a minimum of five (5) years from the date of the last transaction with each counterparty, consistent with OFAC's recordkeeping requirements under 31 C.F.R. § 501.601.

VI. TRANSACTION SUMMARY TABLE

The following table summarizes the five subject transactions between DTI and Caspian Star Commodities DMCC:

All five payments were settled in United States dollars via wire transfer through Ridgeline National Bank, N.A. (Houston, Texas) to DTI's USD-denominated account (Account No. XXXX-XXXX-7831) from Caspian Star's account at Emirates Gulf Commercial Bank, Dubai. In each case, Ridgeline served as the sole U.S. correspondent bank; no intermediary U.S. financial institutions were involved in the processing of any of the five wire transfers.

Five SWIFT MT103 messages (reference numbers RNB20220912-01, RNB20221003-01, RNB20221114-01, RNB20221219-01, and RNB20230123-01) were identified, retrieved, and certified by Ridgeline's compliance department as having been processed through Ridgeline's Houston operations center. Certified copies of all five MT103 messages were produced to OFAC as part of the supplemental submission filed on December 22, 2023.

The routing of all five USD wire transfers through Ridgeline National Bank, N.A., a U.S. financial institution, established the jurisdictional nexus to the United States necessary for OFAC enforcement jurisdiction under 31 C.F.R. Part 594. Specifically, the processing of USD-denominated transactions through a U.S. bank constitutes the involvement of a "United States person" as defined under the applicable sanctions regulations, thereby bringing the transactions within the scope of the prohibitions set forth in Executive Order 14024.

VII. FEES AND COSTS

Calderwood & Harkness LLP's fees and costs for this engagement are summarized below.

Engagement Letter: Executed August 14, 2023.

Fee Structure: Hourly rates as set forth in the engagement letter:

• Partner: $1,250 per hour

• Associate: $725 per hour

• Paraprofessionals: $350 per hour

Original Estimated Budget: $350,000 – $450,000

Summary of Fees and Costs:

Disbursements included OFAC compliance database access fees, PACER and commercial database search fees, travel expenses (including two trips to Houston for client meetings and one trip to Washington, D.C. for consultation with OFAC Enforcement Division counsel), document production and reproduction costs, and related incidental expenses.

Billing Summary:

The sum of prior invoices ($349,943.00) and the final invoice ($50,337.00) equals the total engagement cost ($400,280.00).

All invoices have been submitted. The final invoice, Invoice No. 1016-00007-F, dated February 26, 2024, covers the billing period from January 1, 2024 through February 28, 2024. The total engagement cost of $400,280.00 falls within the original estimated budget range of $350,000 to $450,000.

VIII. RECORD RETENTION

Calderwood & Harkness recommends that the Company retain all documents related to this matter for a minimum of five (5) years from the date of the cautionary letter, i.e., until at least February 21, 2029. This recommendation is consistent with OFAC's recordkeeping requirements under 31 C.F.R. § 501.601, which requires that persons subject to OFAC's jurisdiction maintain full and accurate records of each transaction subject to OFAC regulations for a period of at least five years after the date of such transaction, or for such longer period as may be required by any other applicable law or regulation.

The documents subject to this retention recommendation include, without limitation:

(a) the VSD filing submitted to OFAC on October 6, 2023, and all supporting appendices and exhibits;

(b) all correspondence with OFAC, including the acknowledgment letter dated October 18, 2023, the supplemental information request dated November 29, 2023, and the cautionary letter dated February 21, 2024;

(d) the internal investigation memorandum dated September 18, 2023;

(e) the Compliance Enhancement Memorandum dated September 25, 2023;

(f) all remediation documentation, including records of compliance technology upgrades, policy updates, personnel changes, and training certifications;

(g) all transactional documents relating to the five subject transactions, including invoices, contracts, bills of lading, SWIFT MT103 messages, and banking records;

(h) all KYC documentation for Caspian Star Commodities DMCC;

(i) all sanctions screening records, including screening results, re-screening logs, and analyst notes; and

(j) this closing memorandum.

Calderwood & Harkness LLP will maintain its complete file for this matter (Matter No. 1016-00007) in accordance with the Firm's document retention policy, which requires the retention of closed matter files for a minimum of ten (10) years from the date of matter closure.

IX. CONTINUING OBLIGATIONS

The Company's attention is directed to the following continuing obligations and considerations arising from the resolution of this matter:

OFAC Enforcement Record. The cautionary letter dated February 21, 2024 is part of DEH's OFAC enforcement record. While the cautionary letter does not constitute a finding of violation and carries no monetary penalty, it could be considered as an aggravating factor in any future enforcement action involving DEH or its subsidiaries. Accordingly, maintaining a robust and demonstrably effective sanctions compliance program is of paramount importance.

Ongoing Sanctions Compliance. DTI must continue to comply with all applicable sanctions regulations, including those administered by OFAC (United States), OFSI (United Kingdom), the European Union, and the UAE, as well as any other jurisdictions in which DTI conducts business. This includes ongoing screening of all counterparties against applicable sanctions lists, monitoring for changes in sanctions designations, and prompt assessment of any new designations that may affect existing business relationships.

Maintenance and Improvement of Compliance Enhancements. The compliance enhancements implemented during this engagement — including quarterly re-screening, enhanced beneficial ownership screening using HCS ScreenPro Version 5.0 with Meridian Corporate intelligence data feeds, quarterly third-party manual reviews by Omnivael Global Advisors LLC, the dedicated Sanctions Compliance Officer (Kira Petrossian), the updated Global Sanctions Compliance Policy (Version 4.0), centralized recordkeeping, and annual training — must be maintained and continuously improved. These measures were described to OFAC as part of the VSD and supplemental submission and formed a material basis for the favorable resolution. Any regression or degradation of these measures could undermine the Company's position in any future OFAC interaction.

Future Apparent Violations. Any future apparent violations of sanctions regulations should be reported to legal counsel immediately and assessed for potential voluntary self-disclosure to OFAC. The VSD process confers significant benefits in OFAC's enforcement framework, and early engagement of counsel is critical to preserving those benefits.

Financial Reporting Considerations. From a financial reporting perspective, DEH should consult with Borwick & Thatcher LLP regarding any necessary disclosure in the Company's fiscal year 2023 financial statements. Given that no monetary penalty was imposed and the matter was resolved by cautionary letter, disclosure obligations are expected to be minimal. However, DEH should obtain a formal determination from its auditors on this point to ensure compliance with applicable accounting standards and securities disclosure requirements.

Board Reporting. DEH's Board of Directors should receive quarterly sanctions compliance reports as mandated by the updated DTI Global Sanctions Compliance Policy (Version 4.0). These reports should include, at a minimum, a summary of all screening activities, any potential matches or escalations, the status of the Overwatch quarterly review, training completion rates, and any updates to the sanctions regulatory landscape relevant to the Company's business.

Communication with Sponsor. Helena Reeves, Managing Partner of Grandview Capital Partners LLC, has been notified of the favorable resolution of this matter. Calderwood & Harkness recommends ongoing communication between DEH management and Grandview regarding the Company's sanctions compliance posture, particularly in light of the Company's international trading activities and the evolving global sanctions environment. Grandview, as the majority owner of DEH, has a direct interest in ensuring that the Company's compliance infrastructure is appropriate to the risk profile of its operations.

X. CONFIRMATION OF MATTER CLOSURE

This matter is now closed.

Calderwood & Harkness LLP has completed all work within the scope of its engagement in connection with OFAC Case No. VS-1014-00001 (C&H Matter No. 1016-00007). The VSD has been resolved by OFAC through the issuance of a cautionary letter with no civil monetary penalty. All invoices for professional fees and costs have been submitted, and the final invoice (Invoice No. 1016-00007-F) has been transmitted to DEH.

Calderwood & Harkness LLP stands ready to assist the Company with any future sanctions compliance matters, including ongoing compliance advisory services, counterparty screening review, policy development, training, and representation in connection with any future OFAC or other regulatory inquiries or enforcement proceedings.

For any questions regarding this memorandum or the matters discussed herein, please contact:

Priya Anand Partner Calderwood & Harkness LLP 400 Park Avenue, 28th Floor New York, New York 10022 Telephone: (212) 555-0147

Email: panand@calderwoodharkness.com

This memorandum is a final closing document and supersedes all prior drafts and interim communications related to this matter. It is intended solely for the use of the addressees identified above and should not be distributed further without the prior written consent of Calderwood & Harkness LLP.

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGE — ATTORNEY WORK PRODUCT Calderwood & Harkness LLP	C&H Matter No. 1016-00007	OFAC Case No. VS-1014-00001 © 2024 Calderwood & Harkness LLP. All rights reserved.
Invoice No.	Date	Volume (MT)	Commodity	Delivery Point	Amount (USD)
CS-DTI-0091	September 12, 2022	2,500	LSFO 380 CST	Fujairah, UAE	$1,135,000
CS-DTI-0094	October 3, 2022	2,200	LSFO 380 CST	Fujairah, UAE	$987,500
CS-DTI-0101	November 14, 2022	1,900	LSFO 380 CST	Fujairah, UAE	$842,000
CS-DTI-0108	December 19, 2022	2,300	LSFO 380 CST	Fujairah, UAE	$1,012,000
CS-DTI-0115	January 23, 2023	1,700	LSFO 380 CST	Fujairah, UAE	$750,000
TOTAL	10,600	$4,726,500
Item	Amount
Total professional fees (all invoices)	$387,450.00
Total disbursements (all invoices)	$12,830.00
Total engagement cost	$400,280.00
Description	Amount
Prior invoices billed (August 2023 – December 2023)	$349,943.00
Final invoice (Invoice No. 1016-00007-F, dated February 26, 2024)	$50,337.00
Total	$400,280.00

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 400 Park Avenue, 28th Floor New York, New York 10022
CLOSING MEMORANDUM
TO: Marcus Whitfield, Senior Vice President & General Counsel, Dunmore Energy Holdings Ltd. Derek Huang, Chief Compliance Officer, Dunmore Energy Holdings Ltd.
FROM: Priya Anand, Partner Leila Nazari, Associate
DATE: February 28, 2024
RE: Closing Summary — OFAC Voluntary Self-Disclosure, Case No. VS-1014-00001 C&H Matter No. 1016-00007
This memorandum is protected by the attorney-client privilege and the work product doctrine. It contains confidential legal analysis and advice prepared by Calderwood & Harkness LLP for the exclusive use of Dunmore Energy Holdings Ltd. and its officers, directors, and advisors with a need to know. This memorandum should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP. Inadvertent disclosure does not constitute a waiver of any applicable privilege.
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I. MATTER SUMMARY
Calderwood & Harkness LLP ("Calderwood & Harkness" or the "Firm"), with offices at 400 Park Avenue, 28th Floor, New York, New York 10022, was engaged on August 14, 2023, to represent Dunmore Energy Holdings Ltd. ("DEH" or the "Company"), a Cayman Islands exempted company limited by shares, registered at 4th Floor, Harbour Place, 103 South Church Street, George Town, Grand Cayman KY1-1002, with its principal United States office located at 1200 Travis Street, Suite 3400, Houston, Texas 77002 (EIN 98-1347562), and its wholly owned subsidiary, Dunmore Trading International Ltd. ("DTI"), a private company limited by shares organized under the laws of England and Wales (Companies House No. 12849371), with its registered office at 25 Finsbury Square, London EC2A 1PQ, United Kingdom.
The engagement concerned the preparation, filing, and prosecution of a voluntary self-disclosure ("VSD") to the Office of Foreign Assets Control ("OFAC") of the U.S. Department of the Treasury in connection with apparent violations of U.S. sanctions regulations. The matter was assigned OFAC Case No. VS-1014-00001 and was opened internally at the Firm under Matter No. 1016-00007.
The subject matter of the VSD involved five physical fuel oil sale transactions between DTI and Caspian Star Commodities DMCC ("Caspian Star"), a DMCC Free Zone Company organized in Dubai, United Arab Emirates, with its registered address at Unit 4412, Jumeirah Business Centre 1, Cluster G, Jumeirah Lakes Towers, Dubai, UAE. Caspian Star was owned or controlled by Timur R. Kadyrov (date of birth: September 7, 1971; nationality: Russian Federation), an individual designated by OFAC as a Specially Designated National ("SDN") on March 18, 2022, under SDN Entry ID 47218, pursuant to the sanctions program designated RUSSIA-EO14024. The designation was made under Executive Order 14024 of April 15, 2021, titled "Blocking Property With Respect To Specified Harmful Foreign Activities of the Government of the Russian Federation," on the basis that Kadyrov was determined to be operating or having operated in the technology sector of the Russian Federation economy and to have been involved in sanctions evasion networks.
At the time of the subject transactions, Caspian Star's nominal Managing Director, Farid Mammadov, was listed in all know-your-customer ("KYC") documentation as the sole one hundred percent (100%) owner and managing director of the entity. Kadyrov's beneficial ownership of Caspian Star was not publicly identified by OFAC until the May 12, 2023 SDN List supplemental update, at which time OFAC amended its SDN List annotations to expressly identify Caspian Star Commodities DMCC as an entity owned or controlled by Kadyrov.
The five subject transactions occurred between September 12, 2022 and January 23, 2023, with an aggregate transaction value of $4,726,500. All five transactions involved the sale of Low Sulphur Fuel Oil 380 CST ("LSFO 380 CST") on a free-on-board ("FOB") basis at the port of Fujairah, UAE. All payments for the subject transactions were made in United States dollars via wire transfer processed through Ridgeline National Bank, N.A. ("Ridgeline"), located at 700 Louisiana Street, Suite 4800, Houston, Texas 77002, from Caspian Star's account at Emirates Gulf Commercial Bank in Dubai. The routing of these payments through Ridgeline, a U.S. financial institution, established U.S.-person jurisdiction under 31 C.F.R. Part 594, which implements Executive Order 14024.
DEH is majority-owned, with a sixty-eight point four percent (68.4%) equity interest held by Grandview Capital Partners LLC ("Grandview"), a Delaware limited liability company with offices at 600 Lexington Avenue, Suite 2200, New York, New York 10022, through Grandview Energy Fund IV, LP, a Delaware limited partnership. DEH reported fiscal year 2022 revenue of approximately $2.14 billion and employs approximately 3,800 individuals worldwide. The Company's operations include upstream and midstream oil and gas assets across the Gulf of Mexico, West Africa, and Southeast Asia, as well as a growing portfolio of solar and wind energy projects in the U.S. Southwest.
DTI's principal activity is the physical trading of crude oil and refined petroleum products. DTI's Managing Director during the period in question was, and remains, Gregor Albrecht.
The scope of Calderwood & Harkness's engagement encompassed the following:
(a) conducting a comprehensive internal investigation into the circumstances surrounding the five subject transactions;
(b) preparation and filing of the VSD with OFAC pursuant to 31 C.F.R. § 501.806;
(c) response to OFAC's supplemental information request dated November 29, 2023;
(d) advisory services related to compliance remediation, including development and implementation of enhanced sanctions compliance measures; and
(e) representation of DEH and DTI in all enforcement proceedings before OFAC arising from the VSD.
The Calderwood & Harkness engagement team consisted of the following professionals:
• Oliver Mackenzie, Responsible Partner, Mergers & Acquisitions Practice;
• Priya Anand, Billing Partner, Litigation — General; lead counsel for sanctions and enforcement matters;
• Leila Nazari, Lead Associate, Tax Practice; responsible for cross-border transaction analysis; and
• Robert Jansen, Working Associate, Tax Practice; responsible for financial flow analysis and wire transfer documentation.
The Firm was retained on the recommendation of Grandview Capital Partners LLC; the initial referral was made by Helena Reeves, Managing Partner of Grandview.
II. CHRONOLOGY OF KEY EVENTS
The following chronology sets forth the material events relevant to this matter, from the initial onboarding of Caspian Star as a DTI counterparty through the final resolution by OFAC and closure of the matter.
A. Counterparty Onboarding and Initial Screening (July 2021)
July 8, 2021: Caspian Star Commodities DMCC was onboarded as a counterparty of DTI. KYC documentation was collected by DTI's compliance team in accordance with DTI's then-applicable Global Sanctions Compliance Policy (Version 3.1). The KYC documentation included a trade license issued by the Dubai Multi Commodities Centre ("DMCC") Authority, a certificate of formation, a passport copy and Emirate ID for Farid Mammadov (identified as the sole shareholder and managing director), and a bank reference letter from Emirates Gulf Commercial Bank. Mammadov was listed as the one hundred percent (100%) owner of Caspian Star in all documentation provided.
July 8–12, 2021: Initial sanctions screening was performed by Ashworth & Kline LLP ("Ashworth & Kline"), located at 10 Aldermanbury, London EC2V 7HR, United Kingdom, DTI's then-outside trade compliance counsel. The lead partner for the engagement at Ashworth & Kline was Nigel Ashworth. Screening was conducted using the HCS ScreenPro platform (Version 4.2.3), a sanctions screening tool provided by Harborview Compliance Solutions Inc. ("Harborview"), located at 2300 Clarendon Boulevard, Suite 700, Arlington, Virginia 22201. The screening covered the OFAC SDN List, the European Union Consolidated Sanctions List, and the United Kingdom Office of Financial Sanctions Implementation ("OFSI") Consolidated List of Financial Sanctions Targets. No matches or potential matches were returned for Caspian Star, Farid Mammadov, or any related parties. Caspian Star was assigned a "Standard Risk" rating under DTI's counterparty risk classification framework. It is critical to note that, at the time of onboarding, Timur R. Kadyrov had not yet been designated by OFAC or any other sanctions authority. His designation did not occur until approximately eight months later, on March 18, 2022.
B. OFAC Designation of Kadyrov (March 2022)
March 18, 2022: OFAC designated Timur R. Kadyrov as a Specially Designated National under SDN Entry ID 47218, program RUSSIA-EO14024, pursuant to Executive Order 14024. The SDN entry for Kadyrov included his name, date of birth, nationality, and passport information. However, the SDN entry did not at that time expressly identify Caspian Star Commodities DMCC as an entity owned or controlled by Kadyrov. Kadyrov's control over Caspian Star was exercised through a network of nominee shareholders that obscured his beneficial ownership interest from publicly available corporate registry data and commercial databases.
C. Subject Transactions (September 2022 – January 2023)
September 12, 2022: The first subject transaction was executed. DTI sold LSFO 380 CST to Caspian Star under Invoice No. CS-DTI-0091, for a volume of 2,500 metric tons, delivered FOB Fujairah, UAE, at a total invoice amount of $1,135,000. Payment was received via USD wire transfer through Ridgeline National Bank, N.A.
October 3, 2022: The second subject transaction was executed. DTI sold LSFO 380 CST to Caspian Star under Invoice No. CS-DTI-0094, for a volume of 2,200 metric tons, delivered FOB Fujairah, UAE, at a total invoice amount of $987,500. Payment was received via USD wire transfer through Ridgeline National Bank, N.A.
October 2022 (precise date unavailable): A delayed annual re-screening of Caspian Star was performed using the HCS ScreenPro platform. The re-screening had originally been scheduled for July 2022, in accordance with the annual re-screening interval mandated by DTI's Global Sanctions Compliance Policy (Version 3.2, effective January 1, 2022). However, the screening was delayed by approximately three months due to a staffing vacancy within DTI's compliance department in London. The re-screening did not return any matches or potential matches. The OFAC SDN List at that time did not reference Caspian Star in connection with Kadyrov's designation. Moreover, the HCS ScreenPro platform's beneficial ownership module relied on corporate registry data — specifically, data sourced from the DMCC commercial registry and other commercially available corporate intelligence databases — which continued to reflect Mammadov as the sole one hundred percent (100%) owner of Caspian Star. Beneficial ownership data linking Caspian Star to Kadyrov had not been incorporated into HCS ScreenPro's data feed at that time.
November 14, 2022: The third subject transaction was executed. DTI sold LSFO 380 CST to Caspian Star under Invoice No. CS-DTI-0101, for a volume of 1,900 metric tons, delivered FOB Fujairah, UAE, at a total invoice amount of $842,000. Payment was received via USD wire transfer through Ridgeline National Bank, N.A.
December 19, 2022: The fourth subject transaction was executed. DTI sold LSFO 380 CST to Caspian Star under Invoice No. CS-DTI-0108, for a volume of 2,300 metric tons, delivered FOB Fujairah, UAE, at a total invoice amount of $1,012,000. Payment was received via USD wire transfer through Ridgeline National Bank, N.A.
January 23, 2023: The fifth and final subject transaction was executed. DTI sold LSFO 380 CST to Caspian Star under Invoice No. CS-DTI-0115, for a volume of 1,700 metric tons, delivered FOB Fujairah, UAE, at a total invoice amount of $750,000. Payment was received via USD wire transfer through Ridgeline National Bank, N.A. No further transactions between DTI and Caspian Star were executed after this date.
D. External Audit Flag and Enhanced Review (January – June 2023)
January 30, 2023: Borwick & Thatcher LLP ("Borwick & Thatcher"), located at 1 More London Place, London SE1 2AF, United Kingdom, DEH's external auditors, issued a management letter to the DEH Board of Directors in connection with the fiscal year 2022 audit. The management letter included Caspian Star in a list of "high-risk counterparties." The flag was raised in connection with counterparty credit risk, specifically the absence of audited financial statements for Caspian Star. The flag was not related to sanctions compliance, and the management letter did not suggest or identify any sanctions-related concerns.
March 6, 2023: Derek Huang, Chief Compliance Officer of DEH, initiated an enhanced compliance review of Caspian Star. The review was prompted by the Borwick & Thatcher counterparty risk flag. Mr. Huang directed the DTI compliance team to conduct an updated review of Caspian Star's KYC documentation, corporate structure, and beneficial ownership, as well as refreshed sanctions screening.
May 12, 2023: OFAC updated the SDN List supplemental information to expressly identify Caspian Star Commodities DMCC as an entity owned or controlled by Timur R. Kadyrov. This was the first time OFAC publicly linked Caspian Star to Kadyrov's SDN designation.
E. Discovery, blocking, and Engagement of Counsel (June – August 2023)
June 2, 2023: Derek Huang, in the course of the enhanced compliance review initiated in March 2023, conducted a manual review of OFAC's updated SDN annotations and discovered the link between Caspian Star and Kadyrov. Mr. Huang immediately reported the discovery to Marcus Whitfield, Senior Vice President and General Counsel of DEH. The discovery was made through Mr. Huang's direct review of OFAC's publicly available SDN List data, rather than through an automated screening alert.
June 5, 2023: DTI blocked all dealings with Caspian Star and froze all pending transactions. As of this date, there were no pending transactions between DTI and Caspian Star; the last transaction had been completed on January 23, 2023, approximately four and a half months prior. The blocking action was taken within three (3) business days of Mr. Huang's discovery. DTI issued internal instructions prohibiting any new transactions, communications, or financial dealings with Caspian Star pending further review and legal guidance.
August 14, 2023: Calderwood & Harkness LLP was formally engaged by DEH to represent the Company and DTI in connection with the potential OFAC sanctions violations. The engagement letter was executed on this date, and the matter was opened under Matter No. 1016-00007.
F. Investigation, VSD Filing, and OFAC Proceedings (September 2023 – February 2024)
September 18, 2023: Calderwood & Harkness completed its internal investigation memorandum, which documented the findings of a comprehensive review of the five subject transactions, DTI's counterparty onboarding and screening procedures, the chronology of relevant sanctions designations, and the circumstances surrounding the delayed re-screening and ultimate discovery of the Caspian Star/Kadyrov link. The investigation included interviews of key personnel, review of transactional documents, analysis of wire transfer records, and evaluation of DTI's compliance framework.
September 25, 2023: Calderwood & Harkness delivered a Compliance Enhancement Memorandum to DEH, setting forth detailed recommendations for remedial measures designed to address the compliance deficiencies identified during the internal investigation. The recommendations formed the basis for the compliance enhancements described in Section V of this memorandum.
October 6, 2023: The VSD was filed with OFAC pursuant to 31 C.F.R. § 501.806. The filing included a detailed narrative of the apparent violations, a description of the five subject transactions, copies of relevant transactional documents, a summary of the internal investigation findings, a description of the root causes of the apparent violations, and a detailed account of the remedial measures implemented and planned by DEH and DTI.
October 18, 2023: OFAC issued an acknowledgment of receipt of the VSD and assigned Case No. VS-1014-00001. The acknowledgment was issued by the OFAC Enforcement Division.
November 29, 2023: OFAC issued a supplemental information request, communicated by Thomas W. Harrington, Assistant Director, Enforcement Division, OFAC. The request sought production and/or information in five categories:
(i) complete wire transfer details, including SWIFT MT103 messages for all five subject transactions;
(ii) a description of DTI's beneficial ownership due diligence procedures as applied to Caspian Star and similar counterparties;
(iii) confirmation of whether any prior or subsequent transactions with Caspian Star (beyond the five reported) existed;
(iv) an update on the status of compliance remediation measures; and
(v) a corporate structure chart for DEH, including all material subsidiaries and the Grandview Capital Partners ownership structure.
December 22, 2023: Calderwood & Harkness filed the supplemental submission with OFAC on behalf of DEH and DTI. The submission was filed within twenty-three (23) days of OFAC's request, seven (7) days in advance of the thirty (30) day response deadline. The supplemental submission included certified copies of the five SWIFT MT103 messages, a detailed memorandum describing DTI's beneficial ownership diligence procedures (both as they existed at the time of the subject transactions and as enhanced pursuant to the compliance remediation program), confirmation that no prior or subsequent transactions with Caspian Star were identified, a comprehensive remediation status report, and a corporate structure chart for DEH and its subsidiaries.
February 21, 2024: OFAC issued a cautionary letter resolving Case No. VS-1014-00001. The terms and implications of the cautionary letter are discussed in detail in Section III below.
February 28, 2024: Calderwood & Harkness closed the matter.
III. RESOLUTION
A. OFAC Determination
OFAC resolved Case No. VS-1014-00001 by issuing a cautionary letter dated February 21, 2024, addressed to DEH. No civil monetary penalty was imposed. The actual penalty amount is $0.
OFAC determined that the apparent violations were non-egregious, meaning that OFAC concluded that the conduct at issue did not constitute a flagrant, willful, or reckless violation of U.S. sanctions law and that the case did not present the type of egregious circumstances that would warrant the imposition of a civil monetary penalty.
B. Theoretical Penalty Analysis
Under OFAC's Economic Sanctions Enforcement Guidelines (31 C.F.R. Part 501, Appendix A), the theoretical base penalty amount for a non-egregious case that is voluntarily self-disclosed is calculated as one-half of the transaction value, capped at the applicable statutory maximum. For the five subject transactions, with an aggregate transaction value of $4,726,500, the base penalty calculation is as follows:
Base Penalty Amount = $4,726,500 × 0.25 = $1,181,625
This amount represents the statutory maximum settlement amount for non-egregious, voluntarily disclosed cases under OFAC's guidelines (one-half of the transaction value, with additional adjustments).
Under the International Emergency Economic Powers Act ("IEEPA"), 50 U.S.C. § 1705, the statutory maximum civil penalty for each violation is the greater of $356,579 (as adjusted for inflation) or twice the amount of the underlying transaction. For the aggregate transactions at issue, the statutory maximum civil penalty would have been:
Statutory Maximum = 2 × $4,726,500 = $9,453,000
The favorable resolution — a cautionary letter with no monetary penalty — thus represents a savings of $1,181,625 relative to the theoretical base penalty, and $9,453,000 relative to the statutory maximum.
C. Mitigating Factors Credited by OFAC
OFAC credited the following mitigating factors in its determination to issue a cautionary letter without the imposition of a civil monetary penalty:
1. Voluntary Self-Disclosure. Dunmore self-reported the apparent violations to OFAC promptly after discovery and engagement of outside counsel, prior to any indication that OFAC had independently identified the subject transactions. OFAC's Enforcement Guidelines afford significant weight to the fact that a party voluntarily comes forward, as self-disclosure is a critical component of OFAC's enforcement framework and promotes transparency and cooperation.
2. No Actual Knowledge. Neither DEH nor DTI had actual knowledge of Kadyrov's beneficial ownership of Caspian Star at the time the subject transactions were executed. Kadyrov's ownership was concealed through a network of nominee shareholders, and the publicly available information — including DMCC corporate registry data and KYC documentation provided by Caspian Star — consistently identified Mammadov as the sole owner.
3. Inadvertent Conduct. The subject transactions were routine physical commodity trades executed in the ordinary course of DTI's business. There was no evidence that any DEH or DTI personnel intended to evade U.S. sanctions, and the transactions were conducted openly and documented in the normal course of DTI's trading operations.
4. Prompt Remedial Action. DTI blocked all dealings with Caspian Star within three (3) business days of Mr. Huang's discovery of the SDN link on June 2, 2023. The Company took immediate and decisive action to prevent any further transactions or financial dealings with the designated entity.
5. No Direct Benefit to SDN. All payments for the subject transactions were made to Caspian Star's corporate account at Emirates Gulf Commercial Bank in Dubai. OFAC's investigation did not reveal evidence that Kadyrov personally received any of the funds associated with the subject transactions, although OFAC did not make a definitive determination on this point.
6. Comprehensive Compliance Enhancements. Dunmore implemented a comprehensive suite of remedial measures prior to and during the pendency of the OFAC proceedings, including technology upgrades, the hiring of a dedicated Sanctions Compliance Officer, policy updates, enhanced screening protocols, third-party review engagements, and mandatory training. These measures are described in detail in Section V of this memorandum.
7. Full Cooperation. Dunmore provided extensive documentation throughout the OFAC proceedings and responded to OFAC's supplemental information request within twenty-three (23) days — seven days before the thirty-day deadline — demonstrating a commitment to full transparency and cooperation with the enforcement process.
D. Significance of Timing Gap
The cautionary letter also noted, as relevant context, the timing gap between Kadyrov's initial designation as an SDN on March 18, 2022, and OFAC's public identification of Caspian Star as a Kadyrov-owned entity on May 12, 2023 — a period of approximately fourteen months. During that entire period, which encompassed all five subject transactions, OFAC's own publicly available sanctions data did not expressly link Caspian Star to Kadyrov. This timing gap was recognized as a significant factor in OFAC's assessment of the non-egregious nature of the apparent violations.
E. Legal Effect of the Cautionary Letter
A cautionary letter is not a "finding of violation" under OFAC's Enforcement Guidelines and carries no monetary penalty or formal sanction. It is an administrative communication from OFAC that puts the recipient on notice that its conduct has come to OFAC's attention and that similar conduct in the future could result in enforcement action. However, it is important to note that the cautionary letter is part of DEH's OFAC enforcement record and could be considered as an aggravating factor in any future enforcement action involving DEH or its subsidiaries.
F. Assessment of Outcome
This outcome — a cautionary letter with $0 penalty — represents the best possible outcome short of a no-action letter, which OFAC reserves for cases where no apparent violation is found. Given that five transactions totaling $4,726,500 were executed with an entity owned or controlled by an SDN, and that those transactions involved USD wire transfers routed through a U.S. financial institution, the issuance of a cautionary letter without any monetary penalty is an exceptionally favorable result. It reflects OFAC's recognition of Dunmore's good faith, cooperation, and commitment to compliance.
IV. ROOT CAUSE ANALYSIS
Calderwood & Harkness's internal investigation identified the following root causes for the apparent violations:
Timing of Onboarding Relative to Designation. DTI's onboarding screening of Caspian Star was conducted in July 2021, approximately eight months before OFAC's March 18, 2022 designation of Kadyrov as an SDN. At the time of onboarding, Kadyrov was not designated by OFAC, the European Union, the United Kingdom, or any other sanctions authority. There was, accordingly, no sanctions-related basis to decline the onboarding of Caspian Star at that time.
Limitations of Automated Screening Technology. The HCS ScreenPro platform (Version 4.2.3) did not generate an alert for Caspian Star during the October 2022 re-screening for two independent but reinforcing reasons:
(i) The OFAC SDN List entry for Kadyrov did not at that time reference Caspian Star or identify it as a Kadyrov-owned or Kadyrov-controlled entity. The SDN List is a primary data source for all sanctions screening platforms, and the absence of an express link between Kadyrov and Caspian Star in the SDN List meant that the platform had no basis to flag the counterparty.
(ii) HCS ScreenPro's beneficial ownership module relied on corporate registry data — principally, data sourced from the DMCC commercial registry and commercially available corporate intelligence databases — which continued to reflect Mammadov as the sole one hundred percent (100%) owner of Caspian Star. Kadyrov's beneficial ownership was exercised through a network of nominee shareholders that did not appear in publicly available corporate filings. Beneficial ownership data linking Caspian Star to Kadyrov was not incorporated into HCS ScreenPro's data feed until after OFAC's May 12, 2023 SDN supplemental update.
Delayed Re-Screening. DTI's Global Sanctions Compliance Policy (Version 3.2, effective January 1, 2022) required annual counterparty re-screening. The re-screening of Caspian Star was scheduled for July 2022 — the anniversary of Caspian Star's onboarding — but was delayed until October 2022 due to a staffing vacancy in DTI's compliance department in London. While the delayed re-screening did not ultimately affect the outcome (as the October 2022 re-screening did not return any matches for the reasons described above), the delay reflects a procedural deficiency in DTI's compliance operations that has since been addressed through the remedial measures described in Section V.
Absence of Independent Beneficial Ownership Verification. DTI's compliance procedures at the time of the subject transactions did not include independent verification of counterparty beneficial ownership beyond reliance on (a) self-declarations provided by the counterparty in KYC documentation and (b) automated screening against commercial databases. There was no process for manual cross-referencing of counterparty ownership against intelligence reports, adverse media, or non-public data sources. This gap meant that Kadyrov's concealed beneficial ownership of Caspian Star could not have been detected through DTI's existing compliance framework, absent express identification by OFAC or another sanctions authority.
Indirect discovery Through Audit Process. The Borwick & Thatcher audit flag issued on January 30, 2023 was related to counterparty credit risk, not sanctions compliance. However, the credit risk flag prompted the enhanced compliance review by Mr. Huang that ultimately led to the manual discovery of the Caspian Star/Kadyrov link in June 2023. This indirect discovery pathway highlights the importance of cross-functional information sharing between audit, risk management, and compliance functions.
Concealment by Kadyrov. Caspian Star's corporate records and all widely available commercial databases did not reflect Kadyrov's beneficial ownership at any point prior to the May 2023 OFAC update. Kadyrov exercised control over Caspian Star through nominee shareholders whose identities did not trigger sanctions screening alerts. This deliberate concealment by a designated individual was a material contributing factor to the apparent violations.
V. COMPLIANCE ENHANCEMENTS IMPLEMENTED
During the course of this engagement, DEH and DTI implemented a comprehensive suite of remedial measures designed to address the root causes identified in Section IV and to strengthen the Company's sanctions compliance framework. All of the following measures were described in detail in the VSD filing and supplemental submission to OFAC, and OFAC credited these enhancements as a significant mitigating factor in its resolution of the matter.
1. Screening Technology Upgrade
DTI migrated from HCS ScreenPro Version 4.2.3 to Version 5.0, the latest version of the Harborview Compliance Solutions screening platform. Version 5.0 includes a significantly enhanced beneficial ownership module that incorporates third-party corporate intelligence data feeds from Meridian Corporate intelligence Ltd. ("Meridian"), a London-based corporate intelligence firm, for independent verification of beneficial ownership against all applicable sanctions lists. The upgraded platform also provides real-time alerts when ownership structures of screened entities change, enabling immediate reassessment of counterparty sanctions risk without waiting for scheduled re-screening cycles. The migration to Version 5.0 was completed and became effective on August 1, 2023.
2. Third-Party Manual Review
DTI engaged Omnivael Global Advisors LLC ("Overwatch"), located in Arlington, Virginia, to conduct quarterly manual reviews of all counterparties rated "Elevated Risk" or higher under DTI's counterparty risk classification framework. Overwatch's scope of work includes independent verification of beneficial ownership, adverse media screening, and cross-referencing of counterparty information against non-public intelligence databases maintained by Overwatch and its network of corporate intelligence partners. This engagement provides a critical layer of human review that supplements automated screening, particularly in cases where beneficial ownership is concealed through nominee structures or other obfuscatory mechanisms. The Overwatch engagement became effective on September 15, 2023, and the first quarterly review was completed in the fourth quarter of 2023.
3. Dedicated Sanctions Compliance Officer
DTI hired Kira Petrossian as its dedicated Sanctions Compliance Officer, based in the London office. Ms. Petrossian has extensive experience in sanctions compliance, having previously served in senior compliance roles at two major international commodity trading firms. Ms. Petrossian reports directly to both the DTI Managing Director (Gregor Albrecht) and the DEH Chief Compliance Officer (Derek Huang), ensuring clear and direct lines of accountability and escalation. Ms. Petrossian commenced her role on October 2, 2023.
4. Policy Updates
DTI updated its Global Sanctions Compliance Policy from Version 3.2 to Version 4.0, which became effective on November 1, 2023. The updated policy incorporates the following key enhancements:
(a) Quarterly Re-Screening: The counterparty re-screening interval has been reduced from annual to quarterly, ensuring that all active counterparties are rescreened against updated sanctions lists at least four times per year.
(b) Annual Beneficial Ownership Re-Certification: DTI now requires mandatory re-collection of beneficial ownership declarations from all counterparties at least annually, regardless of whether a change in ownership has been reported by the counterparty. This requirement addresses the risk that counterparties may fail to disclose changes in ownership structure.
(c) Mandatory Escalation Protocol: Any counterparty flagged by auditors, compliance analysts, external advisors, or any other internal or external source for any risk-related reason — including, but not limited to, credit risk, reputational risk, or regulatory risk — must undergo an immediate enhanced sanctions review. This protocol ensures that risk signals from non-sanctions functions are promptly assessed for potential sanctions implications.
(d) Documentation Requirements: All screening results must be documented with date and time stamps and must include the analyst's sign-off, creating a comprehensive audit trail for regulatory examination and internal quality assurance purposes.
(e) Board-Level Reporting: DTI is required to deliver quarterly sanctions compliance reports to the DEH Board of Directors, providing the Board with direct visibility into the Company's sanctions compliance posture and any emerging risks or issues.
5. Training. Mandatory sanctions compliance training was completed for all DTI trading desk personnel, compliance staff, and senior management — a total of fifty-six (56) employees — between August 14 and October 31, 2023. The training program was developed in consultation with Calderwood & Harkness and covered the following topics:
(a) Overview of OFAC sanctions programs, with particular emphasis on the RUSSIA-EO14024 program and the OFAC 50 Percent Rule (i.e., the principle that any entity that is fifty percent or more owned, directly or indirectly, by one or more SDNs is itself treated as blocked, regardless of whether the entity has been expressly listed on the SDN List);
(b) Red flags for sanctions evasion, including the use of nominee shareholders, shell companies, and layered corporate structures;
(c) Beneficial ownership risks in physical commodities trading, including risks specific to trading counterparties organized in free trade zones and jurisdictions with limited beneficial ownership transparency; and
(d) Internal escalation procedures, including the obligation of all employees to report potential sanctions concerns immediately to the Sanctions Compliance Officer or the Chief Compliance Officer.
Annual refresher training has been instituted and will be conducted on a recurring basis each calendar year.
6. Centralized Recordkeeping
DTI initiated the implementation of a centralized compliance recordkeeping system for all counterparty onboarding files, screening results, re-screening logs, escalation records, and training certifications. The system is designed to consolidate compliance documentation that was previously maintained across multiple platforms and filing systems, enabling efficient retrieval and comprehensive audit trail functionality. The target completion date for full implementation was December 31, 2023, and implementation was completed on schedule. All records are to be maintained for a minimum of five (5) years from the date of the last transaction with each counterparty, consistent with OFAC's recordkeeping requirements under 31 C.F.R. § 501.601.
VI. TRANSACTION SUMMARY TABLE
The following table summarizes the five subject transactions between DTI and Caspian Star Commodities DMCC:
All five payments were settled in United States dollars via wire transfer through Ridgeline National Bank, N.A. (Houston, Texas) to DTI's USD-denominated account (Account No. XXXX-XXXX-7831) from Caspian Star's account at Emirates Gulf Commercial Bank, Dubai. In each case, Ridgeline served as the sole U.S. correspondent bank; no intermediary U.S. financial institutions were involved in the processing of any of the five wire transfers.
Five SWIFT MT103 messages (reference numbers RNB20220912-01, RNB20221003-01, RNB20221114-01, RNB20221219-01, and RNB20230123-01) were identified, retrieved, and certified by Ridgeline's compliance department as having been processed through Ridgeline's Houston operations center. Certified copies of all five MT103 messages were produced to OFAC as part of the supplemental submission filed on December 22, 2023.
The routing of all five USD wire transfers through Ridgeline National Bank, N.A., a U.S. financial institution, established the jurisdictional nexus to the United States necessary for OFAC enforcement jurisdiction under 31 C.F.R. Part 594. Specifically, the processing of USD-denominated transactions through a U.S. bank constitutes the involvement of a "United States person" as defined under the applicable sanctions regulations, thereby bringing the transactions within the scope of the prohibitions set forth in Executive Order 14024.
VII. FEES AND COSTS
Calderwood & Harkness LLP's fees and costs for this engagement are summarized below.
Engagement Letter: Executed August 14, 2023.
Fee Structure: Hourly rates as set forth in the engagement letter:
• Partner: $1,250 per hour
• Associate: $725 per hour
• Paraprofessionals: $350 per hour
Original Estimated Budget: $350,000 – $450,000
Summary of Fees and Costs:
Disbursements included OFAC compliance database access fees, PACER and commercial database search fees, travel expenses (including two trips to Houston for client meetings and one trip to Washington, D.C. for consultation with OFAC Enforcement Division counsel), document production and reproduction costs, and related incidental expenses.
Billing Summary:
The sum of prior invoices ($349,943.00) and the final invoice ($50,337.00) equals the total engagement cost ($400,280.00).
All invoices have been submitted. The final invoice, Invoice No. 1016-00007-F, dated February 26, 2024, covers the billing period from January 1, 2024 through February 28, 2024. The total engagement cost of $400,280.00 falls within the original estimated budget range of $350,000 to $450,000.
VIII. RECORD RETENTION
Calderwood & Harkness recommends that the Company retain all documents related to this matter for a minimum of five (5) years from the date of the cautionary letter, i.e., until at least February 21, 2029. This recommendation is consistent with OFAC's recordkeeping requirements under 31 C.F.R. § 501.601, which requires that persons subject to OFAC's jurisdiction maintain full and accurate records of each transaction subject to OFAC regulations for a period of at least five years after the date of such transaction, or for such longer period as may be required by any other applicable law or regulation.
The documents subject to this retention recommendation include, without limitation:
(a) the VSD filing submitted to OFAC on October 6, 2023, and all supporting appendices and exhibits;
(b) all correspondence with OFAC, including the acknowledgment letter dated October 18, 2023, the supplemental information request dated November 29, 2023, and the cautionary letter dated February 21, 2024;
(c) the supplemental submission filed with OFAC on December 22, 2023, and all supporting documentation;
(d) the internal investigation memorandum dated September 18, 2023;
(e) the Compliance Enhancement Memorandum dated September 25, 2023;
(f) all remediation documentation, including records of compliance technology upgrades, policy updates, personnel changes, and training certifications;
(g) all transactional documents relating to the five subject transactions, including invoices, contracts, bills of lading, SWIFT MT103 messages, and banking records;
(h) all KYC documentation for Caspian Star Commodities DMCC;
(i) all sanctions screening records, including screening results, re-screening logs, and analyst notes; and
(j) this closing memorandum.
Calderwood & Harkness LLP will maintain its complete file for this matter (Matter No. 1016-00007) in accordance with the Firm's document retention policy, which requires the retention of closed matter files for a minimum of ten (10) years from the date of matter closure.
IX. CONTINUING OBLIGATIONS
The Company's attention is directed to the following continuing obligations and considerations arising from the resolution of this matter:
OFAC Enforcement Record. The cautionary letter dated February 21, 2024 is part of DEH's OFAC enforcement record. While the cautionary letter does not constitute a finding of violation and carries no monetary penalty, it could be considered as an aggravating factor in any future enforcement action involving DEH or its subsidiaries. Accordingly, maintaining a robust and demonstrably effective sanctions compliance program is of paramount importance.
Ongoing Sanctions Compliance. DTI must continue to comply with all applicable sanctions regulations, including those administered by OFAC (United States), OFSI (United Kingdom), the European Union, and the UAE, as well as any other jurisdictions in which DTI conducts business. This includes ongoing screening of all counterparties against applicable sanctions lists, monitoring for changes in sanctions designations, and prompt assessment of any new designations that may affect existing business relationships.
Maintenance and Improvement of Compliance Enhancements. The compliance enhancements implemented during this engagement — including quarterly re-screening, enhanced beneficial ownership screening using HCS ScreenPro Version 5.0 with Meridian Corporate intelligence data feeds, quarterly third-party manual reviews by Omnivael Global Advisors LLC, the dedicated Sanctions Compliance Officer (Kira Petrossian), the updated Global Sanctions Compliance Policy (Version 4.0), centralized recordkeeping, and annual training — must be maintained and continuously improved. These measures were described to OFAC as part of the VSD and supplemental submission and formed a material basis for the favorable resolution. Any regression or degradation of these measures could undermine the Company's position in any future OFAC interaction.
Future Apparent Violations. Any future apparent violations of sanctions regulations should be reported to legal counsel immediately and assessed for potential voluntary self-disclosure to OFAC. The VSD process confers significant benefits in OFAC's enforcement framework, and early engagement of counsel is critical to preserving those benefits.
Financial Reporting Considerations. From a financial reporting perspective, DEH should consult with Borwick & Thatcher LLP regarding any necessary disclosure in the Company's fiscal year 2023 financial statements. Given that no monetary penalty was imposed and the matter was resolved by cautionary letter, disclosure obligations are expected to be minimal. However, DEH should obtain a formal determination from its auditors on this point to ensure compliance with applicable accounting standards and securities disclosure requirements.
Board Reporting. DEH's Board of Directors should receive quarterly sanctions compliance reports as mandated by the updated DTI Global Sanctions Compliance Policy (Version 4.0). These reports should include, at a minimum, a summary of all screening activities, any potential matches or escalations, the status of the Overwatch quarterly review, training completion rates, and any updates to the sanctions regulatory landscape relevant to the Company's business.
Communication with Sponsor. Helena Reeves, Managing Partner of Grandview Capital Partners LLC, has been notified of the favorable resolution of this matter. Calderwood & Harkness recommends ongoing communication between DEH management and Grandview regarding the Company's sanctions compliance posture, particularly in light of the Company's international trading activities and the evolving global sanctions environment. Grandview, as the majority owner of DEH, has a direct interest in ensuring that the Company's compliance infrastructure is appropriate to the risk profile of its operations.
X. CONFIRMATION OF MATTER CLOSURE
This matter is now closed.
Calderwood & Harkness LLP has completed all work within the scope of its engagement in connection with OFAC Case No. VS-1014-00001 (C&H Matter No. 1016-00007). The VSD has been resolved by OFAC through the issuance of a cautionary letter with no civil monetary penalty. All invoices for professional fees and costs have been submitted, and the final invoice (Invoice No. 1016-00007-F) has been transmitted to DEH.
Calderwood & Harkness LLP stands ready to assist the Company with any future sanctions compliance matters, including ongoing compliance advisory services, counterparty screening review, policy development, training, and representation in connection with any future OFAC or other regulatory inquiries or enforcement proceedings.
For any questions regarding this memorandum or the matters discussed herein, please contact:
Priya Anand Partner Calderwood & Harkness LLP 400 Park Avenue, 28th Floor New York, New York 10022 Telephone: (212) 555-0147
Email: panand@calderwoodharkness.com
This memorandum is a final closing document and supersedes all prior drafts and interim communications related to this matter. It is intended solely for the use of the addressees identified above and should not be distributed further without the prior written consent of Calderwood & Harkness LLP.
PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGE — ATTORNEY WORK PRODUCT Calderwood & Harkness LLP | C&H Matter No. 1016-00007 | OFAC Case No. VS-1014-00001 © 2024 Calderwood & Harkness LLP. All rights reserved.
Invoice No. | Date | Volume (MT) | Commodity | Delivery Point | Amount (USD)
CS-DTI-0091 | September 12, 2022 | 2,500 | LSFO 380 CST | Fujairah, UAE | $1,135,000
CS-DTI-0094 | October 3, 2022 | 2,200 | LSFO 380 CST | Fujairah, UAE | $987,500
CS-DTI-0101 | November 14, 2022 | 1,900 | LSFO 380 CST | Fujairah, UAE | $842,000
CS-DTI-0108 | December 19, 2022 | 2,300 | LSFO 380 CST | Fujairah, UAE | $1,012,000
CS-DTI-0115 | January 23, 2023 | 1,700 | LSFO 380 CST | Fujairah, UAE | $750,000
TOTAL | 10,600 | $4,726,500
Item | Amount
Total professional fees (all invoices) | $387,450.00
Total disbursements (all invoices) | $12,830.00
Total engagement cost | $400,280.00
Description | Amount
Prior invoices billed (August 2023 – December 2023) | $349,943.00
Final invoice (Invoice No. 1016-00007-F, dated February 26, 2024) | $50,337.00
Total | $400,280.00