Marcus,
I am very pleased to report that we received OFAC's determination letter yesterday, dated February 21, 2024. OFAC has resolved Case No. VS-2023-04871 by issuing a **cautionary letter** to Dunmore Energy Holdings Ltd. and Dunmore Trading International Ltd. **No civil monetary penalty has been imposed.**
This is the best possible outcome short of a no-action letter, and it reflects the strength of the mitigating factors we presented throughout this process — namely, the Company's voluntary self-disclosure, the inadvertent nature of the underlying conduct, the swift remedial action taken once the issue was identified (including blocking within three business days), and the full and transparent cooperation the Company provided at every stage.
**Key Points from the Cautionary Letter**
The cautionary letter includes several noteworthy determinations:
- OFAC determined that the apparent violations were **"non-egregious."** - OFAC expressly credited the Company's voluntary self-disclosure and characterized the remedial measures undertaken as **"prompt and thorough."** - OFAC acknowledged the relevant timing context — specifically, the gap between Ramzan Kadyrov's initial designation on March 18, 2022, and the public identification of Caspian Star Commodities DMCC as a Kadyrov-owned entity in the May 12, 2023 SDN List supplemental update. As we argued in our submissions, this timing gap was central to the Company's lack of actual knowledge during the period in which the five fuel oil sale transactions occurred. - The letter cautions Dunmore Energy Holdings Ltd. and Dunmore Trading International Ltd. to **"exercise due care"** in sanctions compliance going forward and to maintain the enhanced compliance measures described in our submissions.
**Significance for the Company's Enforcement Record**
I do want to note an important point for the record. A cautionary letter is **not** a "finding of violation" and carries no penalty or formal sanction. However, it does become part of the Company's OFAC enforcement record and could be considered as a potential aggravating factor in any future enforcement action. For this reason, it is critical that the Company continue to maintain and enhance its sanctions compliance program consistent with the framework we outlined in the September 25, 2023 Compliance Enhancement Memorandum. The cautionary letter itself reinforces this expectation.
**Financial Context**
To put the resolution in perspective: the theoretical base penalty for a non-egregious, voluntarily disclosed case of this size was approximately **$1,181,625** (calculated as $4,726,500 in aggregate transaction value × 25%). The cautionary letter represents a **$0 monetary resolution** — a result that speaks to the strength of the Company's cooperation and remediation efforts.
**Attachments**
I have attached a scanned copy of the cautionary letter for your files. I have also copied Helena Reeves at Grandview Capital Partners, as we previously discussed, so that the sponsor has visibility into the resolution.
**Next Steps**
1. **Closing Memorandum:** Calderwood & Harkness will prepare a brief closing memorandum summarizing the matter and the resolution from inception through the cautionary letter. We will have this to you by the end of next week.
2. **Board Summary:** I would recommend that Derek prepare a summary of the resolution for the DEH Board, emphasizing the cautionary letter outcome and the compliance enhancements that have been implemented. We are happy to assist with drafting if that would be helpful.
3. **Financial Reporting / Auditor Consultation:** Janet, I would suggest consulting with Borwick & Thatcher LLP regarding any necessary disclosure in the FY 2023 financial statements. Given that no penalty was imposed, we believe disclosure obligations should be minimal, but we defer to Borwick & Thatcher's accounting judgment on this point.
4. **Final Invoice:** We will send our final invoice for the engagement shortly under separate cover.
Congratulations to the entire team on this outcome. It is a testament to the Company's genuine commitment to compliance and its willingness to cooperate fully and transparently from the outset. It has been a privilege to work with all of you on this matter.
Best regards,
Priya Anand Partner Calderwood & Harkness LLP 400 Park Avenue, 28th Floor New York, NY 10022 Tel: (212) 555-0147
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