PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE ATTORNEY WORK PRODUCT
MEMORANDUM
January 5, 2023
FROM: Jasmine Thornton, Lead Associate, White Collar & Investigations, Calderwood & Harkness LLP (Washington, D.C.)
TO: Victoria Chambers, Responsible Partner, White Collar & Investigations, Calderwood & Harkness LLP (Washington, D.C.)
CC: Conrad Reeves, Senior Counsel, Export Controls & Sanctions, Calderwood & Harkness LLP (Washington, D.C.); Howard Quinn, Billing Partner, White Collar & Investigations, Calderwood & Harkness LLP (New York)
RE: Dunmore Energy Holdings Ltd. — Remediation Workstream: Scope, Timeline & Deliverables
MATTER NO.: 1016-00009
CLIENT: Dunmore Energy Holdings Ltd.
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I. Executive Summary
The purpose of this memorandum is to outline the comprehensive remediation workstream for Dunmore Energy Holdings Ltd. ("Dunmore" or "DEH") designed to address the compliance deficiencies identified during the course of the internal investigation into potential violations of U.S. sanctions laws—including programs administered by the Office of Foreign Assets Control ("OFAC") of the U.S. Department of the Treasury—and export control regulations under the Export Administration Regulations ("EAR"), 15 C.F.R. Parts 730–774, administered by the Bureau of Industry and Security ("BIS") of the U.S. Department of Commerce.
As described in greater detail below, the U.S. Department of Justice ("DOJ") National Security Division opened an inquiry on April 19, 2022, pursuant to grand jury subpoena GJ No. 22-418, concerning activities at Dunmore Trading International Ltd.'s ("DTI") Dubai-based trading desk. The inquiry centers on DTI's transactions involving counterparties with direct and indirect ties to Volkhov Industrial Group JSC ("Volkhov"), a Russian industrial conglomerate that was initially designated under OFAC Directive 2 (issued November 15, 2019, pursuant to Executive Order 13662) and subsequently subjected to full SDN blocking sanctions effective April 6, 2022, pursuant to Executive Order 14024. The scope and severity of the potential violations, coupled with the DOJ's focus on national security–related corporate enforcement, underscore the urgency and importance of the remediation effort described herein.
The internal investigation, which Calderwood & Harkness LLP ("C&H") has been conducting on behalf of Dunmore since April 2022, has been supported by forensic accounting and financial analysis performed by Ridgeline Advisory Group LLC ("Ridgeline") (Engagement No. RAG-2022-0319) and e-discovery and document review services provided by Nexagen Analytics Inc. ("Nexagen") (Project No. NX-DEH-2204). The investigation has identified significant and pervasive deficiencies in Dunmore's pre-existing sanctions and export controls compliance program across multiple dimensions, as detailed in Section II of this memorandum. These findings are consistent with and further elaborated upon in the November 15, 2022 memorandum prepared by Conrad Reeves and Jasmine Thornton assessing the pre-existing compliance program (the "Compliance Assessment Memorandum"), which should be read in conjunction with the present memorandum.
In light of these deficiencies, C&H retained Pemberton Investors Solutions LLC ("Marlowe Asset Management"), a specialized compliance advisory firm, on December 15, 2022, to design and assist in implementing a comprehensive remediation program. Marlowe Asset Management is led by Dr. Anton Bremer, a former senior OFAC official with extensive experience in sanctions compliance program design and enforcement resolution. Marlowe Asset Management's principal office is located at 1300 I Street NW, Suite 700, Washington, DC 20005. Dr. Bremer's team at Marlowe Asset Management will serve as the primary subject-matter resource for remediation program design across all five workstreams identified in this memorandum, while C&H will provide legal oversight and coordinate remediation efforts with the DOJ and OFAC proceedings.
The remediation workstream is critical to securing a favorable disposition from DOJ under the revised Corporate Enforcement Policy (updated September 2022), which affords significant credit—including the possibility of a declination of prosecution—to companies that, among other things, implement effective compliance programs and remediate identified deficiencies. Additionally, the remediation program will be an essential mitigating factor in any enforcement action or voluntary self-disclosure proceeding before OFAC, consistent with OFAC's Economic Sanctions Enforcement Guidelines (31 C.F.R. Part 501, Appendix A) and the Framework for OFAC Compliance Commitments (May 2019).
For context, the following cooperation milestones have been achieved to date in connection with the DOJ inquiry:
• Document Productions: Two substantial document productions have been made to DOJ. The first production, completed on November 1, 2022, comprised 287,412 documents bearing Bates numbers DEH-DOJ-000001 through DEH-DOJ-287412. The second production, scheduled for completion on January 30, 2023, will comprise an additional 151,504 documents bearing Bates numbers DEH-DOJ-287413 through DEH-DOJ-438916. In total, Dunmore will have produced 438,916 documents to DOJ.
• Witness Interviews: Thirty-seven witness interviews have been completed across two rounds. Round 1 consisted of 22 interviews conducted between May 18 and June 30, 2022. Round 2 consisted of 15 interviews conducted between August 5 and September 30, 2022. A third round of 10 interviews is planned for February–March 2023 to supplement the remediation-related factual record, as discussed in Section IV below.
• Forensic Analysis: Ridgeline Advisory Group's forensic accounting analysis is nearing completion, with the final report expected on or about April 1, 2023. The forensic findings will directly inform the design of the transaction monitoring parameters under Workstream 4 of the remediation program.
This memorandum sets forth the scope, timeline, deliverables, budget, and risk considerations for the remediation workstream, and requests Victoria Chambers' approval to proceed on the basis outlined herein.
II. Background: Identified Compliance Deficiencies
The internal investigation and associated forensic analysis have identified compliance deficiencies across six principal areas. Each area is summarized below. These deficiencies collectively represent a compliance program that was, at the time of the relevant conduct, materially inadequate to detect or prevent the sanctions and export control violations at issue. The remediation workstream described in Section III is designed to address each of these deficiency areas comprehensively.
A. Sanctions Screening Deficiencies
Dunmore's pre-existing OFAC screening program suffered from fundamental structural and operational weaknesses that rendered it incapable of identifying the connections between DTI's counterparties and designated or blocked persons. Most critically, the screening program failed to identify the relationship between Petronova Trading FZE ("Petronova"), a free zone entity established in the Jebel Ali Free Zone, United Arab Emirates, and managed by Sergei Volkov, and Volkhov Industrial Group JSC, a Moscow-based entity chaired by Arkady Volkhov. Sergei Volkov is the nephew of Arkady Volkhov, and Petronova was, at all relevant times, beneficially owned and controlled by the Volkhov family through a layered corporate structure involving intermediary holding entities in Cyprus and the British Virgin Islands.
The screening system did not apply the OFAC 50% Rule—which provides that the property and interests in property of entities directly or indirectly owned 50% or more, individually or in the aggregate, by one or more blocked persons are also considered blocked—to identify entities owned or controlled by SDN-listed persons. This omission was a critical failure, as application of the 50% Rule would have required Dunmore to treat Petronova as a blocked entity following Volkhov's designation.
Gerald Fisk, who served as Dunmore's Chief Compliance Officer until his departure on June 10, 2022, oversaw an OFAC screening protocol that was limited to exact-match name screening against OFAC's SDN List and Consolidated Sanctions List. The protocol did not incorporate fuzzy-matching algorithms to account for transliteration variants, aliases, or name variations commonly encountered in cross-border transactions. No beneficial ownership screening was conducted, and no adverse media screening was integrated into the onboarding or ongoing monitoring processes. The absence of these capabilities meant that even publicly available information regarding the Volkhov family's control of Petronova was never captured by the screening system.
Furthermore, sanctions screening was conducted only at the point of counterparty onboarding. No periodic rescreening mechanism was in place to ensure that existing counterparties were checked against updated sanctions lists on a recurring basis. This gap was of particular consequence given the dynamic nature of OFAC designations, especially during the period of escalating Russia-related sanctions activity beginning in early 2022.
The belated identification of the Volkhov exposure on April 11, 2022, by Mr. Fisk—triggered by a routine screening refresh conducted in response to the April 6, 2022 SDN listing of Volkhov under Executive Order 14024—demonstrated that the system was fundamentally reactive rather than proactive. By the time the exposure was identified, DTI had already executed the substantial majority of the transactions at issue, and Dunmore's ability to mitigate or avoid potential liability was severely constrained.
B. Export Control Classification and Compliance Gaps
The internal investigation has revealed that DTI facilitated a total of $12.4 million in exports of oilfield drilling equipment and components to end users in Russia over a period of approximately 18 months, from August 2020 through January 2022. These items have been classified under Export Administration Regulations ECCN 2B350 (chemical manufacturing equipment and components) and ECCN 2B999 (specific processing equipment not elsewhere specified on the Commerce Control List). The exports were routed through Caspian Logistik GmbH ("Caspian Logistik"), a logistics and freight-forwarding company organized in Hamburg, Germany, and managed by Klaus Weidemann, which served as the intermediary shipper for the transactions.
No formal export classification process existed within DTI or at the Dunmore corporate level. Products and equipment were traded and shipped without any systematic determination of their Export Control Classification Number, their applicability to controlled destinations, or the need for an export license. End-user certifications provided by Caspian Logistik and its downstream counterparties were accepted at face value without any independent verification of the identity of the ultimate end users, the intended end use, or the final destination of the exported items.
No EAR compliance program of any kind existed at DTI. DTI's management placed reliance on Caspian Logistik as the shipper to ensure compliance with applicable export control requirements—a fundamentally flawed approach, as the exporter's compliance obligations under the EAR cannot be delegated to a third-party logistics provider. No due diligence was conducted on Caspian Logistik's own compliance practices, and no contractual provisions imposed export control compliance obligations on Caspian Logistik.
These facts give rise to potential violations of EAR §746.5, which imposes license requirements for exports and reexports of specified items to Russia and Belarus, as well as potential violations of the International Emergency Economic Powers Act ("IEEPA"), 50 U.S.C. §§ 1701–1706, and the Export Control Reform Act of 2018 ("ECRA"), 50 U.S.C. §§ 4801–4852. Criminal penalties under IEEPA include fines of up to $1 million and imprisonment of up to 20 years per violation, and civil penalties under ECRA can reach the greater of $330,947 per violation or twice the value of the transaction at issue.
C. Third-Party / Counterparty Due Diligence Failures
Petronova Trading FZE and Zenith Petroleum DMCC ("Zenith Petroleum"), a Dubai-based trading entity managed by Farhan Qureshi, were both onboarded as DTI counterparties with minimal Know Your Customer ("KYC") documentation. In the case of Petronova, the onboarding file contained only a trade license from the Jebel Ali Free Zone Authority, a certificate of incorporation, and a single page of corporate information listing Sergei Volkov as the sole manager. No beneficial ownership analysis was performed on Petronova at the time of onboarding or at any subsequent point during the course of the trading relationship. The file for Zenith Petroleum was similarly deficient, containing only basic corporate registration documents and no beneficial ownership information.
A total of 14 crude oil swap transactions with a combined notional value of approximately $218.7 million were executed with Petronova and Zenith Petroleum between June 2020 and February 2022, without adequate counterparty due diligence having been performed. Of these 14 transactions, 9 transactions representing approximately $156.3 million in notional value involved crude oil that was ultimately sourced from or destined for entities controlled by the Volkhov family. The forensic analysis conducted by Ridgeline has identified documentary evidence—including internal DTI emails, trade confirmations, and shipping records—indicating that at least some DTI personnel were aware or should have been aware of the Volkhov connection. The failure to conduct meaningful counterparty due diligence was a proximate cause of DTI's engagement in these potentially sanctionable transactions.
D. Payment Monitoring and Anti-Structuring Controls
The Ridgeline forensic analysis has identified approximately $34.2 million in payments across 127 individual transactions that were routed through intermediary accounts at Crescent Commercial Bank PJSC ("Crescent Commercial Bank"), a financial institution based in Dubai, where DTI maintained a correspondent relationship under the oversight of Khalid Mansour, the bank's relationship manager for the Dunmore account. These payments were made between March 2020 and March 2022 and were structured in a manner that obscured the beneficial ownership of the funds and the ultimate originator or beneficiary of the transactions.
Rajesh Malhotra, the Controller at DTI, processed these payments through Crescent Commercial Bank without flagging the apparent structuring patterns. The forensic evidence indicates that multiple payments were broken into sub-threshold amounts, that intermediary accounts were used to layer funds between the ultimate originator and Dunmore, and that the payment routing was inconsistent with the underlying trade documentation. No automated transaction monitoring system was in place at DTI for sanctions-related red flags, and no manual review process existed to identify or escalate suspicious transaction patterns.
E. Governance, Escalation, and Training Deficiencies
The internal investigation has identified systemic weaknesses in Dunmore's governance and organizational structure as they relate to sanctions and export control compliance. No formal escalation protocol existed for sanctions or export control red flags identified by front-line personnel. Trading desk employees and operations staff at DTI had no defined pathway for reporting concerns or seeking compliance guidance, and the absence of clear escalation procedures contributed to an environment in which potential red flags were either not recognized or not acted upon.
Training on OFAC sanctions and EAR compliance was sporadic, inconsistent, and poorly documented. The investigation has not identified any records of formalized, mandatory compliance training having been delivered to DTI employees at any time during the period under review. While certain Dunmore headquarters personnel in Houston received periodic compliance training, the content was general in nature and did not address the specific sanctions and export risks associated with DTI's trading activities in the Middle East and with Russian-connected counterparties.
From a governance standpoint, the CCO (Mr. Fisk) reported indirectly to the General Counsel, Marcus Wellbourne, without direct access to the Board of Directors or independent reporting authority. This reporting structure limited the CCO's ability to elevate compliance concerns to the highest levels of the organization and created a dynamic in which compliance was subordinated to commercial and legal functions. Moreover, DTI in Dubai operated with significant autonomy from Dunmore's Houston headquarters, with minimal oversight of DTI's counterparty onboarding, transaction execution, and compliance functions by corporate management or the Board.
F. Personnel Actions Taken to Date
In connection with the internal investigation, Dunmore has taken the following personnel actions with respect to individuals identified as having played a role in the conduct under review:
• Natasha Sorokin (former Senior Trader, DTI Dubai): Placed on administrative leave on May 16, 2022; separated from Dunmore effective September 15, 2022. Ms. Sorokin is represented by personal counsel, Philip Keane of Wexford Keane LLP (Washington, D.C.).
• Derek Hargrave (former Head of Middle East Trading, DTI Dubai): Placed on administrative leave on July 1, 2022; separated from Dunmore effective October 1, 2022. Mr. Hargrave is represented by personal counsel, James Overstreet of Overstreet & McClain PLLC (Dallas, TX).
• Gerald Fisk (former Chief Compliance Officer, Dunmore Energy Holdings): Departed Dunmore on June 10, 2022, under circumstances that are the subject of a separate analysis. Mr. Fisk is represented by personal counsel, Catherine Blackthorn of Blackthorn & Associates LLP (Houston, TX).
Dunmore appointed Priya Nayar as the new Chief Compliance Officer effective August 1, 2022. Ms. Nayar has extensive experience in sanctions compliance, having previously served as Deputy Director of Compliance at a major international commodity trading firm, and has been actively engaged in the remediation planning process since her appointment.
III. Remediation Workstream Scope
A. Overview of Workstreams
Based on the compliance deficiencies identified in Section II, C&H and Marlowe Asset Management have identified five primary remediation workstreams. Each workstream is designed to address a distinct category of compliance deficiency while maintaining integration across the workstreams to ensure a cohesive and comprehensive Enhanced Program. Calderwood & Harkness will provide legal oversight and strategic direction for all workstreams, while Pemberton Investors Solutions will provide subject-matter expertise, program design, and implementation support. The five workstreams are as follows:
1. Enhanced OFAC / Sanctions Screening Program
2. Export Control Classification and Compliance Program
3. Third-Party / Counterparty Due Diligence Protocol
4. Transaction Monitoring and Payment Controls
5. Governance, Training, and Organizational Structure
Each workstream is described in detail below, including its objective, key deliverables, and assigned personnel from Marlowe Asset Management, Calderwood & Harkness, and Dunmore.
B. Workstream 1: Enhanced OFAC / Sanctions Screening Program
Objective: Design and implement a comprehensive OFAC and global sanctions screening program across all Dunmore entities globally, including entities organized or operating in the Cayman Islands, United Arab Emirates, United States, Germany, Nigeria, and the United Kingdom. The Enhanced Screening Program must be capable of identifying not only direct SDN and blocked-person matches but also indirect exposure through beneficial ownership, affiliates, and controlled entities, as well as sectoral sanctions risk.
Key Deliverables:
The following deliverables will be produced under Workstream 1:
• Automated Sanctions Screening Software: Selection, procurement, and implementation of an enterprise-grade automated sanctions screening platform with fuzzy-matching capability. The platform must integrate the following sanctions lists at a minimum: OFAC SDN List; OFAC Consolidated Sanctions List (Non-SDN); OFAC Sectoral Sanctions Identifications List (SSI List); European Union Consolidated List of Persons, Groups, and Entities Subject to EU Financial Sanctions; and the United Kingdom Sanctions List (maintained by the Office of Financial Sanctions Implementation, HM Treasury). Marlowe Asset Management will assist Dunmore in evaluating vendor options and recommending a platform that meets these requirements.
• OFAC 50% Rule Implementation: Integration of beneficial ownership data into the screening process to enable identification of entities owned 50% or more, individually or in the aggregate, by one or more SDN-listed or blocked persons, consistent with OFAC guidance on the 50% Rule. This will require the screening platform to accept beneficial ownership data feeds and perform automated calculations of aggregate ownership by blocked persons.
• Comprehensive Screening Triggers: Counterparty screening will be required at three points: (i) at onboarding of any new counterparty, intermediary, agent, or business partner; (ii) on a periodic basis (at least quarterly) for all existing counterparties; and (iii) on an event-driven basis, triggered by new OFAC designations, SDN List updates, changes in sanctions programs, or other regulatory developments. This tripartite screening approach is designed to eliminate the gap that existed under the prior system, where screening was conducted only at onboarding.
• Full Transaction-Party Screening: All parties to a transaction must be screened, not merely the direct counterparty. This includes intermediaries, end users, beneficial owners, vessels (for commodity transactions involving maritime transport), financial institutions processing payments, and any other party with a material role in the transaction. This requirement is particularly important given the layered transaction structures and use of intermediary entities observed in the Volkhov-related transactions.
• Adverse Media and PEP Screening: Integration of adverse media screening and Politically Exposed Persons ("PEP") screening into the counterparty onboarding and periodic review processes. Adverse media screening will utilize commercially available data sources to identify negative news, regulatory actions, and enforcement proceedings involving counterparties and their associated persons. PEP screening will identify counterparties or beneficial owners who hold or have recently held prominent public positions, consistent with FATF guidance on PEPs.
• Alert Management and Escalation Workflow: All screening hits—whether generated by name matching, beneficial ownership analysis, or adverse media screening—must be reviewed by a qualified member of the compliance function. A structured escalation workflow will be established: initial screening hits will be reviewed by compliance analysts; confirmed matches or high-risk alerts will be escalated to the CCO (Priya Nayar); and matters involving confirmed SDN or blocked-person matches, or other high-severity alerts, will be further escalated to General Counsel (Marcus Wellbourne) and, as appropriate, to outside counsel (Calderwood & Harkness). The escalation workflow will include defined response times and documentation requirements at each level.
• Documentation and Audit Trail Requirements: All screening activities, alert dispositions, and escalation decisions must be documented and retained in a centralized compliance records management system. The system must generate a complete audit trail for each screening event, including the date and time of screening, the lists screened against, the results generated, the analyst who reviewed the results, the disposition of each alert, and any escalation actions taken. Records must be retained for a minimum of five years, consistent with OFAC recordkeeping requirements (31 C.F.R. § 501.601).
Marlowe Asset Management Lead: Dr. Anton Bremer
Calderwood & Harkness Oversight: Conrad Reeves
Dunmore Point of Contact: Priya Nayar, Chief Compliance Officer
C. Workstream 2: Export Control Classification and Compliance Program
Objective: Establish a formal EAR and dual-use export control compliance program for all Dunmore entities, with particular focus on DTI (Dubai) and Dunmore Renewables GmbH (Hamburg), the two entities with the most significant export control exposure based on the nature of their operations. The program must address the complete lifecycle of export control compliance, from product classification through end-user screening, license determination, and recordkeeping.
Key Deliverables:
The following deliverables will be produced under Workstream 2:
• Export Classification Review: A comprehensive review and classification of all products, equipment, technology, and software currently traded, sold, or exported by Dunmore entities worldwide, with particular focus on items classified under ECCN 2B350 (chemical manufacturing equipment and components) and ECCN 2B999 (specific processing equipment not elsewhere specified) relating to oilfield drilling equipment and components. This review will establish a baseline product classification inventory for the organization.
• Product Classification Matrix and Self-Classification Procedures: Development of a product classification matrix that maps all Dunmore products and equipment to their applicable ECCNs (or EAR99 designation, where appropriate) and documents the basis for each classification determination. The matrix will be accompanied by written self-classification procedures that enable Dunmore's commercial and technical personnel to perform initial classification assessments, subject to compliance review and approval. The procedures will include guidance on when to seek formal commodity classification requests from BIS.
• End-User/End-Use Screening and Verification: Development of robust procedures for screening and independently verifying end-user certifications. These procedures are designed to address the specific deficiency identified in the Caspian Logistik GmbH shipments, where false or unverified end-user certifications were accepted without scrutiny. The procedures will require, at a minimum: (i) independent verification of the identity and business activities of the stated end user through corporate registry searches, open-source research, and, where appropriate, site visits or third-party verification services; (ii) assessment of whether the stated end use is consistent with the end user's known business activities; (iii) confirmation that the stated destination country is not subject to comprehensive sanctions, an embargo, or other restrictions that would prohibit the export; and (iv) retention of all end-user certification documentation.
• Denied Party Screening: Integration of automated screening against the BIS Entity List, Denied Persons List, and Unverified List into the export control compliance process. Denied party screening will be conducted for all parties to an export transaction, including the buyer, consignee, intermediate consignee, end user, and any other party to the transaction. The screening platform selected under Workstream 1 (sanctions screening) will be evaluated for its ability to incorporate BIS restricted party lists, with the goal of maintaining a single, integrated screening platform where possible.
• License Determination Procedures and Recordkeeping: Written procedures for determining whether an export license is required under the EAR, based on the classification of the item, the destination country, the end user, and the end use. The procedures will include a license exception analysis framework and guidance on preparing and submitting license applications to BIS when required. Recordkeeping requirements will be established consistent with 15 C.F.R. Parts 730–774, including the five-year record retention requirement under 15 C.F.R. § 762.6.
• Red Flag Indicators Checklist: Development and distribution of a red flag indicators checklist for all employees involved in sales, trading, logistics, and shipping functions. The checklist will be based on the BIS "Know Your Customer" guidance and "Red Flags" publication and will be tailored to Dunmore's specific business activities and risk profile. Examples of red flags to be included are: a customer's reluctance to provide end-use or end-user information; orders for items inconsistent with the customer's stated business; unusual shipping routes or intermediate destinations; requests for payment structures that obscure the parties to the transaction; and customers located in, or with connections to, countries subject to comprehensive sanctions or heightened export control restrictions.
• Coordination with Russia/Belarus Sanctions Requirements: The export control compliance program will be fully coordinated with the requirements of EAR §746.5, which imposes license requirements for exports and reexports to Russia and Belarus. The program will address the expanding scope of Russia/Belarus export controls as they evolve in response to the ongoing geopolitical situation, including any future amendments to the EAR that broaden the categories of controlled items or expand the scope of end-use and end-user restrictions.
Marlowe Asset Management Lead: Dr. Anton Bremer
Calderwood & Harkness Oversight: Conrad Reeves
Dunmore Point of Contact: Priya Nayar, CCO; coordination with Yves Leclerc (Director of Logistics & Shipping, DTI) and Tobias Engel (Managing Director, Dunmore Renewables GmbH)
D. Workstream 3: Third-Party / Counterparty Due Diligence Protocol
Objective: Design and implement an enhanced KYC and counterparty due diligence program applicable to all trading counterparties, intermediaries, agents, logistics providers, and significant business partners across all Dunmore entities. The enhanced protocol is intended to ensure that Dunmore has adequate information regarding the identity, ownership, control, and risk profile of all counterparties before entering into business relationships or executing transactions, and that this information is maintained and updated on an ongoing basis.
Key Deliverables:
The following deliverables will be produced under Workstream 3:
• Risk-Tiered Due Diligence Framework: A structured framework establishing three tiers of due diligence—standard, enhanced, and prohibited—based on an assessment of jurisdiction risk (e.g., Russia, Belarus, the United Arab Emirates, and other high-risk jurisdictions identified by FATF or relevant regulatory bodies), product risk (e.g., items subject to EAR controls, dual-use goods, commodities commonly associated with sanctions evasion), and counterparty risk factors (e.g., counterparties with opaque ownership structures, counterparties operating in free trade zones, counterparties with connections to state-owned enterprises in sanctioned jurisdictions, and newly established entities with limited operating history). The framework will define the minimum due diligence requirements for each tier and the criteria for assigning counterparties to the appropriate tier.
• Beneficial Ownership Identification and Verification: Requirements for the identification and verification of beneficial ownership that go beyond the OFAC 50% Rule. Specifically, the enhanced protocol will require identification of all owners with 25% or greater ownership interest and all controlling persons, regardless of the level of their ownership interest. This lower threshold is consistent with emerging best practices in anti-money laundering and sanctions compliance and will provide Dunmore with greater visibility into the ownership structures of its counterparties. Verification of beneficial ownership information will require documentary evidence (e.g., corporate registries, shareholder registers, certificates of incumbency) supplemented, where appropriate, by commercially available beneficial ownership databases and open-source research.
• Enhanced Due Diligence for High-Risk Counterparties: Specific enhanced due diligence procedures for counterparties that are located in, organized under the laws of, or have material business connections to comprehensively sanctioned jurisdictions (including Russia, Belarus, Cuba, Iran, North Korea, Syria, and the Crimea, Donetsk, and Luhansk regions of Ukraine). Enhanced due diligence will include, at a minimum: senior management approval of the counterparty relationship; independent third-party background checks; site visits (where feasible); and periodic re-assessment at intervals of no greater than six months.
• Annual Re-Certification and Periodic Review Cycle: All existing counterparties will be subject to annual re-certification, during which the counterparty's KYC documentation, beneficial ownership information, sanctions screening results, and risk-tier classification will be reviewed and updated. In addition to the annual re-certification, counterparties classified as enhanced-risk will be subject to more frequent periodic reviews, as determined by the risk-tiered framework.
• Documentation and Record Retention Requirements: Comprehensive documentation requirements for all due diligence activities, including onboarding files, beneficial ownership analyses, risk-tier assignments, screening results, enhanced due diligence reports, and annual re-certification records. All records must be retained in a centralized and auditable system for a minimum of five years following the termination of the counterparty relationship.
• Integration with Workstreams 1 and 2: The third-party due diligence protocol will be designed to integrate seamlessly with the sanctions screening program (Workstream 1) and the export control compliance program (Workstream 2). Due diligence findings will inform screening parameters, and screening results will inform due diligence risk assessments. The goal is to create a unified, risk-based approach to counterparty management that addresses sanctions, export control, and anti-money laundering risks holistically.
• Remediation of Specific Deficiencies: The enhanced protocol will specifically address the deficiencies that allowed Petronova Trading FZE and Zenith Petroleum DMCC to be onboarded and maintained as counterparties without detection of their connections to the Volkhov family. The protocol will include case studies drawn from these failures (on an appropriately anonymized basis) in the training materials to illustrate the consequences of inadequate due diligence.
Marlowe Asset Management Lead: Dr. Anton Bremer
Calderwood & Harkness Oversight: Jasmine Thornton
Dunmore Point of Contact: Priya Nayar, CCO; coordination with Omar Al-Rashidi (Head of Middle East Operations, DTI)
E. Workstream 4: Transaction Monitoring and Payment Controls
Objective: Implement automated and manual transaction monitoring controls to detect and prevent sanctions evasion, payment structuring, and anomalous transaction patterns. The transaction monitoring framework is designed to address the specific failures identified in connection with the $34.2 million in structured payments routed through Crescent Commercial Bank PJSC, as well as to provide a forward-looking capability to identify and investigate suspicious transaction patterns across all Dunmore entities.
Key Deliverables:
The following deliverables will be produced under Workstream 4:
• Automated Transaction Monitoring System: Implementation of an automated transaction monitoring system for all wire transfers, payments, and financial transactions processed by Dunmore entities globally. The system will incorporate rules-based alerts designed to identify structuring patterns (e.g., multiple payments below reporting or review thresholds within a defined time window), unusual or unexplained use of intermediary accounts, payments to or from high-risk jurisdictions, and transactions with parties not previously identified in the counterparty due diligence process. Alert parameters will be calibrated based in part on the forensic findings from Ridgeline Advisory Group's analysis of the Crescent Commercial Bank payment patterns.
• Crescent Commercial Bank Monitoring: Specific monitoring protocols for transactions routed through Crescent Commercial Bank PJSC (Dubai) and any other trade finance banks utilized by Dunmore entities. Given the role of Crescent Commercial Bank in the structured payments at issue, enhanced scrutiny of this banking relationship is warranted until such time as Dunmore management, in consultation with the compliance function, makes a determination regarding the continuation of the relationship.
• Dual-Approval Requirements: Implementation of dual-approval requirements for transactions above defined thresholds. The specific thresholds will be established during the Phase 1 gap assessment, but the framework will require, at a minimum, that transactions above a specified dollar value receive approval from both the relevant business unit head and a designated compliance officer before execution. The thresholds will be set at levels that capture a meaningful proportion of transaction volume while remaining operationally feasible.
• Reconciliation Procedures: Procedures for reconciling counterparty payments with underlying trade documentation, including trade confirmations, shipping documents, bills of lading, and invoices. The reconciliation process is intended to identify discrepancies between payment flows and the documented trade activity—such as payments from parties not identified as counterparties in the trade documentation, or payments that are inconsistent with the terms of the underlying transaction—that may indicate sanctions evasion, structuring, or other suspicious activity.
• Whistleblower and Reporting Mechanisms: Establishment of confidential whistleblower and reporting mechanisms through which employees can flag suspicious transactions or other compliance concerns without fear of retaliation. The reporting mechanisms will include an anonymous hotline, an online reporting portal, and a direct reporting channel to the CCO. All reports will be documented, investigated, and resolved in accordance with a defined investigation protocol.
• Post-Trade Compliance Review: Development of a post-trade compliance review process for commodity swap transactions and other complex trading instruments. The review will be conducted by the compliance function on a sample basis (with the sampling methodology to be defined during the gap assessment) and will assess whether the transaction was executed in compliance with applicable sanctions and export control requirements, whether the counterparty due diligence was adequate, and whether the payment flows were consistent with the underlying trade.
Marlowe Asset Management Lead: Dr. Anton Bremer, with input from Ridgeline Advisory Group LLC (Dr. Margaret Liu) on forensic findings informing monitoring parameters.
Calderwood & Harkness Oversight: Jasmine Thornton
Dunmore Point of Contact: Sandra Whitfield, Chief Financial Officer; Rajesh Malhotra, Controller (DTI)
F. Workstream 5: Governance, Training, and Organizational Structure
Objective: Strengthen the governance framework for sanctions and export control compliance, establish a robust and well-documented training program, and restructure reporting lines and organizational oversight mechanisms to ensure adequate Board-level and senior management engagement with compliance matters. This workstream addresses the structural and cultural deficiencies that allowed the conduct under review to occur and persist without detection or intervention by senior leadership.
Key Deliverables:
Governance.
• CCO Reporting Lines: The CCO (Priya Nayar) will report directly to the Board of Directors (or a designated Board committee, as discussed below) with a dotted-line reporting relationship to the CEO (Callum Renshaw) and the General Counsel (Marcus Wellbourne). This restructured reporting line is designed to ensure that the CCO has direct access to the Board on all compliance matters and is not subject to undue influence by commercial or legal functions. The CCO's reporting to the Board will be documented through regular written reports and in-person presentations at Board meetings.
• Board Compliance Committee: Establishment of a dedicated Compliance Committee at the Board level, with a charter defining the committee's mandate, composition, authority, and reporting obligations. The Compliance Committee will be responsible for overseeing the Enhanced Program, receiving and reviewing the CCO's quarterly compliance reports, approving material compliance policies and procedures, and ensuring that adequate resources are allocated to the compliance function. The committee should be composed of directors with relevant expertise or experience in compliance, risk management, or regulatory matters.
• Quarterly Compliance Reporting: Implementation of a quarterly compliance reporting framework through which the CCO will provide the Board (or Board Compliance Committee) with a comprehensive report on the status of the sanctions and export control compliance program. The quarterly report will include, at a minimum: a summary of screening activities and alert volumes; a summary of counterparty due diligence activities; a description of any compliance incidents, near-misses, or escalated matters; an update on the status of any ongoing regulatory inquiries or enforcement matters; and an assessment of emerging regulatory risks and changes in the sanctions and export control landscape.
• Annual Independent Assessment: An annual independent assessment of the compliance program's effectiveness will be conducted. For the first two years following implementation, the annual assessment will be performed by Pemberton Investors Solutions. Thereafter, the assessment will be performed by an independent third-party assessor selected by the Board Compliance Committee. The annual assessment will evaluate the design, implementation, and operational effectiveness of the Enhanced Program and will produce a written report with findings and recommendations.
Training.
• Mandatory Annual Training: All Dunmore employees globally—approximately 3,200 individuals across all entities and jurisdictions—will be required to complete mandatory annual sanctions and export controls training. The training will be delivered through a combination of online modules (for baseline training) and in-person or live-virtual sessions (for role-specific training). Completion of the mandatory training will be a condition of continued employment.
• Role-Specific Enhanced Training: In addition to the baseline training, enhanced training tailored to specific job functions will be required for: (i) trading desk personnel, who are on the front lines of counterparty interaction and transaction execution; (ii) logistics and shipping staff, who are responsible for the physical movement of goods and equipment; (iii) finance and accounting personnel, who process payments and are positioned to identify anomalous financial flows; and (iv) senior management, who bear oversight responsibility and must be equipped to identify and escalate compliance concerns.
• Training Content: Training content will be developed by Marlowe Asset Management in coordination with Conrad Reeves and will cover the following subject areas at a minimum: OFAC sanctions programs, with specific focus on Executive Order 14024, Directive 2, and the regulations set forth in 31 C.F.R. Part 589; EAR requirements under 15 C.F.R. Parts 730–774, including §746.5 (Russia/Belarus sanctions); red flag indicators for sanctions evasion and export control violations; the Dunmore escalation procedures and reporting obligations; and the consequences of non-compliance, including criminal penalties under IEEPA (up to $1 million and 20 years imprisonment per violation) and penalties under ECRA. The training will incorporate real-world case studies, including appropriately anonymized scenarios drawn from the Dunmore investigation, to ensure relevance and engagement.
• Training Completion Tracking and Attestation: An electronic training management system will be implemented to track completion of all training requirements. Each employee will be required to attest, upon completion of training, that they have reviewed and understood the training materials, that they understand their compliance obligations, and that they are not aware of any unreported compliance concerns. Training records and attestations will be retained for a minimum of five years.
Organizational Structure.
• Dedicated Compliance Personnel at DTI Dubai: Dunmore will hire and embed dedicated compliance personnel at the DTI Dubai office. Currently, DTI has no dedicated compliance staff, and compliance responsibilities have been handled on an ad hoc basis by operations and finance personnel without formal compliance training. The number and seniority of the compliance hires will be determined during the Phase 1 gap assessment, but at a minimum, one senior compliance officer should be stationed at DTI with authority to review, approve, or counterparty onboarding and transaction execution.
• Enhanced Headquarters Oversight of DTI: Dunmore's Houston headquarters will exercise enhanced oversight of DTI's operations, including regular compliance audits conducted by the corporate compliance function (or by external auditors at the direction of the CCO). The frequency and scope of these audits will be defined in the Enhanced Program policies and procedures, but quarterly compliance reviews of DTI operations are recommended for at least the first two years following implementation.
• Reduction of DTI Operational Autonomy: DTI's operational autonomy with respect to counterparty onboarding and transaction approval will be reduced. Specifically, all new counterparty onboarding at DTI will require approval from the corporate compliance function in Houston, and all transactions above defined thresholds will require dual approval from both DTI management and corporate headquarters. These controls are designed to address the root cause of the compliance failures at DTI—namely, the lack of effective oversight from the parent entity—while maintaining DTI's commercial effectiveness.
Marlowe Asset Management Lead: Dr. Anton Bremer
Calderwood & Harkness Oversight: Conrad Reeves (governance and policy); Jasmine Thornton (training and organizational)
Dunmore Point of Contact: Priya Nayar, CCO; Callum Renshaw, CEO (for Board-level governance changes)
IV. Timeline and Milestones
The remediation workstream is organized into five phases spanning approximately 15 months, from January 2023 through March 2024, with ongoing monitoring and sustainability activities continuing beyond that period. The timeline is designed to ensure that the Enhanced Program is substantially designed, implemented, and operational before the anticipated DOJ decision point regarding prosecution or declination.
A. Phase 1: Assessment and Design (January – April 2023)
• January 5, 2023: Formal kickoff of the remediation workstream. This memorandum serves as the foundational scoping document, establishing the objectives, scope, and organizational framework for the remediation effort.
• January 15 – February 28, 2023: Pemberton Investors Solutions conducts a comprehensive gap assessment across all five workstreams. The gap assessment will include on-site visits to the three primary Dunmore locations: DTI Dubai (Level 14, Gate Building 3, DIFC, Dubai, UAE), Dunmore operational headquarters in Houston (1200 McKinney Street, Suite 3400, Houston, TX 77010), and Dunmore Renewables GmbH in Hamburg (Überseeallee 12, 20457 Hamburg, Germany). The on-site assessments will include interviews with key personnel, review of existing policies and procedures, evaluation of technology systems, and observation of current compliance processes. Marlowe Asset Management will coordinate the on-site schedule with Priya Nayar and the relevant local management teams.
• February 15 – March 15, 2023: A third round of witness interviews (10 interviews) will be conducted to supplement the remediation-related factual record. These interviews will focus on operational processes, compliance awareness, and institutional knowledge relevant to the design of the Enhanced Program. The interview schedule will be coordinated by Jasmine Thornton in consultation with the remediation team to ensure that the interviews address the specific factual gaps identified during the Phase 1 assessment.
• March 15, 2023: Marlowe Asset Management delivers the preliminary gap assessment and recommendations report. This report will identify the specific gaps between Dunmore's current state and the target state for each workstream, and will provide prioritized recommendations for remediation actions.
• April 1, 2023: Ridgeline Advisory Group delivers the final forensic accounting report. The forensic findings, including the detailed analysis of the Crescent Commercial Bank payment patterns, will directly inform the design of the transaction monitoring parameters under Workstream 4. Dr. Margaret Liu will present the findings to the remediation team and participate in the calibration of monitoring rules and alert thresholds.
• April 15, 2023: Calderwood & Harkness and Marlowe Asset Management finalize the remediation program design, including draft policies and procedures for all five workstreams. This milestone marks the transition from the assessment and design phase to the policy drafting and regulatory coordination phase.
B. Phase 2: Policy Drafting and DOJ/OFAC Coordination (May – August 2023)
• May 2023 (target): Submission of the comprehensive internal investigation report to DOJ. The investigation report is projected to be approximately 176 pages in length and will present the factual findings of the investigation, the root causes of the compliance failures, the personnel actions taken, and the remediation steps undertaken and planned. The remediation program design will be referenced prominently in the investigation report as evidence of Dunmore's commitment to compliance and its good-faith efforts to address the identified deficiencies, consistent with the factors articulated in the DOJ Corporate Enforcement Policy (updated September 2022).
• May – June 2023: Consideration and preparation of an OFAC voluntary self-disclosure ("VSD") filing. The remediation program status will be included in the VSD narrative as a mitigating factor under OFAC's Economic Sanctions Enforcement Guidelines. Conrad Reeves is developing a separate memorandum analyzing the strategic considerations relating to a VSD, including the relative advantages and risks of filing with OFAC versus BIS, given the dual nature of the potential violations (sanctions and export controls). That memorandum is anticipated on or about May 1, 2023.
• June – August 2023: Drafting of all enhanced policies and procedures across the five workstreams, including: (i) the Enhanced Sanctions & Export Controls Compliance Policy (the overarching policy document); (ii) the Third-Party Due Diligence Policy; (iii) the Transaction Monitoring Policy; (iv) the Export Classification Procedures Manual; and (v) the Training Program curriculum and associated training materials. Each document will undergo internal review by the C&H team, consultation with Marlowe Asset Management, and review by Dunmore's CCO and General Counsel before finalization.
• August 1, 2023 (target): The draft Enhanced Sanctions & Export Controls Compliance Policy is finalized by Conrad Reeves and Dr. Anton Bremer for internal review and Board consideration. This is a critical milestone, as the policy document will serve as the cornerstone of the Enhanced Program and will be the primary document presented to the Board for adoption.
C. Phase 3: Implementation (September – December 2023)
• September 15, 2023 (target): Marlowe Asset Management delivers the final remediation report and Enhanced Compliance Program framework. The final report will incorporate the results of the gap assessment, the policy and procedure documents, the governance recommendations, and the implementation plan, presented as a unified and comprehensive compliance program framework.
• September – October 2023: Board review and approval process for the Enhanced Program. Calderwood & Harkness will prepare the necessary Board materials, including a Board memorandum summarizing the Enhanced Program, the Board resolution adopting the program, and the charter for the Board Compliance Committee. Victoria Chambers and Conrad Reeves will present the Enhanced Program to the Board and address any questions or concerns.
• October 1, 2023 (target): The Board of Directors of Dunmore Energy Holdings Ltd. adopts the Enhanced Sanctions & Export Controls Compliance Program by formal resolution. Board adoption is a critical milestone that demonstrates the organization's commitment to compliance at the highest level of governance and will be prominently cited in the supplemental remediation report to DOJ.
• October – November 2023: Implementation of the operational components of the Enhanced Program, including: deployment and configuration of the sanctions screening software; deployment and configuration of the transaction monitoring system; implementation of organizational changes (including the hiring of dedicated compliance personnel at DTI Dubai); and establishment of the new reporting lines and governance structures.
• November 2023: Launch of the initial training program. All Dunmore employees globally will be required to complete the mandatory baseline training module by the end of Q1 2024. Role-specific enhanced training will be rolled out in a phased manner, beginning with trading desk personnel and logistics/shipping staff at DTI Dubai.
• November 30, 2023 (target): Voluntary disgorgement payment of $8.75 million to the U.S. Treasury. This amount has been calculated as $156.3 million (the notional value of the 9 tainted crude oil swap transactions involving Volkhov-controlled entities) multiplied by 5.6% (Dunmore's estimated net margin on these transactions), yielding an approximate disgorgement amount of $8.75 million. The payment will be coordinated with DOJ and OFAC as a demonstration of good faith and disgorgement of ill-gotten gains. The calculation methodology and supporting documentation will be prepared by Ridgeline and reviewed by C&H before submission.
• December 2023: The first cycle of the new quarterly compliance reporting to the Board will be completed, establishing the cadence for ongoing Board-level oversight of the compliance program.
D. Phase 4: Verification and Reporting to DOJ (January – March 2024)
• January 15, 2024 (target): Calderwood & Harkness submits the supplemental remediation report to DOJ documenting the full implementation of the Enhanced Program. The report will be prepared by Victoria Chambers and Conrad Reeves and will include a detailed description of each workstream, the policies and procedures adopted, the technology systems deployed, the organizational changes implemented, the training program launched, and the governance framework established. The report will also include metrics on screening volumes, alert disposition, training completion rates, and other indicators of program effectiveness.
• Q1 2024: DOJ evaluation of the remediation effort. We anticipate active dialogue with AUSA Meredith Calloway and Trial Attorneys Samuel Kovacs and Diana Pressman regarding the sufficiency of the remediation efforts. Calderwood & Harkness will be prepared to address any questions or concerns raised by the DOJ team and, if necessary, to provide supplemental information or documentation regarding specific aspects of the Enhanced Program.
• March 2024 (target): We anticipate that DOJ will provide an indication of its willingness to decline prosecution, subject to verified remediation. While the ultimate outcome depends on a number of factors beyond the remediation workstream—including the strength of the evidence, the nature and severity of the violations, Dunmore's cooperation, and the personnel actions taken—we believe that a comprehensive and well-implemented remediation program is the single most important factor within Dunmore's control that can influence the DOJ's disposition decision.
E. Phase 5: Ongoing Monitoring and Sustainability (Q2 2024 Onward)
Following the completion of Phase 4 and the anticipated DOJ disposition, the remediation workstream will transition into an ongoing monitoring and sustainability phase. The key elements of this phase include:
• Establishment of a comprehensive monitoring and testing framework, including periodic testing of screening systems, transaction monitoring rules, and due diligence processes. The monitoring and testing framework will be the subject of a separate memorandum to be prepared by Jasmine Thornton.
• Annual independent compliance program assessments, as described in Workstream 5, conducted initially by Marlowe Asset Management and subsequently by an independent third-party assessor.
• Continuous improvement of the Enhanced Program based on regulatory developments, new OFAC guidance and enforcement actions, changes in the sanctions and export control landscape, and lessons learned from the operation of the program.
V. Deliverables Summary Table
The following table provides a comprehensive summary of all deliverables associated with the remediation workstream, organized by deliverable number, description, responsible party, target delivery date, and Dunmore approver.
The target dates set forth above are ambitious but achievable provided that all parties—C&H, Marlowe Asset Management, and Dunmore—dedicate the necessary resources and maintain the cadence of work contemplated by this memorandum. Any material delays in the delivery of one or more of the above deliverables should be escalated promptly to Victoria Chambers for assessment and resolution.
VI. Budget and Resource Allocation
The remediation workstream will require the commitment of significant external and internal resources. The budget and resource allocation for the workstream are summarized below.
A. Pemberton Investors Solutions LLC
Marlowe Asset Management's engagement encompasses the full scope of remediation design, gap assessment, policy drafting, training materials development, and implementation support across all five workstreams. Marlowe Asset Management's estimated fees for the remediation engagement are approximately $875,000, inclusive of all on-site assessments at DTI Dubai, Dunmore Houston, and Dunmore Renewables GmbH Hamburg, as well as all policy development, training design, and implementation advisory services. The engagement is scoped on a fixed-fee basis with defined deliverables and milestones. Marlowe Asset Management's lead on the engagement is Dr. Anton Bremer.
Travel expenses for on-site assessments in Dubai and Hamburg will be billed at cost and are estimated at approximately $45,000, which is included within the total engagement estimate. Should the scope of Marlowe Asset Management's engagement expand beyond the five workstreams described herein—for example, if additional workstreams are identified during the gap assessment or if the DOJ or OFAC requests specific enhancements—the fee estimate will be revised and presented for approval.
B. Calde