ATTORNEY-CLIENT PRIVILEGED & CONFIDENTIAL ATTORNEY WORK PRODUCT
This document and all information contained herein are protected by the attorney-client privilege and constitute attorney work product prepared in anticipation of litigation and in connection with the provision of legal advice. This document shall not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP and Dunmore Energy Holdings Ltd.
TRAINING MATERIALS OUTLINE
SANCTIONS & EXPORT CONTROLS EMPLOYEE TRAINING PROGRAM
Dunmore Energy Holdings Ltd.
November 1, 2023
Prepared By: Pemberton Investors Solutions LLC Dr. Anton Bremer, Lead Consultant 1300 I Street NW, Suite 700 Washington, DC 20005, USA
Reviewed By: Conrad Reeves, Senior Counsel Export Controls & Sanctions Calderwood & Harkness LLP 1750 Pennsylvania Avenue NW, Suite 800 Washington, DC 20006, USA
Prepared For: Dunmore Energy Holdings Ltd.
Attn: Priya Nayar, Chief Compliance Officer
Marcus Wellbourne, General Counsel
This outline forms part of the Enhanced Sanctions & Export Controls Compliance Program adopted by the Board of Directors of Dunmore Energy Holdings Ltd. on October 1, 2023, and is designed to support Dunmore's obligations under the DOJ Corporate Enforcement Policy (updated September 2022) and the DOJ Evaluation of Corporate Compliance Programs (updated March 2023). The training program described herein has been developed in close coordination with Calderwood & Harkness LLP, which serves as outside counsel to Dunmore Energy Holdings Ltd. in connection with the ongoing DOJ inquiry, and Pemberton Investors Solutions LLC, which was engaged to provide remediation advisory services and to support the design and implementation of Dunmore's enhanced compliance infrastructure.
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I. INTRODUCTION AND PROGRAM OVERVIEW
1.1 Purpose of the Training Program
This Training Program constitutes a core component of Dunmore Energy Holdings Ltd.'s ("DEH" or the "Company") Enhanced Sanctions & Export Controls Compliance Program (the "Program"), which was formally adopted by the DEH Board of Directors on October 1, 2023. The Program was developed in direct response to findings from the internal investigation conducted by Calderwood & Harkness LLP, which commenced in April 2022 following the issuance of a grand jury subpoena, and the comprehensive remediation assessment delivered by Pemberton Investors Solutions LLC on September 15, 2023.
The fundamental purpose of this training program is to ensure that all employees of Dunmore Energy Holdings Ltd. and each of its subsidiaries — regardless of geographic location, functional role, or seniority level — understand their individual and collective obligations under U.S. sanctions laws and export control regulations. Through a structured, tiered curriculum, the training program is designed to equip employees with the knowledge and practical skills necessary to identify potential sanctions and export control issues, escalate those issues through the appropriate channels in a timely manner, and take affirmative steps to avoid conduct that could give rise to violations of applicable law.
The training program has been developed with particular attention to the specific compliance deficiencies identified during the internal investigation relating to the DOJ inquiry opened on April 19, 2022, pursuant to grand jury subpoena GJ No. 22-418 issued by the U.S. District Court for the District of Columbia. Those deficiencies, which are described in greater detail in Module 3 of this outline, included the absence of any formal sanctions or export controls training program, inadequate screening protocols, a failure to escalate identified red flags, and insufficient due diligence on counterparties and intermediaries. This training program is intended to address each of those deficiencies directly and to serve as a critical element of the Company's broader remediation efforts.
The design and content of this training program reflect the expectations articulated by the U.S. Department of Justice in its Evaluation of Corporate Compliance Programs (updated March 2023), which identifies training and communications as a key component of an effective compliance program. Specifically, the DOJ evaluates whether a company has implemented training that is "risk-based," "periodically updated," and "tailored to the audience," and whether the company has "communicated its policies and procedures to all employees and relevant third parties." This training program has been structured to satisfy each of those criteria.
1.2 Regulatory Background
The regulatory context for this training program arises from an inquiry initiated by the U.S. Department of Justice, National Security Division, Counterintelligence and Export Control Section ("CES"). CES opened its inquiry into Dunmore's potential violations of U.S. sanctions and export control laws in connection with activities conducted at Dunmore Trading International Ltd.'s ("DTI") Dubai-based trading desk. The inquiry focused on DTI's transactions involving counterparties with undisclosed ties to persons and entities subject to sanctions administered by the Office of Foreign Assets Control ("OFAC") of the U.S. Department of the Treasury, as well as potential violations of the Export Administration Regulations ("EAR") administered by the Bureau of Industry and Security ("BIS") of the U.S. Department of Commerce.
The principal legal authorities implicated by the inquiry, and which form the substantive foundation for this training program, include the following:
• OFAC-Administered Sanctions Programs. OFAC administers and enforces a range of economic sanctions programs targeting specific countries, regimes, individuals, and entities. These programs are implemented pursuant to Executive Orders issued by the President of the United States and various federal statutes. The sanctions programs most directly relevant to Dunmore's operations are the Russia/Ukraine-related sanctions programs, though other programs (including those targeting Iran, Syria, North Korea, Venezuela, Cuba, and Belarus) are also addressed in the training curriculum given the geographic scope of Dunmore's operations.
• The International Emergency Economic Powers Act ("IEEPA"). Codified at 50 U.S.C. §§ 1701–1706, IEEPA provides the President with broad authority to regulate international economic transactions in response to unusual and extraordinary threats to the national security, foreign policy, or economy of the United States. IEEPA is the principal statutory authority underlying most OFAC-administered sanctions programs and provides for both civil and criminal penalties for violations.
• The Export Administration Regulations ("EAR"). Codified at 15 C.F.R. Parts 730–774, the EAR regulate the export, reexport, and transfer (in-country) of items, software, and technology that are subject to U.S. jurisdiction. The EAR are administered by BIS and are implemented pursuant to the Export Control Reform Act of 2018 ("ECRA"), codified at 50 U.S.C. §§ 4801–4852.
It is important to note that at the time of this outline's preparation, Dunmore is actively seeking a formal declination of prosecution from the DOJ in connection with the CES inquiry. The Company's remediation efforts — including the adoption of the Enhanced Sanctions & Export Controls Compliance Program and the implementation of this training program — are critical factors in the government's ongoing evaluation of the appropriate resolution of the matter. The DOJ Corporate Enforcement Policy (updated September 2022) provides that a company may receive a declination of prosecution where, among other factors, the company has implemented an effective compliance and ethics program, has voluntarily disclosed the conduct to the government, has fully cooperated with the investigation, and has remediated the underlying compliance deficiencies. This training program is a central element of Dunmore's remediation efforts and is designed to demonstrate the Company's commitment to a culture of compliance going forward.
1.3 Training Audience and Tiering
Consistent with the DOJ's expectation that compliance training be "risk-based" and "tailored to the audience," this training program employs a three-tiered structure that calibrates the depth and specificity of training content to the employee's role, function, and risk exposure. The three tiers are defined as follows:
Tier 1 — All Employees (Global): General Awareness Training
Tier 1 training is mandatory for all approximately 3,200 employees across all Dunmore entities worldwide. This includes personnel at:
• Dunmore Energy Holdings Ltd. — Registered in the Cayman Islands with operational headquarters in Houston, Texas;
• Dunmore Trading International Ltd. ("DTI") — Registered in the Dubai International Financial Centre, Dubai, United Arab Emirates;
• Dunmore upstream Americas LLC ("DUA") — Organized under the laws of the State of Delaware with principal offices in Houston, Texas;
• Dunmore Renewables GmbH — Organized under the laws of the Federal Republic of Germany with offices in Hamburg; and
• Dunmore Exploration West Africa Ltd. ("DEWA") — Registered in Lagos, Nigeria.
Tier 1 training provides general awareness-level instruction on U.S. sanctions laws and export control regulations, Dunmore's compliance policies and procedures, red flag identification, and escalation and reporting obligations. The objective is to ensure that every Dunmore employee, regardless of function, possesses a baseline understanding of the regulatory landscape and the Company's expectations for compliant conduct.
Tier 2 — Enhanced Training (Risk-Elevated Functions)
Tier 2 training is mandatory for all personnel in functions identified as carrying elevated sanctions and export control risk. These include:
• Trading and commercial personnel across all entities;
• Logistics, shipping, and supply chain personnel;
• Finance and accounting personnel, including all individuals with wire transfer initiation or payment approval authority;
• Legal and compliance department personnel;
• Business development personnel engaged in counterparty-facing activities; and
• All DTI Dubai staff, regardless of function, given DTI's designation as the highest-risk operating subsidiary.
Tier 2 training specifically includes all DUA and Dunmore Renewables personnel with counterparty-facing roles, as well as all finance personnel with wire transfer or payment approval authority, including Controller-level roles. This tier expressly encompasses the type of role held by Rajesh Malhotra, DTI Controller, whose payment authorization function was identified during the internal investigation as a critical control point that had previously lacked adequate sanctions compliance training. Tier 2 training builds on the Tier 1 curriculum and incorporates more detailed instruction on counterparty screening, due diligence procedures, transaction review and approval workflows, and the practical application of export control classifications.
Tier 3 — Advanced / Specialized Training (Senior Leadership and Compliance)
Tier 3 training is mandatory for senior leadership and all personnel with direct responsibilities for trade approval, sanctions screening, or export classification. Tier 3 personnel include:
• CEO Callum Renshaw;
• CFO Sandra Whitfield;
• General Counsel Marcus Wellbourne;
• CCO Priya Nayar;
• Subsidiary heads, including Managing Director Tobias Engel of Dunmore Renewables GmbH;
• All personnel with sanctions screening or trade approval authority; and
• All personnel with export classification responsibilities.
Tier 3 training provides the most comprehensive and detailed instruction, including advanced legal analysis, governance responsibilities, interaction with government regulators, voluntary self-disclosure procedures, and the exercise of professional judgment in complex sanctions and export control scenarios. Tier 3 participants also engage in tabletop exercises that simulate real-world compliance challenges drawn from Dunmore's own experience.
1.4 Training Delivery Methodology
The training program employs a multi-modal delivery methodology designed to maximize employee engagement, comprehension, and retention across Dunmore's geographically dispersed workforce.
Delivery Formats. Training content will be delivered through a combination of the following formats:
• Live instructor-led sessions (in-person): Conducted at Dunmore's principal office locations in Houston, Dubai, and Hamburg by qualified trainers from Pemberton Investors Solutions LLC and, where appropriate, representatives of Calderwood & Harkness LLP. In-person sessions are the primary delivery format for Tier 3 personnel and are strongly encouraged for Tier 2 personnel.
• Live instructor-led sessions (virtual): Conducted via secure videoconference for personnel who are unable to attend in-person sessions due to geographic constraints. Virtual sessions replicate the content and interactive elements of in-person sessions.
• E-learning modules: Self-paced, interactive online modules deployed through Dunmore's learning management system ("LMS"). E-learning modules are the primary delivery format for Tier 1 personnel and serve as a supplemental resource for Tier 2 and Tier 3 personnel.
• Tabletop exercises: Facilitated scenario-based exercises designed for Tier 2 and Tier 3 personnel, in which participants work through realistic compliance scenarios and practice applying Dunmore's policies and procedures in a structured setting.
Annual Mandatory Training. All personnel at all tiers are required to complete the applicable training curriculum on an annual basis. In addition to the annual training cycle, targeted training sessions will be conducted for new hires (within 30 days of start date) and upon the occurrence of material regulatory changes that affect Dunmore's obligations under sanctions or export control laws.
Language Accessibility. Recognizing the multilingual character of Dunmore's global workforce, training materials will be delivered in English as the primary language, with supplementary materials and, where feasible, live instruction available in the following additional languages:
• Arabic, for Dubai-based personnel at DTI;
• German, for Hamburg-based personnel at Dunmore Renewables GmbH; and
• French, for francophone personnel, including individuals such as Yves Leclerc.
All translated materials will be reviewed for legal accuracy by Calderwood & Harkness LLP and Pemberton Investors Solutions LLC prior to deployment.
Attendance Tracking and Certification. Completion of training will be tracked through Dunmore's LMS and through manual attendance records for live sessions. Upon completion of the applicable training curriculum and successful passage of the post-training assessment, each employee will receive a Training Completion Certification (the form of which is attached as Appendix G). All completion records will be maintained by the office of CCO Priya Nayar and will be available for inspection by outside counsel and, if requested, by government regulators.
Annual Content Review. The content of all training materials will be reviewed at least annually by Calderwood & Harkness LLP (Conrad Reeves, Senior Counsel, Export Controls & Sanctions) and Pemberton Investors Solutions LLC (Dr. Anton Bremer, Lead Consultant) to ensure continued accuracy, relevance, and alignment with current regulatory requirements and enforcement trends.
1.5 Training Completion Timeline
The training program will be deployed in accordance with the following schedule:
Initial Rollout: November 2023 – January 2024. The initial deployment of the training program across all three tiers will be completed during the three-month period from November 2023 through January 2024. The phased rollout begins with Tier 3 (Senior Leadership and Compliance) in November 2023, followed by Tier 2 (Risk-Elevated Functions) in December 2023, and concluding with Tier 1 (All Employees) in January 2024. This sequencing ensures that senior leadership and compliance personnel are fully trained before the broader employee population, enabling them to serve as informed resources and role models during the Tier 1 rollout.
Annual Refresher Training: Calendar Q4 Each Year. Following the initial rollout, annual refresher training will be conducted during the fourth calendar quarter of each year, commencing in Q4 2024. Refresher training will incorporate updated content reflecting any changes in applicable regulations, new enforcement trends, and lessons learned from Dunmore's ongoing compliance monitoring activities.
New Hire Onboarding Training: Within 30 Days of Start Date. All new hires, regardless of function or location, are required to complete the applicable tier of sanctions and export controls training within 30 days of their start date. New hire training is integrated into Dunmore's standard onboarding process and is administered through a combination of e-learning modules and, for Tier 2 and Tier 3 new hires, live sessions with the Compliance Department.
II. MODULE 1: OVERVIEW OF U.S. SANCTIONS LAWS AND OFAC PROGRAMS
2.1 What Are Economic Sanctions?
Economic sanctions are restrictions imposed by the United States government on economic and financial transactions with targeted countries, governments, entities, and individuals. The purpose of U.S. economic sanctions is to advance the national security and foreign policy objectives of the United States, including the promotion of international peace and stability, the deterrence of terrorism and weapons proliferation, and the protection of human rights. Sanctions represent one of the most powerful tools available to the U.S. government short of military action, and they impose significant compliance obligations on all persons and entities subject to U.S. jurisdiction.
Legal Authority. The principal statutory authority for U.S. economic sanctions is the International Emergency Economic Powers Act ("IEEPA"), codified at 50 U.S.C. §§ 1701–1706. IEEPA authorizes the President of the United States, upon the declaration of a national emergency with respect to any unusual and extraordinary threat emanating from outside the United States, to impose a range of economic restrictions, including blocking (freezing) the assets of targeted persons and entities, prohibiting transactions involving targeted parties, and restricting trade with targeted countries. In addition to IEEPA, certain sanctions programs are authorized under other statutes, including the Trading with the Enemy Act (50 U.S.C. § 4305) (which is the basis for the Cuba sanctions), various country-specific sanctions statutes (such as the Iran Sanctions Act), and counter-terrorism authorities. The President implements these authorities through Executive Orders, which set forth the scope and terms of specific sanctions programs.
Role of the Office of Foreign Assets Control ("OFAC"). OFAC, a bureau within the U.S. Department of the Treasury, is the primary federal agency responsible for the administration and enforcement of U.S. economic sanctions programs. OFAC issues regulations implementing each sanctions program, maintains the lists of sanctioned persons and entities (including the Specially Designated Nationals and blocked Persons List, or "SDN List"), issues specific licenses authorizing otherwise prohibited transactions, publishes interpretive guidance, and takes civil enforcement action against persons who violate the sanctions regulations. All Dunmore employees should understand that OFAC's authority is broad, its enforcement is active, and the consequences of violations — whether intentional or inadvertent — can be severe.
2.2 Key OFAC-Administered Programs Relevant to Dunmore
While OFAC administers more than thirty distinct sanctions programs, the programs most directly relevant to Dunmore's business operations are the Russia/Ukraine-related sanctions programs. The training curriculum also provides an overview of other programs that may be implicated by Dunmore's global operations.
Russia/Ukraine-Related Sanctions
The Russia/Ukraine-related sanctions represent the most significant sanctions exposure for Dunmore's operations, and they are the focus of the DOJ inquiry. The key components of these sanctions are as follows:
Executive Order 13662 — Sectoral Sanctions. Executive Order 13662, issued on March 20, 2014, authorizes OFAC to impose sanctions on persons operating in certain sectors of the Russian economy, including the energy sector. Pursuant to E.O. 13662, OFAC issued a series of Directives that impose specific restrictions on transactions with identified Russian entities operating in the targeted sectors. Directive 2, which is particularly relevant to Dunmore, restricts the provision, exportation, or reexportation of new financing (including new debt of longer than 60 days maturity and new equity) to persons identified on the Sectoral Sanctions Identifications (SSI) List as operating in the energy sector of the Russian Federation. Directive 2 does not impose a full asset freeze or transaction prohibition; rather, it targets specific categories of financial transactions. This distinction between sectoral sanctions and full blocking sanctions is a critical concept for Dunmore employees to understand, as the applicable restrictions — and the compliance obligations they impose — differ significantly.
Executive Order 14024 — Full blocking Sanctions. Executive Order 14024, issued on April 15, 2021, as subsequently amended, authorizes OFAC to block the property and interests in property of persons determined to operate or have operated in specified sectors of the Russian Federation economy, including the energy sector, and persons determined to be responsible for or complicit in activities that undermine the peace, security, stability, or sovereignty of Ukraine. Persons designated under E.O. 14024 are placed on the SDN List, and all of their property and interests in property within U.S. jurisdiction are blocked (frozen). U.S. persons are prohibited from engaging in virtually any transaction or dealing with SDN-listed persons, and non-U.S. persons may face secondary sanctions or penalties for certain transactions involving SDN-listed persons. The implementation regulations for E.O. 14024 are codified at 31 C.F.R. Part 589.
Specially Designated Nationals and blocked Persons List (SDN List). The SDN List is OFAC's master list of individuals and entities whose property and interests in property are blocked. When a person or entity is placed on the SDN List, all of that person's or entity's assets within U.S. jurisdiction are frozen, and U.S. persons are generally prohibited from engaging in any transaction or dealing with the listed party. This prohibition extends to virtually all forms of economic activity — the provision of goods, services, technology, or financial transactions — and applies regardless of the dollar amount involved. Employees should understand that even indirect dealings with SDN-listed persons, such as transactions facilitated through intermediaries, can constitute violations.
Sectoral Sanctions Identifications (SSI) List and Directive 2. The SSI List identifies persons subject to sectoral sanctions imposed under E.O. 13662. Unlike SDN-listed persons, SSI-listed persons are not subject to a comprehensive asset freeze or transaction prohibition. Instead, SSI-listed persons are subject to the specific restrictions set forth in the applicable Directive. Under Directive 2, for example, U.S. persons are prohibited from providing new financing (debt or equity beyond specified thresholds) to SSI-listed energy sector entities, but other transactions with those entities — such as the purchase of commodities or the provision of services not involving prohibited financing — may be permissible. Employees must understand the distinction between the SDN List and the SSI List and appreciate that different levels of restrictions apply depending on the relevant designation.
Other Potentially Applicable Sanctions Programs. In addition to the Russia/Ukraine-related sanctions, the following OFAC-administered programs may be relevant to Dunmore's global operations and are addressed at an overview level in the training curriculum:
• Iran Sanctions: Comprehensive sanctions prohibiting virtually all transactions between U.S. persons and Iran or the Government of Iran; secondary sanctions targeting non-U.S. persons who engage in certain significant transactions with Iran.
• Syria Sanctions: Comprehensive sanctions prohibiting most transactions involving Syria.
• North Korea Sanctions: Comprehensive sanctions prohibiting most transactions involving North Korea.
• Venezuela Sanctions: Sector-based sanctions targeting the Government of Venezuela and the Venezuelan oil sector.
• Cuba Sanctions: Comprehensive embargo on trade with Cuba, administered under the Trading with the Enemy Act and Cuban Assets Control Regulations.
• Belarus Sanctions: Sanctions targeting persons involved in the Belarusian regime's activities, including in connection with the conflict in Ukraine.
2.3 Who Is a "U.S. Person"?
The concept of "U.S. person" is foundational to the application of U.S. sanctions law. The scope of OFAC's jurisdiction is primarily defined by reference to the conduct of U.S. persons, and understanding whether a given individual or entity qualifies as a U.S. person is a threshold inquiry in any sanctions compliance analysis.
Definition Under OFAC Regulations. Under OFAC's regulations, the term "U.S. person" generally includes:
• Any citizen or permanent resident alien (green card holder) of the United States, wherever located in the world;
• Any entity organized under the laws of the United States or any jurisdiction within the United States, including any state, territory, or the District of Columbia (this includes corporations, limited liability companies, partnerships, and other legal entities);
• Any person physically located in the United States, regardless of citizenship or nationality; and
• Any branch or office of a foreign entity that is located in the United States.
Application to Dunmore. The U.S. person analysis is of critical importance to Dunmore because the Company's organizational structure spans multiple jurisdictions, and the U.S. person status of individual entities and employees within the Dunmore group has direct implications for the scope of applicable sanctions obligations.
• Dunmore upstream Americas LLC ("DUA") is a limited liability company organized under the laws of the State of Delaware (EIN 84-2937561) with its principal offices in Houston, Texas. DUA is unambiguously a "U.S. person" under OFAC's regulations. As such, DUA is prohibited from engaging in any transactions with SDN-listed persons or entities, must comply with all sectoral sanctions restrictions, and is subject to the full range of OFAC civil and criminal enforcement authorities.
• Dunmore Energy Holdings Ltd. ("DEH") is incorporated in the Cayman Islands and is not, by virtue of its place of incorporation, a U.S. person. However, DEH may trigger U.S. sanctions jurisdiction through the activities of its U.S.-person employees, the use of the U.S. financial system (e.g., dollar-denominated transactions cleared through U.S. correspondent banks), or the involvement of U.S.-origin goods, technology, or services in its operations.
• Dunmore Trading International Ltd. ("DTI") is registered in the Dubai International Financial Centre and is not, by virtue of its place of registration, a U.S. person. However, DTI's operations may implicate U.S. sanctions jurisdiction through the same nexus points identified for DEH — U.S.-person employees, the U.S. financial system, and U.S.-origin items. The internal investigation examined the jurisdictional nexus between DTI's activities and U.S. sanctions law in considerable detail, and the analysis performed during that investigation underscores the breadth of U.S. jurisdictional reach even with respect to non-U.S. entities.
"Causing" Violations. A critical principle that all Dunmore employees must understand is that non-U.S. persons can violate U.S. sanctions law by "causing" a U.S. person to engage in a prohibited transaction. Under OFAC's regulations and interpretive guidance, a non-U.S. person who orders, directs, or otherwise facilitates a transaction that causes a U.S. person (such as a U.S. bank processing a dollar-denominated wire transfer) to engage in a prohibited transaction may be held liable for a sanctions violation, even if the non-U.S. person is not itself subject to U.S. jurisdiction on any other basis. This principle has significant implications for DTI, DEWA, and Dunmore Renewables GmbH, all of which may engage in transactions that involve the U.S. financial system, U.S.-person counterparties, or U.S.-origin items.
The analysis performed during the internal investigation regarding jurisdictional nexus and U.S.-person status of DTI and its employees further highlighted the importance of this "causing" theory to Dunmore's compliance posture. Employees at non-U.S. Dunmore entities must understand that their conduct is not beyond the reach of U.S. sanctions law simply because they are located outside the United States or employed by a non-U.S. entity.
2.4 The OFAC 50% Rule
The OFAC 50% Rule is one of the most important — and frequently misunderstood — principles in U.S. sanctions compliance. A thorough understanding of this rule is essential for all Dunmore employees involved in counterparty screening, due diligence, or transaction approval.
Explanation of the Rule. Under OFAC's guidance, any entity that is owned, directly or indirectly, 50 percent or more in the aggregate by one or more blocked persons (i.e., persons on the SDN List) is itself considered to be a blocked person, even if that entity is not separately identified on the SDN List. This means that all transactions with such an entity are prohibited to the same extent as if the entity were itself listed on the SDN List. The 50% Rule applies both to direct ownership (where a single SDN-listed person owns 50% or more of the entity) and to aggregate ownership (where multiple SDN-listed persons collectively own 50% or more).
Practical Application. The practical implication of the 50% Rule is that sanctions screening cannot be limited to checking the names of counterparties against the SDN List. Compliance personnel must also conduct ownership analysis to determine whether a counterparty is 50% or more owned, individually or in the aggregate, by SDN-listed persons. This requires obtaining and verifying beneficial ownership information — a process that is addressed in Dunmore's enhanced counterparty due diligence procedures (described in Module 4 of this outline). Failure to conduct adequate ownership analysis creates a risk that Dunmore could unknowingly engage in transactions with entities that are constructively blocked under the 50% Rule.
Case Study from Dunmore's Experience. The importance of the 50% Rule is illustrated by Dunmore's own experience with Petronova Trading FZE. Petronova Trading FZE was a free zone establishment registered in the Jebel Ali Free Zone in Dubai, managed by Sergei Volkov. The internal investigation, supported by forensic analysis conducted by Ridgeline Advisory Group LLC, revealed that Petronova was beneficially owned and controlled by Volkhov Industrial Group JSC ("VIG"), a Russian joint-stock company chaired by Arkady Volkhov. Volkhov Industrial Group JSC was identified on the SSI List under E.O. 13662, Directive 2 on November 15, 2019, subjecting it to sectoral sanctions restrictions on new debt and equity in the energy sector. Subsequently, on April 6, 2022, Arkady Volkhov was designated on the SDN List under E.O. 14024, resulting in full blocking sanctions.
The 50% Rule analysis demonstrated that once Arkady Volkhov was designated on the SDN List, any entity he owned 50% or more — including, through VIG's ownership structure, Petronova Trading FZE — became a blocked entity as a matter of law. This meant that all of Dunmore's transactions with Petronova after Volkhov's SDN designation were prohibited, regardless of whether Petronova itself appeared on the SDN List. Moreover, the Directive 2 sectoral sanctions restrictions on VIG applied to Petronova through the same ownership analysis during the period prior to Volkhov's full SDN designation, restricting certain financing transactions with Petronova beginning as early as November 15, 2019. Had Dunmore conducted adequate beneficial ownership verification at the time of Petronova's onboarding, the Company would have identified the ownership connection to VIG and Arkady Volkhov, and the applicable sanctions restrictions could have been identified and applied before any prohibited transactions occurred.
2.5 Prohibited Conduct and Penalties
U.S. sanctions laws prohibit a broad range of economic activities involving sanctioned persons, entities, and jurisdictions. All Dunmore employees must understand the scope of prohibited conduct and the severity of the penalties that may be imposed for violations.
Types of Prohibited Transactions. The categories of transactions that are generally prohibited under OFAC-administered sanctions programs include, but are not limited to:
• Exports of goods, services, or technology to sanctioned persons, entities, or jurisdictions;
• Imports of goods from sanctioned persons, entities, or jurisdictions;
• Financial transactions, including wire transfers, trade financing, and the provision of credit;
• Facilitation of transactions by non-sanctioned persons on behalf of sanctioned persons or in connection with sanctioned jurisdictions;
• Provision of services, including brokering, logistics, insurance, and advisory services;
• Trade in goods, including commodities, equipment, and technology; and
• Any other dealing in the property or interests in property of a blocked person.
Civil Penalties. OFAC administers its civil enforcement authority in accordance with the OFAC Economic Sanctions Enforcement Guidelines, which establish a framework for assessing civil penalties based on factors including the nature and severity of the violation, whether the violation was voluntary, whether the person had knowledge of the conduct giving rise to the violation, whether the person cooperated with OFAC, and whether the person has implemented an effective compliance program. The statutory maximum civil penalty for violations of IEEPA is currently the greater of approximately $356,579 per violation or twice the value of the transaction that is the basis of the violation. For egregious violations involving large-value transactions, civil penalties can reach into the hundreds of millions of dollars.
Criminal Penalties. Willful violations of U.S. sanctions laws can result in criminal prosecution. Under IEEPA, criminal penalties include fines of up to $1 million per violation and imprisonment of up to 20 years per violation. The DOJ has stated that it views sanctions evasion as a national security priority and has committed to pursuing criminal prosecution in appropriate cases.
Corporate Liability vs. Individual Liability. It is essential for all Dunmore employees to understand that both the Company and individual employees can be held liable for sanctions violations. Corporate liability attaches when a violation is committed by an employee acting within the scope of their duties or with the knowledge or approval of management. Individual liability attaches to any person — including employees, officers, and directors — who willfully commits, conspires to commit, or aids and abets a sanctions violation. The DOJ has increasingly emphasized individual accountability in corporate sanctions enforcement, and employees should understand that compliance is not merely a corporate obligation but a personal one.
III. MODULE 2: U.S. EXPORT CONTROL REGULATIONS (EAR)
3.1 Overview of the Export Administration Regulations
In addition to the sanctions laws administered by OFAC, Dunmore's operations are subject to U.S. export control regulations administered by the Bureau of Industry and Security ("BIS"), a bureau within the U.S. Department of Commerce. The export control regime is distinct from, but complementary to, the sanctions regime, and violations of export controls can give rise to separate civil and criminal liability.
Legal Authority. The primary statutory authority for U.S. export controls is the Export Control Reform Act of 2018 ("ECRA"), codified at 50 U.S.C. §§ 4801–4852. ECRA establishes the legal framework for the control of exports, reexports, and transfers (in-country) of items, software, and technology that are subject to U.S. jurisdiction, in order to advance the national security and foreign policy interests of the United States.
The Export Administration Regulations. BIS implements ECRA through the Export Administration Regulations, codified at 15 C.F.R. Parts 730–774. The EAR establish the rules governing when a license from BIS is required for the export, reexport, or transfer of a particular item to a particular destination, end-user, or end-use, and they specify the available license exceptions that may permit certain transactions without a specific license. The EAR also establish the Commerce Control List ("CCL"), which classifies controlled items by Export Control Classification Number ("ECCN"), and they maintain several restricted party lists, including the Entity List, the Denied Persons List, and the Unverified List.
All Dunmore employees involved in the export, reexport, or transfer of goods, technology, or software — including oilfield equipment, drilling components, and technical data — must understand the basic framework of the EAR and the circumstances under which a BIS license may be required.
3.2 Key Concepts
The EAR employ several technical concepts that are essential to understanding when a license is required and how to classify items for export control purposes.
Export, Reexport, and Transfer (In-Country). Under the EAR, an "export" is the shipment or transmission of an item out of the United States, or the release of technology or source code to a foreign national within the United States (the latter being known as a "deemed export"). A "reexport" is the shipment or transmission of an item from one foreign country to another, or the release of technology or source code to a national of a different country within the same foreign country. A "transfer (in-country)" is the change in end-use or end-user of an item within the same foreign country. All three categories of transactions — exports, reexports, and transfers (in-country) — are subject to the EAR's licensing requirements.
The concept of "deemed export" is of particular importance for Dunmore because it means that the disclosure of controlled technology or source code to a foreign national within the United States (for example, sharing technical data with a non-U.S. engineer at Dunmore's Houston office) may constitute a controlled export requiring a BIS license.
Export Control Classification Number (ECCN). The CCL classifies all controlled items by ECCN, a five-character alphanumeric code that identifies the item's technical parameters, the reasons for control, and the applicable licensing requirements. The ECCN determines whether a license is required for a particular export based on the item's classification, the destination country, the end-user, and the end-use. Proper ECCN classification is the starting point for any export control analysis and is the responsibility of the exporter — not the counterparty or the freight forwarder.
EAR99. Items that are subject to the EAR but are not specifically classified on the CCL — that is, items that do not correspond to any ECCN — are designated as "EAR99." Most commercial products fall into the EAR99 category. While EAR99 items generally do not require a license for export to most destinations, a license may still be required based on the end-user, end-use, or destination country. In particular, exports of EAR99 items to embargoed destinations (such as Russia, under current regulations) or to entities on the BIS Entity List may require a license.
License Requirements and License Exceptions. When the EAR indicate that a license is required for a particular transaction, the exporter must apply to BIS for a specific license before the export can proceed. In certain cases, the EAR provide license exceptions that authorize specific types of transactions without a specific license, subject to conditions and limitations set forth in the regulations. The determination of whether a license exception is available is a fact-intensive analysis that must be conducted on a transaction-by-transaction basis.
3.3 Russia/Belarus Sanctions Under the EAR
In response to Russia's invasion of Ukraine in February 2022, BIS implemented sweeping new export controls targeting Russia and Belarus. These controls significantly expanded the scope of items subject to license requirements for export, reexport, or transfer to Russia and Belarus and established a policy of denial for most license applications.
EAR §746.5: Comprehensive Restrictions. Section 746.5 of the EAR imposes comprehensive restrictions on exports, reexports, and transfers (in-country) of items subject to the EAR to or within Russia and Belarus. These restrictions apply to a broad range of items, including items classified under numerous ECCNs as well as many EAR99 items. The policy for license applications under §746.5 is generally a policy of denial, with limited exceptions for specified categories of items (such as certain consumer goods and humanitarian items).
Specific Focus on Oil and Gas Items. The EAR restrictions on Russia are of particular relevance to Dunmore's business because they specifically target items relevant to oil and gas exploration and production. This includes items used in drilling, well completion, downhole tools, refining, and other aspects of the upstream and midstream oil and gas value chain. BIS has identified the Russian energy sector as a strategic priority for export controls, and the licensing requirements for energy-related items are among the most restrictive provisions of the Russia/Belarus sanctions under the EAR.
ECCNs Relevant to Dunmore's Business. The internal investigation identified two ECCNs of particular relevance to Dunmore's export activities:
• ECCN 2B350: Chemical/Biological Equipment and Components. This classification covers certain types of processing and production equipment, including components that have applications in oilfield operations. Items classified under ECCN 2B350 are controlled for chemical and biological weapons proliferation reasons and are subject to heightened licensing requirements, including for exports to Russia.
• ECCN 2B999: Specific Processing Equipment Not Elsewhere Specified. This classification covers certain oilfield drilling equipment and components that are not classified under other ECCNs. Items classified under ECCN 2B999 are controlled for anti-terrorism and other policy reasons and are subject to license requirements for exports to specified destinations, including Russia.
Reference to the Internal Investigation's Findings. The internal investigation determined that Dunmore Trading International Ltd. facilitated exports of oilfield drilling equipment and components with a total transaction value of approximately $12.4 million, classified under ECCN 2B350 and ECCN 2B999, to end users in Russia via Caspian Logistik GmbH, a German logistics company based in Hamburg and managed by Klaus Weidemann. These shipments potentially violated EAR §746.5 to the extent they constituted unauthorized exports, reexports, or transfers of controlled items to Russia without the required BIS license. The factual circumstances of these transactions — including the use of a European logistics intermediary, the routing of shipments through transshipment points, and the reliance on potentially false end-user certifications — are incorporated into the case study exercises in Module 5 of this training program.
3.4 End-User and End-Use Restrictions
In addition to the country-based restrictions imposed under the EAR, BIS maintains several restricted party lists that identify specific end-users and entities with which transactions are subject to heightened scrutiny or outright prohibition.
BIS Restricted Party Lists.
• Entity List (Supplement No. 4 to Part 744): The Entity List identifies foreign persons (including entities, individuals, and government organizations) that are subject to specific license requirements for the export, reexport, or transfer of specified items. Inclusion on the Entity List generally imposes a license requirement for all items subject to the EAR, with a policy of denial for most applications.
• Denied Persons List: The Denied Persons List identifies persons whose export privileges have been denied by BIS. Any transaction involving a person on the Denied Persons List is prohibited.
• Unverified List: The Unverified List identifies foreign persons for whom BIS has been unable to verify the bona fides of the end-user in connection with a prior transaction. While inclusion on the Unverified List does not impose an absolute prohibition, it imposes additional due diligence obligations and prohibits the use of certain license exceptions.
End-User Certificates. An end-user certificate ("EUC") is a document provided by the ultimate recipient of exported goods that certifies the identity of the end-user, the intended end-use, and the final destination of the goods. EUCs are a common element of export control compliance programs and are frequently required by BIS as a condition of a license or as part of the exporter's due diligence. However, EUCs are only as reliable as the verification process applied to them. Exporters have an obligation to assess the credibility and accuracy of EUCs and to identify red flags that may indicate false or misleading certifications.
Red flags for false EUCs include: the EUC is issued by an entity that has no verifiable business operations or no apparent need for the exported items; the EUC contains inconsistencies (such as discrepancies in company names, addresses, or authorized signatures); the EUC uses a generic template that does not appear customized to the specific transaction; the stated end-use is inconsistent with the item's technical capabilities; or the EUC is issued by an entity in a non-sanctioned jurisdiction but the shipping documentation indicates that the goods will transit through or be diverted to a sanctioned jurisdiction.
Case Study from Dunmore's Experience. The importance of end-user verification is illustrated by the findings of the internal investigation regarding shipments routed through Caspian Logistik GmbH. Review of end-user certifications associated with those shipments revealed that the stated end-users were entities located in non-sanctioned jurisdictions (ostensibly in Central Asian countries), but further investigation by Ridgeline Advisory Group LLC and Calderwood & Harkness LLP determined that the goods were ultimately destined for Volkhov-controlled entities operating in Russia. The EUCs in question contained multiple red flags, including the use of identical template language across multiple certifications, the listing of recently formed entities with no verifiable oilfield operations as end-users, and discrepancies between the stated end-use and the technical specifications of the exported equipment. Had Dunmore implemented proper end-user verification procedures — including independent verification of the end-user's identity, business operations, and stated end-use — these red flags would have been identified before the shipments were executed.
3.5 Penalties for Export Control Violations
Violations of the EAR can result in severe civil and criminal penalties, as well as administrative sanctions that can effectively destroy a company's ability to engage in international trade.
Civil Penalties. BIS has the authority to impose civil monetary penalties of up to approximately $330,947 per violation, or twice the value of the transaction that is the basis of the violation, whichever is greater. BIS also has the authority to issue warning letters and to enter into settlement agreements with violators. The amount of any civil penalty is determined based on factors including the nature and seriousness of the violation, the violator's compliance history, the degree of willfulness, and the violator's cooperation with the investigation.
Criminal Penalties. Willful violations of ECRA and the EAR can result in criminal prosecution. Criminal penalties include fines of up to $1 million per violation and imprisonment of up to 20 years per violation. The DOJ's National Security Division has designated export control enforcement as a top priority, and the CES has dedicated significant resources to the investigation and prosecution of export control violations, particularly those involving Russia, China, and Iran.
Denial of Export Privileges. In addition to monetary penalties and criminal sanctions, BIS has the authority to deny a person's export privileges — effectively prohibiting the person from participating in any export transaction subject to the EAR. A denial order can be imposed on individuals as well as entities and can extend for periods of up to 20 years. For a company like Dunmore, which relies on the ability to export equipment, technology, and services internationally, the denial of export privileges would have a devastating impact on business operations.
IV. MODULE 3: DUNMORE-SPECIFIC RISK PROFILE AND LESSONS LEARNED
4.1 Dunmore's Business Operations and Risk Areas
Dunmore Energy Holdings Ltd. operates a diversified global energy business encompassing oil and gas exploration, production, and trading, as well as renewable energy development. The geographic breadth and operational complexity of Dunmore's business create a multifaceted risk profile with respect to sanctions and export controls compliance. Understanding this risk profile — and the specific factors that contributed to the compliance failures identified during the internal investigation — is essential for all Dunmore employees.
Key Subsidiaries and Their Risk Profiles:
Dunmore Trading International Ltd. ("DTI"). DTI is Dunmore's Dubai-based commodity trading subsidiary, registered in the Dubai International Financial Centre under DIFC License No. CL-4827. DTI operates a trading desk engaged in the purchase, sale, and swap of crude oil, refined petroleum products, and oilfield equipment. DTI has been identified as the highest-risk operating subsidiary within the Dunmore group due to several factors: the nature of commodity trading, which involves high-value, fast-moving transactions with a large number of counterparties; the geographic location of DTI in Dubai, which is a major transshipment hub and a jurisdiction where intermediary entities with connections to sanctioned persons frequently operate; DTI's historical engagement in transactions involving counterparties in or connected to sanctioned regions, including Russia; and the fact that the conduct giving rise to the DOJ inquiry was centered at DTI's trading desk.
Dunmore upstream Americas LLC ("DUA"). DUA is Dunmore's Houston-based U.S. operating subsidiary, organized as a Delaware limited liability company. As a U.S. person, DUA is subject to the full scope of U.S. sanctions and export control laws. Any involvement by DUA in international transactions — including the provision of technical support, financial services, or management oversight to other Dunmore entities — carries inherent sanctions risk. DUA's risk profile is further elevated by its role as the locus of technical expertise within the Dunmore group, as the provision of controlled technology or technical data to non-U.S. entities may constitute a controlled export under the EAR.
Dunmore Renewables GmbH. Dunmore Renewables is Dunmore's Hamburg-based renewable energy development subsidiary, organized under German law. While Dunmore Renewables' primary business activities relate to renewable energy projects, the subsidiary's risk profile includes exposure to dual-use technology issues (certain renewable energy technologies and components may have dual-use applications and may be classified under the CCL) and the potential for transshipment of controlled items through European logistics intermediaries. The investigation's identification of Caspian Logistik GmbH — also based in Hamburg — as a conduit for potentially unauthorized exports underscores the transshipment risk associated with European logistics corridors.
Dunmore Exploration West Africa Ltd. ("DEWA"). DEWA is Dunmore's Lagos-based exploration subsidiary. DEWA's risk profile includes exposure to interactions with sanctioned parties operating in the West African energy sector, as well as elevated corruption and diversion risks associated with the Nigerian operating environment. While DEWA was not directly implicated in the conduct giving rise to the DOJ inquiry, its operations in a jurisdiction with significant governance challenges require heightened vigilance.
Geographic Risk Factors. Several geographic factors contribute to Dunmore's overall risk profile:
• United Arab Emirates (UAE): The UAE, and Dubai in particular, is one of the world's largest transshipment hubs. The UAE's free zone regime facilitates the establishment of intermediary entities that may be used to obscure the ultimate origin or destination of goods and commodities. OFAC and BIS have identified the UAE as a jurisdiction of concern for sanctions evasion, and the presence of a high volume of intermediary entities connected to Russian, Iranian, and other sanctioned-jurisdiction principals necessitates rigorous due diligence for UAE-based counterparties.
• Germany: Germany's role as a major logistics and industrial hub within Europe creates transshipment risk, as goods moving through German ports and logistics networks may be diverted to sanctioned destinations. The involvement of Caspian Logistik GmbH in the conduct at issue in the DOJ inquiry illustrates this risk.
• Russia: Russia is a comprehensively sanctioned jurisdiction under both OFAC and BIS regulations. All transactions involving Russian counterparties, Russian-origin commodities, or goods destined for Russia require careful analysis and, in most cases, are prohibited absent a specific license.
• Nigeria: While Nigeria is not a sanctioned jurisdiction, the Nigerian operating environment presents elevated risks related to corruption, diversion of goods, and the potential for interactions with individuals or entities connected to sanctioned programs.
4.2 Summary of Conduct That Gave Rise to the DOJ Inquiry
For training purposes, the conduct that gave rise to the DOJ inquiry is presented in the form of an anonymized and generalized case study, though it references publicly known facts and the findings of the internal investigation. The purpose of this case study is not to assign individual blame but to ensure that all Dunmore employees understand the types of conduct that can give rise to sanctions and export control violations and to reinforce the importance of the compliance controls and procedures now in place.
Overview of the Conduct. Between approximately March 2020 and April 2022, DTI's Dubai trading desk engaged in a series of crude oil, refined product, and oilfield equipment transactions involving counterparties with undisclosed ties to a Russian industrial conglomerate — Volkhov Industrial Group JSC — that was subject to OFAC sectoral sanctions (SSI List, Directive 2, under E.O. 13662) and subsequently to full SDN blocking sanctions (under E.O. 14024). The relevant transactions fell into three categories:
Crude Oil Swap Transactions. DTI entered into 14 crude oil swap transactions with a total notional value of approximately $218.7 million. These transactions involved intermediary entities Petronova Trading FZE and Zenith Petroleum DMCC, both of which were Dubai-based trading companies. Forensic analysis conducted by Ridgeline Advisory Group LLC determined that 9 of the 14 transactions, representing approximately $156.3 million in notional value, involved crude oil that was ultimately sourced from or destined for entities controlled by Arkady Volkhov and Volkhov Industrial Group JSC. The use of intermediary entities — Petronova and Zenith — served to obscure the involvement of Volkhov-controlled entities in the transactions and to distance Dunmore from the sanctioned parties.
Oilfield Equipment Exports. DTI facilitated the export of oilfield drilling equipment and components with a total transaction value of approximately $12.4 million. The equipment was classified under ECCN 2B350 and ECCN 2B999 and was shipped to end users in Russia via Caspian Logistik GmbH, a German logistics company based in Hamburg and managed by Klaus Weidemann. End-user certifications associated with these shipments were determined to contain potentially false statements regarding the identity and location of the ultimate end-users, and investigation revealed that the equipment was ultimately destined for Volkhov-controlled entities operating in Russia. These shipments potentially violated EAR §746.5, which prohibits the export, reexport, or transfer of controlled items to Russia without a BIS license.
Payment Structuring. A total of $34.2 million in payments across 127 discrete transactions were routed through intermediary accounts at Crescent Commercial Bank PJSC in Dubai during the period from March 2020 to March 2022. The payment flows were structured to obscure the ultimate beneficial ownership of Volkhov-connected entities. Payments were layered through multiple intermediary accounts, and the stated beneficiaries of the transactions did not correspond to the actual parties involved in the underlying commodity trades. This payment structuring pattern was identified during the forensic accounting workstream of the internal investigation and constituted a significant red flag that was not identified or escalated by DTI's finance function or the compliance department during the relevant period.
4.3 Compliance Failures Identified
The internal investigation and the remediation assessment identified several critical compliance failures that contributed to the conduct described above. These failures are presented here not as historical curiosities but as actionable lessons for all Dunmore employees. Understanding what went wrong — and why — is essential to ensuring that similar failures do not recur.
Inadequate OFAC Screening Protocols. Dunmore's former Chief Compliance Officer, Gerald Fisk, maintained sanctions screening procedures that were sporadic and inconsistent. Screening refreshes for existing counterparties were not conducted on a regular schedule, and enhanced due diligence was not applied to counterparties in high-risk jurisdictions. The screening protocols in place during the relevant period did not incorporate beneficial ownership analysis, meaning that counterparties with SDN-listed beneficial owners could pass through the screening process without detection. The investigation determined that Petronova Trading FZE was never subjected to a beneficial ownership analysis, despite the fact that its managing director, Sergei Volkov, was a Russian national and the entity was registered in a free zone known as a hub for intermediary trading companies.
Failure to Escalate Red Flags. Multiple red flags associated with Petronova Trading FZE and Zenith Petroleum DMCC were apparent to personnel on DTI'