A non-executive director of a shipping company which chartered a ship used to transport gunshot cartridges from St Petersburg to Morocco has been cleared of breaching EU sanctions against Russia.
Karl David Mallia was prosecuted as a non-executive director of Donna Shipping Company Ltd, a Malta-registered company whose business centered around the vessel MV Sheksna.
Investigations were launched in April 2019 when a local bank flagged a suspicious transaction to the Sanctions Monitoring Board.
The transaction involved a pending inward payment of €78,000 from St Petersburg company United Transport Company LLC, to the account of the Maltese shipping company for “sea freight”.
The bank requested further information from the shipping company and was handed documents which showed that it had chartered the MV Sheksna to transport “142 pallets/95,200kg of sporting and hunting cartridges (civil use)” from St Petersburg to the General Directorate for National Security of Morocco.
The bank subsequently blocked that payment in view of EU sanctions in response to Russia’s actions against Ukraine.
Although the sanctions decision (of the time) applied to all EU Member States, it was up to each member state to establish punishment for any breach.
The court observed that in this case, the police did not charge Mallia and the company for breaching any domestic law implementing the directive as the Maltese authorities had not provided punishment in respect of any such breach.
Magistrate Donatella Frendo Dimech noted that Mallia’s statements to the police clearly showed that he had carried out normal due diligence, relying on due diligence carried out by a reputable Maltese law firm as well as banks.
The vessel had all the necessary certificates to operate and besides, as non-executive director Mallia was not involved in operations which were handled by the company’s management. He was not one of the company’s signatories and simply represented the ultimate beneficial owner and sole shareholder, who was Vladislav Ovsyannikov.
Mallia had testified that he only got to know about the suspicious transaction from the police, and the news hit him like a bolt from the blue.
The court observed that the bank had flagged the matter to the Sanctions Monitoring Board and sought documents from the company’s service provider without ever asking Mallia.
In fact, the bank had communicated with the company’s UBO and not Mallia.
A lawyer from a private firm whose office was the registered address of the shipping company, acted in terms of a power of attorney.
Electronic correspondence between Mallia and the company’s auditor revolved around financial, audits and investments.
It also turned out that the ship had not been registered in Malta since August 2014, namely five years before Mallia stepped in as director.
Although Mallia had stated that “the company had a vessel” that vessel did not feature among the assets of Donna Shipping when searches were carried out at Transport Malta.
The manager and operator of the vessel appeared to be a foreign company, GSE Aspol Baltic, whose client was Donna Shipping.
Yet police had not contacted that company.
Neither the director nor the company could be found guilty of breaching those sanctions as well as anti-money laundering and financing of terrorism regulations, as charged, the court said.