[Alpha Biz= Lee Joonhyun] Samsung Heavy Industries is facing mounting criticism over internal control failures after a multi-billion-won crude tanker contract became entangled with an Iranian entity later placed under U.S. sanctions.

According to industry sources on February 19, the company recently explained that it had terminated the contract earlier this year due to non-payment, prior to the U.S. Treasury designating Meritron DMCC as part of an illicit Iranian oil network. Samsung Heavy Industries stated that it avoided sanctions exposure as a result.

However, the case has raised serious concerns about the company’s due diligence and risk management systems. The contract, initially signed in 2023 with another party, was later transferred to Meritron, an entity allegedly linked to a shadow fleet tied to Iran. The ownership change—considered a typical sanctions evasion tactic—was not properly identified during the contract process.

Industry insiders suggest that neither working-level staff nor senior management adequately verified the true ownership or funding sources behind the contract, despite its multi-billion-dollar scale.

Critics argue that the company’s exit from the deal was not a proactive risk mitigation measure but rather a forced decision due to unpaid balances. Had the final payment been completed, Samsung Heavy Industries could have faced significant exposure to U.S. sanctions and restrictions in the global financial system.

“The fact that the company appears relieved to have avoided sanctions by chance rather than through proper controls is misleading to investors and the market,” said Yoon Joo-ho, CEO of Umbrella Research.

As a result, two ultra-large crude carriers (VLCCs), each with a capacity of approximately one million barrels, remain undelivered and are currently idle near the company’s Geoje shipyard, occupying valuable dock space and tying up capital and resources.

Observers say the incident underscores systemic weaknesses in sales practices and internal controls, warning that a focus on order volume without adequate compliance checks may have contributed to the failure.

Experts are calling on the company’s leadership to overhaul its internal control systems and strengthen due diligence processes to prevent similar risks in the future.

 

 

 

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