The “Mission Impossible”-esque Ghosn escape may be an extreme case study, but it is a cautionary tale for any private jet operator. As captivating as they may be, various versions of the facts are well publicized and are not the focus of this article. For the purposes of this article, I assume MNG Jet’s public statements to date concerning the rogue nature of the operation and employees involved to be true. MNG Jet claims to be a victim, and maintains that it had no knowledge of the “illegal” use of its aircraft.  Still, the company could face millions of dollars of potential liability as well as reputational damage.  This Turkish undelight – perhaps along with a cup of Turkish coffee – serves as a wake-up call for operators for the need to have a robust risk and compliance framework in place.

Private jet operators face the ongoing risk of exposure to an array of scoundrels, including money launderers, corrupt officials, organized criminals, terrorists, sanctioned parties and even human traffickers. Indeed, is the inherently private, flexible and tailored nature of service that makes private jets at once attractive and susceptible to illicit and criminal enterprise.  Compounding such risk is the premise that multiple countries can assert legal jurisdiction over these companies, for example, between physical location, nationality of individuals and type of currency changing hands.  Moreover,

When faced with such risks, any well-managed private jet operator should, at a minimum, adopt compliance best practices that are used in other industries to manage similar risks.  The key is to develop inoculation strategies and cultivate “backward defensibility” – a phrase which can prove to be a saving grace when – not if – a private jet operator encounters a bad actor and/or careless employee(s). To that end, I recommend that private jet operators take the following six steps if they have not already:

1. Conduct a risk assessment exercise to assess your aircraft under management might be misused to violate the law. You can do this internally, or via a credible third party like outside legal counsel.
2. Issue a statement that legal compliance is company policy. Owners or senior officials can issue policy statements to all employees stating the complying with law is, in short, more important than business and that the company intends to comply with applicable laws and not help others to violate them.  Mention the important ones identified in your risk assessment – e.g. anti-money laundering (AML), anti-corruption, counter-terrorism, sanctions, export controls and tax evasion.
3. Identify a compliance officer. Task a senior employee with responsibility for monitoring adherence to the compliance policy statement.  Empower them with a direct reporting line to the senior management and owners.
4. Implement written compliance plans and procedures. Take the time to put in writing how the company expects to do business, how it expects employees to act and how to keep proper records.
5. Establish an AML program. This can help organize deliberate steps to avoid misuse of the aircraft under management.  Conduct customer and vendor due diligence, vet employees, and screen customers and commercial partners against Interpol, sanctions and other denied party lists.  Know your counterparty and assess their sources of funds.  If transacting in U.S. dollars, be certain not to provide services in countries or with parties that violation U.S. sanctions laws (U.S. dollar transactions clear the U.S. banking system and are subject to U.S. sanctions jurisdiction).
6. Conduct training for your employees. After investing in a compliance program, make sure personnel understand the company’s rules and why it is important to follow them.  Explain the legal risks to employees if misconduct is supported or ignored – for example, several MNG employees alleged to be involved in the Ghosn affair are facing individual criminal charges.  Identify red flags and encourage reporting by employees to supervisors.  Talking music cases with air holes are a good example of a red flag.  Keep records of the training for each employee.

The great escape artist Harry Houdini once famously remarked that “…what the eyes see and ears hear, the mind believes.”  He could have just as well been remarking on backward defensibility, where perception is tantamount to reality. In that light, a well-documented compliance program not only helps private jet operators avoid actual legal violations and manage risk exposure generally, but also helps evidence that the company intended to do the right thing.  If the need arises, senior management should be able to present specific documents to law enforcement, courts, lenders, commercial partners or even media to buttress an argument that the brush with unlawful activity was against company policy and unauthorized.

Paul Jebely serves as the managing partner of Pillsbury’s Hong Kong office and co-chair of its asset finance practice. He has advised clients on over US$ 13 billion in aircraft finance, leasing and trading transactions as well as on restructuring and enforcement matters. He is qualified to practice law in England, the United States and Canada.

He arrived in a box for a panel of Asian business aviation at Corporate Jet Investor London 2020 (pictured).