- Weak flag registry oversight has fueled the expansion of the shadow fleet, according to a new RUSI report.
- IMO lacks enforcement powers, leaving systemic gaps that allow vessels to evade sanctions.
- FATF could provide oversight, using its proven regulatory tools to hold flag states accountable.
The Royal United Services Institute (RUSI) has warned that the recent surge in the shadow fleet is not a one-off event but the direct result of systemic weaknesses in flag state governance. Its new report highlights how ships can obtain flags with little scrutiny, avoid ownership transparency, and escape enforcement actions, creating a parallel ecosystem that undermines maritime norms and sanctions.
According to RUSI, more than 700 vessels were sanctioned in the past year, including those targeted by the US for links to Iran and by the EU and UK for ties to Russia. Despite some targeted measures, regulators remain fragmented and reactive, failing to slow the fleet’s expansion.
IMO’s Limited Role
While the International Maritime Organization (IMO) imposes obligations on its member states, it has no enforcement powers, leaving implementation to flag states. Co-author Gonzalo Saiz from RUSI’s Centre for Finance and Security argued that many flag states neglect their responsibilities, failing to check vessel ownership, insurance, or seaworthiness.
“The problem stems from a lack of pressure on flag states,” Saiz said, noting that some jurisdictions see flagging as a quick revenue stream rather than a responsibility. This permissive environment, he added, has fueled unsafe and opaque practices across global shipping.
FATF as a Potential Oversight Body
RUSI argues that the Financial Action Task Force (FATF), the international watchdog for money laundering and terrorist financing, is uniquely positioned to bring accountability to the system. Unlike the IMO, FATF has a track record of driving real regulatory reforms, with its assessments carrying significant weight in global financial markets.
The report recommends that FATF evaluate how jurisdictions regulate foreign registries and maritime service providers, shifting accountability “upstream” to governments that tolerate lax practices. This would help dismantle the fraudulent networks enabling flag-hopping and high-risk ship registrations.
Systemic Risks and the Need for Reform
The report stresses that registry abuse has become prevalent in proliferation financing — the funding of weapons of mass destruction programs — an area already covered by FATF mandates. With growing geopolitical tensions and the increasing militarisation of maritime sanctions, RUSI argues that leveraging FATF’s framework is the most scalable and credible way to curb shadow fleet activity.
Currently, the burden falls disproportionately on port states, insurers, financial institutions, and naval patrols, while permissive registries escape scrutiny. A shift toward FATF-led oversight would directly target the root enablers of sanctions evasion and restore integrity to global shipping.
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Source: Lloyd’s List
