- The UK’s top sanctions regulator has issued landmark guidance for all companies involved in maritime trade, instructing them to pay closer attention to vessel behaviour, company structures and potentially forged documents.
- The advisory is for entities especially involved in areas that may be subject to UK financial sanctions restrictions, including the handling of goods.
- According to the new guidance, UK companies are now expected to carry out “checks on ownership structures, vessel flag information, details of home ports and recently visited ports” when conducting seaborne trade transactions.
The shipping advisory from the UK Office of Financial Sanctions Implementation (OFSI) launched a guide that provides financial sanctions guidance for entities and individuals which operate in, or with, the maritime shipping sector, reports Thomson Reuters.
Objectionable tactics in maritime trade
The Office of Financial Sanctions Implementation (OFSI) warns that “a variety of tactics are deployed to confuse or conceal the identities of vessels, cargo, routes and ports,” meaning banks, insurers, traders and others could be unwittingly exposed to the illicit movement of goods and funds.
This report outlines a number of questionable practices used to trade in sanctioned goods at sea, reinforcing the need to develop compliance frameworks for stakeholders across the wider maritime ecosystem.
In the first place, the report explains what are the financial sanctions and where they are generally imposed to.
According to the report, “Financial sanctions help the UK meet its foreign policy and national security aims, as well as protecting the integrity of its financial system.”
The financial sanctions specifically relate to restrictions on funds and economic resources that are owned, held, controlled or made available to, or for the benefit of, designated persons or entities.
Illicit practices in shipping
It is noted that individuals and entities with exposure to the maritime shipping sector should be aware of the non-exhaustive list of illicit practices and ensure compliance and due diligence procedures take account of them.
Thus, the illicit practices include:
- Ship-to-ship transfers
- Automatic Identification Systems (AIS)
- Cyber activity
- Cryptoassets
- Financial system abuse
- False documentation
- Concealment.
The practices described above are not necessarily in themselves breaches of financial sanctions regulations in all cases. However, it is likely that transactions relating to or behaviors underpinning these practices, are.
Read the full maritime guidance here.
Industry turns to tech
The guidance is reminiscent of an advisory issued by the US Office of Foreign Assets Control (OFAC) in May this year, which signalled a major change in the role of the maritime sector in fighting financial crime.
Taken together, industry experts believe one trend is clear: a move away from checking lists of sanctioned entities when onboarding new customers, and towards ongoing due diligence.
“Businesses now need to screen against possible sanctions evasion, rather than just screen names against lists of sanctioned entities,” says Ami Daniel, chief executive of Tel Aviv-based Windward Maritime Analytics.
“Eventually, they will need to screen ships continuously, even if they’ve done business recently, which creates more challenges to business relationships and operations.”
Guy Sear, executive director for product management at IHS Markit, agrees business can no longer give “carte blanche” approval to individual ships.
“Vessels can change compliance status from one minute to the next,” he tells GTR. The end result, Sear says, is an uptick in the use of maritime analytics technology across the industry.
In IHS Markit’s case, the company monitors ships’ activities – or lack of activity, in the case of dark vessel movements – in real-time. Firms can use that information to provide immediate notifications when there is a change in status for a vessel on their watchlist.
At Windward, Daniel says there has been a 200% increase in new trials for its maritime analytics solutions since the OFAC advisory was published in May.
And for Pole Star, Ring says a growing number of companies have expressed an interest in its “hybrid tracking” services, which combine tracking data gleaned from multiple sources to obtain a clearer picture of a vessel’s behaviour.
That trend is expected to continue as other sanctions authorities turn their eye to maritime trade.
“The UN Security Council is pushing for information on this, and that typically becomes a driver for the EU,” Sear says. “Then regulators in Singapore, Hong Kong and South Korea often follow EU and UN guidance, and we’re already starting to see more downstream activity across Asia.”
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Source: Thomson Reuters
