Unravelling Opaque Ownership: Sanctions Evasion & The Dark Arts of Enabling Illicit Maritime Trade

Opaque ownership structures pose one of the most persistent challenges for trade risk assessment, sanctions and regulatory compliance. Understanding how these structures operate, and the tell-tale signs to look out for, is essential to assessing risk exposure, strengthening due diligence processes and ultimately protecting your business from harm.

What defines a UBO?

At the heart of these ownership structures is the question of who ultimately controls the vessel. This is where the concept of the Ultimate Beneficial Owner (UBO) becomes critical. A UBO is defined as the individual person - or sometimes a small group of individuals - who ultimately own or exercise effective control over a legal entity, even if their name never appears on public sources or corporate filings. Correctly identifying the UBO is not just best practice; it is a regulatory necessity.

U.S. sanctions guidance makes this point clear through the OFAC 50% Rule , which states that any entity owned 50% or more - directly or indirectly - by one or more blocked persons is itself considered a sanctioned party, even if not explicitly named on the Specially Designated Nationals (SDN) List.

In the maritime industry, this means that ownership stakes buried in layers of holding companies or joint ventures can still trigger sanctions exposure. Failing to map out these relationships leaves compliance processes vulnerable to hidden risks.

The Early Warning Signs

While a shareholder document or annual return provides crucial documentary evidence, it can often provide misleading reassurance in a trading environment where “just enough” and moral hazard is rife and efforts to dig deeper are avoided due to time, relationship or financial concerns.

Be on the look-out for:

• Companies using different sets of UBO information for trading partners and financiers.
• Dark fleets represented by a series of unique, and unknown, directors and shareholders allocated per SPV.
• Trading teams running large-scale trading books with no obvious access to capital, or backed by individuals with no obvious source of wealth or experience in the sector.
• New companies buying on abnormal terms from suppliers perceived to be controlled by sanctioned individuals.
• Nominated vessel buyers receiving gold delivered from sanctioned Russian banks.

KYC Best Practices

A robust KYC process is the backbone of any counterparty due diligence, be it for new client onboarding, or onward risk monitoring. Below are our top 5 best practices that every compliance team should look have as part of their workflow:

1. Establish Identity

Confirm the precise registered details of your proposed counterparty; this must take place at outset to establish legitimacy and ensure ensuing KYC and due diligence work will be correctly targeted.

2. Secure Documentation

Request KYC documentation from your counterparty as early as possible, such as:

• Trade licenses/incorporation documents
• Passport details of the principals/promoters
• Documentation on sources of capital, financial accounts etc.
• Company profiles

3. Stress Test

Performing sanctions checks against names within the KYC data you receive is only part of the solution. Look beyond the documentation - not least in terms of true ultimate beneficial ownership and the source(s) of funding, which can be obscured behind the use of nominee shareholders and other measures designed to shift focus away from the actual interests involved.

4. Widen Coverage

Widen your search parameters to cover vessels involved in the transaction, and the trading partners of your counterparty.

Confirm historical vessel behaviour, (e.g. movements, ports calls, AIS gaps/spoofing and STS transfers), details of vessel ownership (immediate and ultimate), and the identification of likely end users of the commodities or vessels traded.

5. Subcontract and Protect

Engage a trusted third-party specialist to help alleviate the time-pressures of manual research and eliminate human error; such partners may already have vital intelligence to-hand, and will be primed to conduct thorough, highly targeted and efficient searches. Lastly, ensure you maintain a well-structured and accessible audit-trail of all KYC work undertaken and delivered against every transaction (and the resulting decisions taken).

We know first-hand that establishing ownership is hampered by a myriad of challenges, but by implementing the above practices to become second nature, you can rest assured that you are protecting your business effectively from hidden threats to trade.