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Avoid Illicit Activity 

Compliance Adherence

Identifying illicit activity 

Identifying and assessing vessel behaviour that may point to activity that is illicit or questionable is crucial for insurers – whether or not they have a formal compliance team in place. 

Thankfully, illicit activity undertaken by commercial vessels is extremely rare, but when it occurs it can have a major impact on the businesses who have insured the vessel, its cargo, or its voyage. 

These activities are myriad and detecting them requires accurate maritime data and unparalleled insight from a trusted provider. 

Sanction violations 

The case of the American International Group (AIG) is a stark warning of sheer variety of insurance risks out there. 

From November 2007 to September 2012, AIG was alleged to be engaged in a total of 555 transactions totalling $396,530 in premiums and claims for insurance of maritime shipments of goods and materials destined for or transited through Iran, Cuba, or Sudan. 

On 26 June 2017, AIG settled with the US Treasury Department’s Office of Foreign Assets Control (OFAC) for 555 apparent violations under the OFAC’s Iranian Transactions and Sanctions Regulations (ITSR), the Weapons of Mass Destruction Proliferators Sanctions Regulations (WMDPSR), the Sudanese Sanctions Regulations (SSR), and the Cuban Assets Control (CACR). 

This case demonstrates the risk of fines, but other companies in the sector have been subject to investigations by regulators that have been extremely expensive and time-consuming even though they haven’t led to fines. 

Looming dangers 

Risks include, but are not limited to: 

  • Suspicious gaps in the ship’s automatic identification system (AIS) which continuously transmits a ship’s position. 
  • Intentionally tampering or disabling the vessel’s AIS transmitter or the information that it contains to obscure a vessel's whereabouts when conducting illicit trade. 
  • Suspicious delays, unscheduled stops or unaccountable loitering in combination with any other potentially risky activity. 
  • ‘Dark port’ stops where vessels with AIS signals turn them off before calling at sanctioned ports. This issue has hit the headlines because of an increase in such incidents since Russia began its invasion of Ukraine. There were 73 instances of suspicious AIS gaps for bulk carriers and general cargo ships in which vessels were deemed likely to have called at a port in Crimea in May, according to Lloyd’s List Intelligence analysis. This was up from 63 in April and 47 in March. 
  • Falsified documents are a common tactic for sanctions circumvention. By altering documentation associated with maritime transactions, invoices, and insurance paperwork, bad faith actors can obscure the origin of a vessel, its goods, its destination, or even give sanctioned vessels legitimacy. 
  • Ship-to-ship transfers (STS) are a common and legitimate practice where cargo is transferred between vessels at sea instead of at port. However, the practice can also be used to conceal the origin and nature of cargo and facilitate the illicit transfer of goods to evade sanctions.  

Help is at hand 

While the fleet operator and insurer risks being locked out of financial structures, civil and criminal penalties, and fines, the insurer's reputation may become tarnished by association. And when it comes to insurance, trust is everything. 

Suspicious AIS gaps, unaccountable loitering, or the possibility of making dark port calls during gaps in AIS messages would all be behaviours of concern. And they aren’t easy to spot. 

Brokers should, to the best of their ability, ensure that a minimum level of due diligence information is provided to underwriters in sufficient time to enable them to consider it and raise further queries – and insurers themselves need to undertake their own checks to stay on the right side of ever-changing regulations and sanctions.  

Intelligence at your fingertips 

It is not sufficient to simply look up whether a vessel or a company is sanctioned. Everyone interacting with a vessel, vessel cargo, vessel owner or charterer has been asked to adopt a risk-based approach to compliance checks.  

There is a need for marine insurers to interpret this guidance and quickly get a view of the fleet and operators they underwrite, to monitor high-risk area callings, sanctions and potential sanction breaches. 

With Seasearcher Advanced Risk & Compliance Insurers can maintain watchlists or be alerted to vessel behaviour that warrants checks and could be in breach of cover on the insured fleet and operators.   

The tool makes performing first-line screening or deeper compliance investigations easier and gives potentially illicit actors very few places to hide.