As maritime risks increase and the regulatory environment becomes more demanding, so does the emphasis on due diligence and compliance controls when providing maritime finance.
Finance teams need to understand current and evolving risks, ensure they have comprehensive information about all the vessels and shipments on their portfolios, and perform stringent real-time checks to satisfy compliance. Can you detect potentially illicit behaviours such ship-to-ship transfers, deactivation of tracking systems and frequent flag-hopping?
Why is compliance risk management getting more complex?
Stricter guidelines and environmental responsibilities
The rules and guidelines the industry must work to are getting stricter. One example is the advisory on illicit shipping and sanctions evasion issued by the Office of Foreign Assets Control (OFAC), in conjunction with other US authorities. Building on earlier advisories, it listed a wide range of deceptive practices and reinforced the need for compliant finance.
Lenders also have environmental, social and governance (ESG) issues to consider, including the Poseidon Principles which aim to promote more sustainable shipping. Meanwhile, the International Maritime Organization’s IMO 2020 sulphur reduction plan encourages finance teams to exercise due diligence to identify counterparties who are not compliant.
The cost of mistakes is high
Therefore, Finance teams need a consistent, global, timely approach to sanctions compliance. Even unintentional breaches can and do result in large fines. In more extreme cases, there can be loss of access to the US financial market and even criminal penalties.
