When it comes to sanctions compliance, the maritime industry needs more than the basic vessel tracking tools.
Sophisticated and highly accurate monitoring tools are required to stay on top of the increasingly complex and deceptive practices being deployed by those engaged in trading sanctioned cargoes.
While Lloyd’s List Intelligence has been warning the industry about this for a long time now, the source of the above message comes not from us but a senior official at the US Office of Foreign Asset Control (OFAC).
Last week, OFAC issued guidance that tankers are manipulating Automatic Identification Systems (AIS) to obfuscate calls in eastern Russian ports such as Kozmino.
It said US nationals may have been deceived with falsified documents or deceptive shipping practices and inadvertently provided covered services to ships carrying oil sold above the price cap.
“Specifically in terms of what we are seeing that led to us issuing this alert, what we’ve seen is that sometimes there will be a discrepancy between what a very basic vessel-tracking service shows and a more sophisticated vessel-tracking service or subscription will show,” Claire McCleskey, assistant director of sanctions compliance and evaluation at Ofac, told a recent webinar.
“The very basic vessel-tracking [platforms] will show that a ship was somewhere in the area around Kozmino for example, but [will show] very clearly that they did not go anywhere near it, and then when you access a more sophisticated vessel-tracking system, you can see clearly that ship did in fact, call at Kozmino.”
Regulators are clearly gearing up for an enforcement campaign following an unprecedented influx of sanctions targeting Russia in the past year - but is the shipping industry ready?
Banks learned about sanctions diligence the hard way. The maritime industry does not have to.
Ask BNP Paribas what can happen to companies in any line of business, from anywhere in the world, deemed to have violated US sanctions.
In 2014, the French banking giant was ordered to forfeit $8.8bn and fined $140m after pleading guilty to processing transactions for Sudanese, Cuban and Iranian entities, in what still marks the largest criminal financial penalty in history.
Standard Chartered has had to fork out a total of $1.6bn for two sanctions cases in 2012 and 2019, while Commerzbank reached a $1.45bn settlement with OFAC in 2015.
It is now shipping’s turn in the firing line. US, EU and UK sanctions against Russia hinge on tanker operators and their insurers observing a $60 a barrel price cap on Russian crude exports.
In particular, Washington is keen to disrupt the opaque operations of the so-called ‘Dark Fleet’ of tankers ready to evade these measures and trade with Russia and other sanctioned countries such as Iran and Venezuela.
This fleet has now grown to 456 vessels, as of April 2023, equivalent to about 10% of the existing international tanker tonnage.
There is a real risk of inadvertently falling foul of the strictures if due diligence is restricted to just kicking the tyres.
Simply put, tick-box efforts are not going to be good enough. Relying on vessel tracking services that only do the basics will not pass muster.
With more stringent OFAC guidance and increased regulatory scrutiny, you can't afford to make mistakes, particularly when it comes to suspicious or illicit activities.
Read the whitepaper ‘Shifty Shades of Grey’ to understand the different risk profiles of the dark fleet.
Seasearcher Advanced Risk & Compliance from Lloyd’s List Intelligence is the new standard in compliance risk analysis. It provides insight that was previously unattainable, enabling you to save time and effort completing sanctions compliance checks, investigations and monitoring vessels for illicit activity.
