This instalment of Pole Star Global’s case study series highlights the indispensable role of PurpleTRAC in vessel screening operations. Kieran Michael Brown, Group Credit Risk Manager at Island Oil unveils the integral role Pole Star Global plays for the company’s compliance assurance processes.
Island Oil Holdings Ltd stands as a reliable partner and supplier in the marine and domestic fuels sector.
As an international company, Island Oil Holdings Limited operates physical supply stations across Cyprus, Romania, and Israel, and boasts ownership and self-management of 11 bunker vessels. Additionally, the business extends its influence with offices in key global hubs. This includes Piraeus, Singapore, London, Constanta, Haifa, Shanghai, and Hong Kong.
Island Oil Ltd serves as the flagship of Island Oil Holdings and is a stalwart in the global bunker market. Integral to the success of Island Oil are its top-tier vessel screening, compliance, and credit systems. Facilitated by Pole Star Global's PurpleTRAC solution, Island Oil has streamlined these processes and ensured accuracy in compliance due diligence.
To learn more, Pole Star Global spoke with Kieran Michael Brown, Group Credit Risk Manager at Island Oil. Brown oversees the Credit Risk Department for the Island Oil group of companies and plays a pivotal role as the primary operator in their Compliance Working Group.
Credit risk has a significant role in our industry, but compliance has become equally vital since global regulations tightened. Banks now scrutinise compliance as they process payments. We must ensure we adhere to our compliance procedures, including screening vessels for compliance, with the help of tools like Pole Star's PurpleTRAC. - Kieran Michael Brown, Group Credit Risk Manager at Island Oil
In this Pole Star Global case study, Brown elaborates on Island Oil’s vessel screening operations, highlighting the indispensable role of PurpleTRAC. Use this case study as a reference point to enhance your maritime due diligence.
Island Oil’s Vessel Screening Operations Safeguard Compliance for Secure Payments
Island Oil offers both fuel oil and diesel products to cater to diverse customer needs. Yet, what sets its distribution strategy apart is the reliance on unsecured credits. That is, Island Oil doesn't use conventional payment methods like immediate cash transactions or secured credit lines.
This approach serves a crucial purpose: it grants Island Oil the ability to extend flexibility to its clientele, a service that's particularly important in this industry. Given that shipping fuels constitute roughly half of a ship operator’s expenses, the option of immediate payment may not always be feasible.
In this, Island Oil acts as a lifeline for the shipping industry, akin to a trusted merchant bank providing essential liquidity.
Yet, this poses a risk for Island Oil due to the uncertainty surrounding future payments.
To illustrate, imagine the following scenario, as initially explained by Brown:
If your bank detects suspicious activity, they could freeze payment and launch an investigation. In favourable instances, the payment might be temporarily held for review. However, in less fortunate circumstances, the bank might outright reject the payment, leaving you stranded and scrambling for alternative payment avenues.
On top of this, compliance regulations are becoming increasingly stringent. Especially today, in light of the widely publicised May 2020 OFAC advisory, and amidst the ongoing Ukrainian conflict. Compliance has never been more crucial.
As such, it's evident that it's not just about mitigating credit risk to ensure payment, but it's also about adhering to compliance standards. That is, compliance plays a pivotal role in securing payments within this industry.
Brown, alongside his team, ensures strict adherence to compliance procedures at all times. These procedures mandate thorough screening of vessels, a task facilitated by Pole Star Global’s PurpleTRAC.
Island Oil’s Compliance and Vessel Screening Processes: Utilising PurpleTRAC in a 3-Step Process
Before PurpleTRAC, Island Group relied on a patchwork of different programs and their best guesses to navigate compliance. This meant juggling various tools such as vessel movement programs, official portals like OFAC, compliance portal aggregators, vessel detail databases and hastily adapted AML programs.
As you can imagine, Island Group's credit and compliance team found themselves spending valuable time clearing ships and legal entities. Unfortunately, their findings often fell short of accuracy. Limited data meant teams struggled to gain a comprehensive understanding of the compliance landscape.
So, how exactly has PurpleTRAC transformed Island Group's vessel compliance processes?
Brown highlights that vessel compliance is an ongoing endeavour. Yet he offers an insightful overview of Island Group's revamped process, summarised in 3 key steps.
- Step One - Define Your Risk Tolerance:
- Island Group's journey began with defining the company’s compliance risk tolerance. Once defined, PurpleTRAC's settings were adjusted to match. This step took two months to complete with the help of PurpleTRAC's sales engineer. Priority was given to capturing low-hanging fruit compliance breaches. For example, alerts were set for tankers that recently called Bandar Abbas.
- Step Two - Fine-tune Your PurpleTRAC Settings:
- Collaborating closely with Pole Star's team and leveraging PurpleTRAC, Island Group delved into the more nuanced, commercially sensitive settings. These scenarios often dwell in the grey areas, where vessels may raise flags due to their movements, ownership structures, or affiliations. While these instances may spark suspicion, they don't necessarily indicate non-compliance. It's worth noting that navigating these grey areas is an ongoing process. As such, Island Group continually investigates vessels on a case-by-case basis. This is discussed further below.
- Step Three - Teach the Process With Employee Training:
- Traders underwent comprehensive training in executing the vessel screening process using PurpleTRAC. Thanks to the platform's user-friendly interface and straightforward outputs, the training was completed within two weeks. Once proficient with PurpleTRAC, the screening process is seamlessly integrated into the traders' workflow. This created streamlined operations and freed up valuable time for credit or compliance members.
"Training our traders was the straightforward part, taking about two weeks. PurpleTRAC's user-friendly system and clear outputs streamlined our screening process. Traders' involvement in initial screening reduced the workload for our credit and compliance teams." - Kieran Michael Brown, Group Credit Risk Manager at Island Oil
Investigating Dark Activity with PurpleTRAC on a Case-By-Case Basis
The term “dark fleet” can provoke feelings of apprehension, for any credit manager, as stated by Brown. Yet, with the right tools on hand, a more diligent approach to risk mitigation and regulatory compliance can be championed.
"The term 'dark fleet' strikes fear into the hearts of credit managers and compliance professionals alike. PurpleTRAC illuminates many of the telltale signs of dark fleet vessels, both in terms of their movements and intrinsic characteristics." - - Kieran Michael Brown, Group Credit Risk Manager at Island Oil
PurpleTRAC offers a suite of cutting-edge features to identify dark fleet activity and bad actors. With these features, vessel movement, ownership, flag registries, and operators can be investigated.
While dark fleet activity can indeed signal potential non-compliance, Brown underscores the importance of exercising caution. Thorough investigations are needed using PurpleTRAC's robust capabilities. To highlight the significance of this, consider the following scenario.
Imagine PurpleTRAC flags a vessel for frequent flag changes within a short time frame. At first glance, this might appear suspicious. However, a deeper dive into the vessel's movement data using PurpleTRAC reveals no periods of AIS non-reporting. In other words, there’s full transparency of the ship's activities. In such instances, hastily labelling the vessel as non-compliant based solely on flag hopping would be a misjudgement. Indeed, more often than not, vessels in similar situations prove to be compliant.
But even if the vessel does exhibit a non-reporting period, it's essential to exercise discretion. Brown elaborates on his team's approach, which involves delineating custom zones of known suspicious activity within PurpleTRAC. Whenever a vessel enters these designated areas, PurpleTRAC alerts the team, ensuring proactive monitoring even for ships that may not initially raise suspicion.
PurpleTRAC also offers tools to determine if AIS non reporting means anything. If one sees a vessel go “dark” at point A and reappear at point B, the system can determine can calculate how long at the ship’s service speed it would have taken to get from A to B. If the two amounts of time are the same, there is no reason to suspect illicit activity.
“All of this allows us to figure out if we simply have an older vessel with perhaps less-than-ideally attentive operators or if we have a vessel that has or will break sanctions.” - Kieran Michael Brown, Group Credit Risk Manager at Island Oil
How PurpleTRAC Refines Compliance for Stability and Financial Growth
Before PurpleTRAC, a lack of accuracy and convoluted processes had been impeding Island Oil’s compliance policies and procedures.
Initially, the company was unaware of the wealth of data available to them, leaving blind spots in their monitoring efforts. Plus, this scarcity of data compelled Island Oil to consistently err on the side of caution. The result: missed opportunities.
Competing traders and suppliers were more willing to engage with vessels or companies that Island Oil hesitated to work with due to a lack of evidence supporting legality. These competitors had the necessary data (or not!) to substantiate their decisions - a capability now mirrored by Island Group through PurpleTRAC.
Previously, Island Oil relied heavily on guesswork in their vessel screening processes.
But, with PurpleTRAC's comprehensive data, the company has cultivated new in-house expertise and confidence to navigate compliance nuances more effectively. This has led to improvements in both the company’s policies and procedures.
And all of this has had invaluable knock-on effects for Island Oil.
With the implementation of PurpleTRAC, Island Oil’s banks expanded their lines of credit using factoring agreements. The strength of Island Oil’s compliance and credit systems played a crucial role in shaping this decision.
Moreover, Island Oil’s primary marine insurance provider granted a Discretionary Credit Limit. With this, Island Oil affords the flexibility to extend insurance coverage to selected companies, and without the cumbersome process of individual applications. This streamlined approach has eradicated uncertainties surrounding approval, enhancing Island Oil’s operational efficiency.
"After adopting PurpleTRAC our banks increased our lines of credit (factoring agreements) based in large part on our compliance and credit systems. Similarly, our main marine insurance company recently provided us with a Discretionary Credit Limit, i.e., we can simply choose to apply insurance to the companies we would like to insure without having to apply for each company individually and hope our provider approves it. Since we can factor a higher percentage of our invoices if the invoices are insured, this becomes a kind of virtuous circle." - Kieran Michael Brown, Group Credit Risk Manager at Island Oil
Navigate the Dynamic Waters of Maritime Compliance with Pole Star Global
In the fast-paced realm of maritime compliance, regulatory updates occur as frequently as every 12 minutes. As such, the landscape for commodity traders, charterers, and stakeholders in ship-to-ship bunkering and oil and gas trade is constantly changing. Staying ahead of these developments isn't just important - it's essential.
Enter Pole Star Global, your trusted partner for navigating the ever-changing seas of compliance. Pole Star's dedicated team stays at the forefront of regulatory developments. The aim is to give unparalleled expertise to empower you with the accountability and transparency you need.
In this case study, you've experienced firsthand the remarkable effectiveness of Pole Star Global’s PurpleTRAC solution. Kieran Michael Brown, Group Credit Risk Manager at Island Oil Limited, has outlined how PurpleTRAC streamlines vessel screening operations, reducing false positives and instances of non-compliance.
PurpleTRAC’s suite of essential features plays a pivotal role in this. These features include:
- Entity Screening:
- Harnessing top-tier data from Pole Star's esteemed partners at Dow Jones Risk and Compliance, PurpleTRAC meticulously screens vessels and their associated ownership. This risk intelligence solution conducts thorough checks against economic sanctions lists (including U.S., U.S. DOC, OFAC, EU, and UN), scrutinises Port State Control (PSC) inspection records, and analyses movement history to identify any recent visits to blacklisted ports or sanctioned countries.
- Flag History Checks:
- Leveraging Pole Star's cutting-edge technology, PurpleTRAC provides in-depth insights into a vessel's flag history, shedding light on instances of flag hopping.
- Dark Activity Monitoring:
- With PurpleTRAC's advanced dark activity monitoring, concealed vessel ownership, registration, and activities are brought to light. This critical feature plays a pivotal role in detecting potential non-compliance and suspicious behaviour, thereby mitigating risks associated with regulatory oversight evasion.
Now, can one ever be 100% certain in such grey-zone cases? Of course not. But what we can say, in a worst-case scenario, to any bank or regulator is that we did our diligence to the best of our abilities, and our abilities are now robust and formidable.” - - Kieran Michael Brown, Group Credit Risk Manager at Island Oil
To stay ahead of bad actors, you need the best technology by your side. Schedule your demo with Pole Star Global today to discover how to kickstart your journey. Ensure thorough due diligence with PurpleTRAC, and always be at the forefront of compliance.
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