This week in Washington, David Peyman, Deputy Assistant Secretary of State for Counter Threat Finance and Sanctions, outlined details relating to a forthcoming advisory that will see the U.S. State Department and the Office of Foreign Asset Control (OFAC) now focusing on all areas of maritime trade and shipping.
Peyman stated that “the maritime industry is the key artery for sanctions evasion globally”. Gone are the days when regulators focused almost entirely on financial institutions. The maritime industry has now become a regulatory focal point due to its potential to facilitate trade and fund terrorism for states whose banking sectors are excluded from the global economy.
As such, regulators are bearing down heavily on particular groups within the maritime industry. These include flag registries, ship owners and operators, ships (in particular ship types carrying specific cargoes under strategic sanctions programs), chartering, insurance, ports, shipping service providers and the maritime supply chain as a whole.
He reiterated the need for those involved in the wider shipping industry to further develop their sanctions compliance programmes, and announced the upcoming issuing of a new global maritime sanctions advisory.
Who should be paying attention?
The shipping industry contains a vast web of different businesses and services that stand at risk of transacting with sanctioned vessels or parties. These include:
The upcoming OFAC advisories are expected to go into depth regarding these key players and why they need to be on high alert.
Key Takeaways
1. No one is shielded from sanctions
No organisation is too large or too safe to elude sanctions. The recent OFAC sanctions imposed on subsidiaries of COSCO, the world’s largest shipping company, for violating US sanctions on Iran is a good example of this. With regard to OFAC sanctions, “no company is too big to fail [...] and no company is too safe.”
2. OFAC is focusing on strategic sanctions
As seen with the COSCO example, OFAC is focusing on sanctions that have an impact beyond the designated target itself, an impact across industries and across sectors, and send a message to similar companies that they are being watched and will be caught if they are in breach of sanctions.
3. Knowing where a vessel has been is essential
Knowledge of where a vessel has been operating including ports, regions, and jurisdictions, while implementing effective tools for ship tracking with continuity (which includes AIS transponders to be switched on at all times) is crucial. Moreover, the ongoing monitoring of sanctions, risk, and ship movements over the course of a maritime transaction is needed to ensure compliance. This is expected to be included in the upcoming advisory.
4. The ship screening process is not sufficient
It is essential as part of the screening process to investigate all associated companies commercially and operationally engaged with the ship, including the ship’s Beneficial Ownership, Registered Owner, Operator, and Managers, its flag registry, and the associated companies’ country of registration, domicile, and control.
5. Suspicions of false documentation should not be taken lightly
If any suspicion of false documents occurs, including Bills of Lading, contact regulators immediately to determine guidance and support to validate whether the documentation is demonstrating fraud and fraudulent activity.
6. Ensure full investigations are done prior to engaging in ship-to-ship (STS) transfers
Be aware of the location of STS transfers; there are high risk regions including the Persian Gulf, UAE, Iraq, Malaysia, Hong Kong, off the Coast of China, and the South China Sea. Be extra vigilant with STS transfers in these areas of operation by screening all parties associated with the ship and ensuring appropriate ship tracking service availability.
Which areas of operation should you be looking at?
To ensure that all associated ownership and management, as well as any other areas of regulatory risk, are screened and recorded, ship owners, operators, and other parties involved must consider the following areas of operation.
Ship Owners
When vetting ships prior to purchase, ship owners should engage in:
With regards to their current asset portfolio, ship owners should monitor their ships and operators’ activities and movements to ensure that they are remaining compliant.
Ship Managers, Operators, and Charterers
Port Agencies and Port Operators
Bunkering
Ancillary shipping service providers
More to come in the coming weeks from OFAC in their upcoming maritime sanctions advisory.
For the time being, contact us via sales@polestarglobal.com to learn more about how we can help ensure that you are staying on the right side of regulators.