In July 2020, the UK Office of Financial Sanctions Implementation (OFSI) published guidance for entities and individuals operating within the maritime shipping sector.
The size and scale of the UK shipping sector is large and thus may be particularly susceptible to criminals seeking to deploy tactics to confuse or conceal the identities of vessels, cargo, routes and ports to circumvent sanctions regimes, in particular relating to the comprehensive regimes against North Korea, Iran, Libya and Syria.
This guidance therefore aims to support individuals and entities operating in the maritime shipping sector by raising awareness of the most current illicit practices to aid them in enhancing compliance and due diligence procedures to mitigate risk.
In particular, the guidance highlights risks associated with:
- Ship-to-ship transfers: the transfer of cargo at sea (rather than at a port).
- Automatic Identification Systems (AIS): disabling of ship tracking systems (especially for the execution of illicit ship-to-ship transfers).
- Cyber activity: the illegal force of transfer of funds from financial institutions and cryptocurrency exchanges to circumvent financial sanctions, particularly focussed on military units which generate income.
- Cryptoassets: any exchange of funds or economic resources within the maritime sector.
- Financial system abuse: bank accounts set up for the sole purpose of being front accounts to facilitate illegal shipping practices.
- False documentation: production of counterfeit documents such as bills of lading, invoices and insurance paperwork to mask the origin or destination of a vessel, its goods or even the legitimacy of the vessel itself.
- Concealment: the physical hiding of goods on a vessel to avoid detection by port or maritime authorities.
The guidance also sets out a non-exhaustive set of measures for firms to consider with respect to the maritime industry and sanctions compliance. These include:
- When engaging in business activity involving high risk jurisdictions, gaining a comprehensive understanding of relevant sanctions regimes in place, operating a risk-based approach to the application of enhanced due diligence (EDD) measures and seeking legal advice as required.
- Inclusion of ‘AIS switch off’ clauses in contracts and investigating instances where AIS has been switched off.
- Maintaining subscriptions to paid resources, or proactively checking publicly available resources (such as Companies House), to validate ownership structures, source vessel flag information and obtain details of a vessel’s home port(s) and recently visited ports.
- Conducting investigations into suspected fraudulent documents prior to contract signing.
- Immediately freezing assets or funds which been identified through screening to be a true match against a sanctions listed party.
In addition, the guidance highlights that the UK remains obliged to adhere to the EU sanctions list during the Brexit transition period, as well as UK sanctions imposed by OFSI.
Firms should take heed of this guidance to optimise their sanctions compliance framework to support the global effort to curb the malpractices which warrant the imposition of financial sanctions. Further, failure to adopt a robust sanctions compliance framework could lead to the imposition of monetary penalties or prosecution against institutions and those responsible for managing them.
