Sanctions Experts Issue Maritime Trade Guidance

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A group of sanctions, banking and shipping organizations has issued guidance for lenders who have restrictions on maritime trade, followed by banking industry concerns on tackling illegal activity.

The Association of Certified Sanctions Specialists, the Institute of International Banking Law & Practice (IIBLP) and IHS Markit published guidance in response to a landmark advisory from US sanctions authorities. 

The advisory issued by the Office of Foreign Assets Control (OFAC) in May 2020 tells us about the expectation of regulators on how industry participants should detect trade involving sanctioned countries and entities and includes specific guidance to banks, traders, shipping companies and others.

According to the recent news, many banks believe that it contains a “lack of actionable data”, leading to excessive false positives. In the past, the advisory has proven to be highly dominant in the trade and trade finance sectors.

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The sector-specific guidance for financial institutions lacks detailed information compared to other industries such as brokers, traders, and flag states. A survey by a bank said that OFAC’s demand for an internal risk assessment is high and not as aggressive as it could have been. Furthermore, they added that many potential valuable items are missing.

Product director for trade finance at IHS Markit, Byron McKinney, tells GTR that their feedback from banks over the last 12 to 18 months mainly focuses on the challenges raised in the advisory, such as ship-to-ship transfers dark activity etc.

Furthermore, he added that one primary feedback they received was about the section within the OFAC advisory aimed at financial institutions. This was in talks because it doesn’t give a basis to work as it’s one page, a few bullet points and relatively high-level. 

One of the paper’s conclusions is that automatic identification system (AIS) transmissions, in which vessels are used to report their location, can be highly used to spot illegal activity.

It mentions a Danish court case involving a Russian oil tanker who violated sanctions by delivering fuel to Syria. Investigators believed it may have docked in Syria as AIS signals weren’t transmitted for nearly six days. This technique was allegedly used as many as 33 times.

The paper recommends banks that combine AIS data with other information, including ship’s flag status, ownership or registered name.

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It describes The Courageous, an oil carrier activity that reported minimal port call activity and frequent AIS outages. The ship has changed its flag registration and name multiple times since 2016, while there were four corporate entity changes within its ownership structure.

The paper says that these activities are a likely sign of illegal intentions. The Courageous has been detained by US authorities and is accused of transferring oil to a North Korean carrier and hiding on another vessel.

Another one is IHS Markit data obtained back in November 2020, which shows a vessel that stopped transmitting from its location north of Colombia for nearly a month. When it reappeared, its draught was updated from ballast to laden, which suggested that the cargo had been onboard during that outage. Due to this, they changed their reported destination to China rather than Colombia, saying that it was the discharge location.

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