Compliance with sanctions isn’t just a bank issue. In the past year, the Office of Foreign Assets Control has begun to focus on industries outside the financial sector including those involved in shipping. Sanctions related to Iran, North Korea and Venezuela have increased pressure on maritime trade businesses including shipping companies, insurance companies, commodities traders, associated financial institutions, and others. In response, organizations are looking for guidance and solutions to adapt to the rapidly evolving and complex compliance landscape
According to Simon Ring, Global Head – Regulatory Technologies at Pole Star, just four or five years ago there were no best practices for maritime shipping sanctions compliance. “In the last twelve months, however, you are seeing a lot of guidance come out of OFAC.”
Among that guidance are two advisories published earlier this year that are quite prescriptive in nature … especially for OFAC. Those in addition to a detailed report on North Korean deceptive shipping practices published by the United Nations Panel of Experts makes one thing very clear – companies will be expected to do a lot more than just screen against an SDN list.
Monitoring and screening
Specifically, even though it is not mandated, it is obvious that compliance programs should focus on monitoring the Automatic Identification System (AIS) on vessels. AIS is a navigation program that was initially used for collision avoidance, however since it transmits location and vessel identification it can be used to track shipments.
Both the UN and OFAC call out manipulating and disabling the AIS as a major red flag for illicit activity. In its Updated Guidance on Addressing North Korea’s Illicit Shipping Practices published in March, OFAC states, “North Korea-flagged vessels sometimes manipulate the data transmitted via AIS. Such manipulation could include altering vessel names, IMO numbers, Maritime Mobile Service Identities (MMSIs), or other unique identifying information. This tactic can conceal a vessel’s next port of call or other information regarding its voyage.”
Not only do the organizations recommend looking at the vessel’s AIS history for initial screening purposes, the organizations also say companies should continue to monitor a ship’s movements, particularly if they are in at-risk industries or travel through sanctioned regions.
“This can be challenging, however, since the information that is entered manually on equipment aboard ships about the next port of call and destination may be incomplete, inaccurate or deliberately false,” says Ring. “On the other hand, satellite-AIS data collection may not be as complete due to message collection and latency limitations.”
Instead, Ring recommends a hybrid tracking solution incorporating Inmarsat data that can provide the additional security for institutions. The Inmarsat network is a secure, real-time vessel tracking system, providing positions that are less vulnerable to manipulation.
“Regulatory technologies that streamline, automate, and record complex compliance processes do this better than anything else,” says Ring.
OFAC and the UN also called on port operators and shipping companies, especially in the petroleum sector, to remind vessels to “maintain AIS broadcasts,” and suggested that insurance and re-insurance companies “should include a “AIS switch-off clause” and AIS screening in contracts for at-risk vessels operating in relevant regions.”