Shipowners, tankers, and other vessels shipping products and services from sanctioned nations are frequently placed on the U.S. Treasury Department’s Office of Foreign Asset Control (OFAC) blacklist. Identifying information on the ships in question, such as the type and name of the ship, the International Maritime Organization (IMO) number, and the country of origin can be accessed online, along with the list of penalties. But if criminals hide the IMO number, it may be difficult to identify a ship.
General cargo ships and crude oil tankers carrying gallons of oil are just a few of the different ship types that can be included on sanctions lists. They are frequently discovered carrying products and services between North Korea, Iran, or Venezuela, which are all sanctioned nations. Even if not all ships are state-owned, regulators are alarmed by their association with a certain nation.
3 Common Deceptive Shipping Red Flags
The ability to swiftly recognize and evaluate patterns of high-risk behavior and activity is essential for recognizing maritime compliance risk. Ideally, this should be done as soon as the activity starts and before it gets out of hand.
Sanctions-skirting vessels may occasionally start engaging in illegal activity after many years of what appears to be a routine operation. For compliance experts and regulators, this is a difficult task to identify the change from normal to aberrant behavior before it develops into a pattern of substantial risk.
Corporate entities that conceal beneficial ownership
What exactly is it? Simply put, each vessel has a registered owner and a beneficial owner, who are typically two separate legal entities. The registered owner is the organization that is listed as having legal title of ownership over the vessel, whereas the beneficial owner is thought to be the vessel's actual owner. To reduce the legal liability of the ultimate beneficial owner, the registered owner will typically be a special purpose vehicle.
How is it used? Complex ownership structures for vessels are sometimes used to conceal the ultimate beneficial owner, making it more difficult for law enforcement to track down the real culprit behind the vessel's operations.When determining the danger of a vessel evading sanctions, it is important to keep in mind that complex ownership structures may exist for a variety of different reasons.
Several factual patterns that are suspicious:
- a vessel's ownership frequently changes hands between businesses that are all managed by the same beneficial owner.
- when there isn't a really good reason to transfer ownership.
- vessels with numerous owners or companies acting as a shell or front.
Changing the vessel's distinctive identifier
What exactly is it? a distinctive seven-digit number assigned to a vessel for the duration of its life to aid in easy identification and traceability. The vessel's individual identification number will be one of the details that the AIS transmits to receivers on land and in space.
How is it used? Bad actors involved in illegal commerce will physically change a vessel's identity to fool others into thinking it is a different vessel, for as by painting over the name and IMO number.
Several factual patterns that are suspicious:
- if the Global Integrated Shipping Information System of the IMO cannot confirm the vessel's IMO number. If the vessel name and IMO number do not match, this may raise more questions.
- where the vessel's IMO number is listed as "unknown" in public registers and databases.
Visiting ports in sanctioned nations
What is it? As the name implies, it refers to any ship that has been to a port in a sanctioned nation, particularly one that is regarded as "high-risk" (e.g., North Korea, Iran, and Russia). The vessel's AIS data may provide this information, but often the AIS is turned off when the vessel approaches a port or country that has been sanctioned.
Several factual patterns that are suspicious:
- Even if not every vessel's visit to a port or country that has been sanctioned means that it is engaging in illegal trade, it should still be looked further into.
- It is important to distinguish between vessels that transit through the territorial seas of a sanctioned nation and those that arrive at a sanctioned port to receive cargo because the latter indicates a higher risk.
What Can Businesses Do?
Before engaging into any contracts, participants are highly advised to research the past, present, and ongoing information and activities of a vessel and/or counterparty. The above-mentioned deceitful tactics and warning signs may make it easier for parties to spot any suspicious behavior at an early stage. If any issues are found, they must be brought up internally and looked into as quickly as feasible.
While sanctions on land receive a lot of media attention, businesses also need to be aware of the possible risks posed by naval vessels. The first line of defense against suspected violations should be a rigorous due diligence procedure that routinely checks the OFAC sanctions lists for sanctioned vessels. Frequent vessel identification and screening are two other initiatives.
Companies should know where a vessel is registered and identify any businesses associated to it in order to screen for any vessel-related risks:
- Verify the data: Check IMO numbers and relevant reports outlining maritime routes and operators against ship registrations. These databases frequently contain decades' worth of information about vessel ownership, management, and names.
- Screen for risk: Make sure that no vessels are added to the sanctions or terrorism lists or have strong ties to nations that are under an embargo. This should involve checking for ships that have been specifically targeted for sanctions, ships flying the flag of a nation that has been broadly targeted for sanctions (such Cuba, Iran, or North Korea), or ships whose owner or operator has ties to those nations.
- Enhanced Due Diligence: Additional, more thorough checks may be made when a business or vessel raises a red flag. The best programs take extra safeguards early on and keep an eye on the issue until a problem develops.
With Sanction Scanner’s AML Screening Software, businesses can check people, organizations, vessels, and aircraft on sanction lists. Sanction Scanner's AML database contains adverse media data in addition to sanction lists. You can contact us for "Vessel Screening" in global and real-time AML data.
