On May 14, 2020, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) together with the U.S.
Department of State and the U.S. Coast Guard issued “Sanctions Advisory for the Maritime
Industry, Energy and Metals Sectors, and Related Communities” (the “Advisory”). The Advisory offers a global guidance across 10 sectors that touch the maritime industry. Russia and Russian companies are directly mentioned in Annex B addressing the Syria-related sanctions.
The Advisory contains the list of “deceptive shipping practices” which are the follows:
- Disabling
or Manipulating the Automatic Identification System (AIS) on Vessels; - Physically
Altering Vessel Identification; - Falsifying
Cargo and Vessel Documents; - Ship-to-Ship
(STS) Transfers; - Voyage
Irregularities; - False
Flags and Flag Hopping; and - Complex
Ownership or Management.
In order to identify the aforementioned practices and avoid the respective risks, the Advisory offers a list of suggested compliance steps that “may assist in more effectively identifying potential sanctions evasion.” These are:
- Institutionalize
Sanctions Compliance Programs; - Establish
AIS Best Practices and Contractual Requirements; - Monitor
Ships Throughout the Entire Transaction Lifecycle; - Know
Your Customer and Counterparty; - Exercise
Supply Chain Due Diligence; - Contractual
Language; and - Industry
Information Sharing.
On top of that, the Advisory includes specific compliance recommendations for such industries operating in the maritime sector as maritime insurance companies, flag registration managers, port authorities, ship owners/operators/charterers, etc.
Inter alia, the Advisory provides the following key recommendations:
- The
Advisory establishes the new compliance baseline which are going to be used by
the OFAC when dealing with sanctions compliance programs developed and
implemented by all actors active in the maritime sector. - The
Advisory extends the automatic identification system (AIS) monitoring
recommendations to “continuous” monitoring. The OFAC recommends that, for
example, ship owners/managers/charterers should “continuously monitor vessels,”
and flag registries should have the “capability to monitor AIS transmissions
continuously.” - The
Advisory requires the access to AIS monitoring tools being granted to insurers,
ship owners, suppliers, buyers, charterers as well as flag registers in order
to that they have the ability to “research the AIS history for all the vessels
under the ownership or control of such parties. - The
Advisory requires substantially more detailed ownership checks. Thus, for
vessels determined to be operating in areas at high risk for sanctions evasion
maritime user and classification societies should acquire “a colour photocopy
of the passports, names, business and residential addresses, phone numbers,
email of all individual owners of the vessel”. - The
Advisory creates and implied a know your customer’s control obligation. The
OFAC recommends that ship owners, operators, charterers, and classification
societies require that counterparties maintain an “adequate and appropriate”
compliance policy.
There is little doubt that the OFAC is going to use the recommendations envisaged in the Advisory with its communications with the maritime industry. It is therefore highly recommended for all actors to thoroughly review the recommendations contained in the Advisory and assess their current compliance program to be in line with the suggested standards.
