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.