OFAC AND THE UN URGE ENHANCED TRADE SANCTIONS CONTROLS FOR MARITIME SUPPLY CHAIN ACTORS, INCLUDING BANKS AND INSURERS

On 4th June, TerraLex published a briefing saying that the UN Security Council Panel of Experts on North Korea and OFAC have put maritime sanctions compliance in the spotlight.  Since early March 2019, a series of UN and OFAC reports and advisories have announced heightened compliance expectations that, if not recognised, present significantly increased risk of adverse regulatory action for all actors involved in high-risk sectors of the maritime supply chain, including supporting players such as banks and insurers.   It says that the Advisories and reports spotlight high-risk sectors of the maritime supply chain from a sanctions perspective, namely those involving transport of petroleum product or coal, or ship-to-ship transfer-capable vessels, in the Mediterranean Sea, Red Sea, Gulf of Tonkin, East China Sea, or waters around the Korean Peninsula.  For these high-risk sectors, the Advisories provide updated intelligence on potential red flags for maritime sanctions evasion, and significantly clarify regulators’ expectations.  This article provides a refresher on relevant sanctions regulations, summarises the recent advisories (including the red flags), and the expectations regarding who should implement controls and what controls should be implemented.  It then touches upon the challenge presented by the new mandate to conduct AIS transmission analysis, and potential solutions.  The risk indicators and red flags include –

  • The oil, coal and luxury goods sectors, and ship-to-ship transfer-capable vessels;
  • The waters around the Korean peninsula, the East China Sea, or the Gulf of Tonkin; and for Syrian and Iranian sanctions evasion, the Mediterranean Sea and the Red Sea;
  • Certain ports – Vladivostok, Nakhodka (Russia); Busan, Yosu, Gwangyang (South Korea); Singapore; Hong Kong; Luhuashan, Zhoushan, Luoyuan, Taichung (China); Keelung, Taipei, Kaohsiung (Taiwan);
  • Certain vessel types type of vessel (including coastal, product and general-purpose tankers, and ship-to-ship-capable vessels); the age of vessel; those with port control safety inspections and/or fines for pollution; sailing under the jurisdiction of flag-of-convenience states; double-flagging; frequent name changes; and
  • Specific named vessels.

The Advisories recommend a long list of compliance mechanisms for parties in the maritime supply chain to implement in their compliance programmes, as appropriate to their particular roles and risk profiles, and in addition to standard controls already assumed to be in place, such as sanctions clauses and party screening.

https://www.lexology.com/library/document.ashx?g=42bfcb07-d13f-4f4b-8f73-6de5cfe00ca6

Author: raytodd2017

Chartered Legal Executive and former senior manager with Isle of Man Customs and Excise, where I was (amongst other things) Sanctions Officer (for UN/EU sanctions), Export Licensing Officer and Manager of the Legal-Library & Collectorate Support Section

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