The sweeping sanctions advisory that US regulators released in mid-May has forced stakeholders across the entire maritime supply chain to confront deceptive shipping practices in the context of their own internal compliance programmes.
This new guidance places shipowners, operators, managers, charterers, brokers, flags, ports, shippers, freight forwarders, commodity traders, insurers and financial institutions firmly in the sights of the US Department of State, US Department of Treasury and US Coast Guard.
As we’ve seen in recent weeks, organisations that fail to adapt to the rapidly changing regulatory landscape face crippling fines, damaged reputations, lost revenue, and depressed stock values. In fact, research conducted by our partners at Dow Jones Risk & Compliance suggests that the reputational cost to companies is 9 times greater than any fine—to the point where some businesses can never fully recover.
This, of course, begs the question: as the US crackdown intensifies, how can owners, insurers, banks and other institutions involved in maritime commerce stay on the right side of regulators?
Deceptive shipping practices
The advisory outlines the most prevalent practices used to facilitate illicit trade with the likes of Iran, North Korea, Syria and, more recently, Venezuela. These include:
Disabling or manipulating automatic identification system (AIS) transponders and data
- Physically altering vessel information
- Falsifying cargo and vessel documents
- Ship-to-ship (STS) transfers
- False flags and flag hopping
Other red flags include voyage irregularities and complex ship ownership or management structures.
Going forward, these practices constitute critical focal points that need to underpin the due diligence processes undertaken by shipowners, insurers, banks and all the other organisations that now find themselves under the regulatory microscope.
The paper-based nature of maritime shipping has long been a weak point as well, exposing the sector to heightened risk of fraud. Consequently, the US Treasury’s Office of Foreign Assets Control (OFAC) is now calling for the stringent review and investigation of all relevant documentation, with an emphasis on those associated with transshipments.
AIS data and dark ships
The focus on both past and current AIS transmissions in the realm of sanctions enforcement has never been greater. As such, basic due diligence should now ensure the continuous transmission of AIS data, alongside the monitoring of potential manipulation and route deviations. Moreover, the use of IMO numbers as the sole unique identifier of ships is finally being reinforced.
Prior to engaging in STS transfers, which face heightened scrutiny due to their repeated use by sanctioned countries, a thorough review of AIS transmissions, vessel names, and IMO numbers should be conducted prior to engaging in shipping transactions and repeated frequently thereafter.
While a dark vessel is, by definition, one that does not report its position, hybrid tracking solutions enable users to monitor a ship’s movements even when its AIS transponder is disabled. They’re also more reliable and provide an additional layer of security for organisations that are susceptible to regulatory enforcement.
Persistent tracking using multi-source GPS data transmitted over secure satellite communications such as Inmarsat and Iridium, combined with AIS, is the cornerstone of Pole Star’s compliance solutions, on which numerous tier one banks, flags, and major shipping companies have relied for over 20 years in response to UN Security Council and International Maritime Organization regulations.
AIS versus Hybrid Tracking: A picture’s worth a thousand words
The limits of AIS are well known—as are its vulnerabilities. Dual-mode solutions provide redundancy and greatly reduce what would be a significant level of false positives with the use of AIS alone.
In this example, the map on the left presents the position reports received from an AIS transponder on board a ship. The other illustrates the power of Pole Star’s hybrid persistent tracking technology, combining AIS data and an Inmarsat position report feed to present a far more comprehensive view of where the vessel is and where it’s been. Simply put, AIS is unable to provide a true picture on its own.
What can be done to protect yourself against regulatory exposure?
This advisory is among the most holistic regulatory documents to affect the maritime industry in decades. It puts well-known weaknesses that have long been exploited to flout sanctions at the fore. How can you stay on the right side of regulators? One option is PurpleTRAC, which combines cloud-based software with Pole Star’s patented hybrid persistent tracking technology. This makes it one-of-a-kind.
Julian Longson has been with Pole Star since it was founded in 1998. He joined as a Business Development Manager but now serves as CEO & Managing Director. With a deep knowledge and practical understanding of satellite earth observation, satellite communications, and associated applications, his 27-year career spans work with international leaders from the UK, US, Canada, and Italy. Julian earned an MSc in Applied Remote Sensing from the Cranfield Institute of Technology in the UK.
PurpleTRAC enables any institution with sanctions and risk exposure to screen and track vessels, their owners and management in seconds using only a name or IMO number. Our award-winning system helps users to automate, streamline and record their compliance processes faster and with greater ease than ever before.
When it comes to compliance, experience matters. In addition to shipowners, insurers and financial institutions such as Credit Agricole, UBS, ICBC Standard Bank, Citi and Nordea, among others, we track over 40,000 vessels each and every day.
Contact us now to learn more about how we can assist you in staying on the right side of regulators in light of this new advisory. Or, connect with me directly on LinkedIn.