Earlier this year, the U.S. Department of State, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), and the U.S. Coast Guard issued a global advisory (the “Advisory”), providing information and tools to counter current and emerging trends of illicit shipping and sanctions evasion. The guidance offered in the Advisory is aimed at those engaged in trade in the maritime industry, energy and metal sectors, and financial institutions.
The Advisory focuses on North Korea, Iran, and Syria, and is an update and expansion of the North Korea shipping advisories (on February 23, 2018 and March 21, 2019), the Iran shipping advisory (on September 4, 2019), and the Syria shipping advisories (on November 20, 2018 and March 25, 2019). It provides updated information on the deceptive shipping practices used to evade sanctions and policies, such as the intentional disabling or manipulation of the Automatic Identification System (AIS) on vessels, physical alteration of vessel identification, falsification of cargo and vessel documents, ship-to-ship transfers at night or in areas determined to be high risk for illicit activity, voyage irregularities, false flags and flag hopping, or complex ownership or management.
In the current sanctions environment, it is critical that private sector entities appropriately assess their sanctions risk, and if necessary, implement compliance controls to address any gaps in their compliance programs. The Advisory identifies best practices that entities may consider adopting as part of a risk-based sanctions compliance program, including:
- Institutionalizing a sanctions compliance program
- Establishing AIS best practices and contractual requirements
- Monitoring ships throughout the entire transaction lifecycle
- Knowing your customer and counterparty
- Exercising supply chain due diligence
- Incorporating best practices in contractual language
- Providing and sharing relevant industry information with colleagues
Though these practices are not specifically required under U.S. law, entities would benefit from implementing them to mitigate against sanctions risk.