On May 14, 2020, the US Department of State, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC), and the US Coast Guard issued guidance to the private sector aimed at preventing deceptive shipping practices used in sanctions evasion, smuggling, facilitation of terrorism, and other criminal activity (the “Advisory”). The Advisory focuses on tactics recently used by malign actors to evade sanctions and sets out a non-exhaustive list of best practices companies may wish to adopt to identify and prevent sanctions violations before they happen. Described as a consolidated and updated iteration of advisories previously issued regarding shipping-related evasion of sanctions targeting Iran, North Korea, and Syria, the Advisory is not limited by territory. (The previous advisories remain on OFAC’s website for those country-specific sanctions programs.)
The Advisory does not place any legal requirements on companies. Consistent with OFAC’s Framework for Compliance Commitments (“OFAC Framework”) that instructs companies to implement risk-based sanctions compliance program tailored to their particular operations, the Advisory alerts certain businesses to heightened risks in the supply chains of crude oil, refined petroleum, petrochemicals, steel, iron, aluminum, copper, sand, and coal, so that they can enhance their compliance processes and procedures as appropriate. The challenge for market players is that many of the practices identified as red flags are often entirely legitimate maritime activities, but they have been identified as open to abuse by bad actors. The Advisory affects everyone involved in the maritime industry, including ship owners, managers, operators, brokers, ship chandlers, Flag Registries, port operators, shipping companies, freight forwarders, Class Societies, commodity traders, insurance companies, and financial institutions. It also contains sector-specific guidance for ten categories of market players.
In addition to sanctions compliance programs based on the OFAC Framework (link provided above), the Advisory recommends certain best practices to detect deceptive shipping practices and potential sanctions evasion. To read about these, see the rest of this article on our Sanctions blog, here.
Authors: Kerry B. Contini, Alexandre (Alex) Lamy, Kirsty Cattanach and Callie Lefevre.
