By Sanday Chongo Kabange, The Red Flag Group®
Internationally, wrongdoers are devising new and complex ways of circumventing the barriers that are designed to block business transactions with governments, entities and individuals under legal sanction. While you may not be directly dealing with these sanctioned businesses, your third parties might, and this could put your company at risk.
Given the complex and closed nature of the maritime industry, standard due diligence on vessels and their related parties may not reveal ties to governments, entities, and individuals that are under sanctions. Therefore, many companies choose to go a step further when examining vessels and their networks of owners and operators. Doing so can mitigate direct and indirect risks associated with sanctions.
Direct risks can stem from engaging a vessel that is currently sanctioned or has been associated with illicit or illegal activity.
Indirect risks would include engaging a vessel that is owned, part-owned, controlled or operated by an individual or organisation that:
- Is under sanction, meaning the hiring company is indirectly financing a sanctioned entity
- Has been identified as engaging in illegal or illicit activity, exposing the hiring company to operational, financial, or reputational risk.
There are thriving opportunities for wrongdoing
Sanctioned entities and individuals located in countries such as North Korea and Iran have large supplies of materials including oil, grains, coal and minerals that they are constantly leveraging, increasing your exposure to illicit business practices. The complexities involved in the maritime business make it difficult to trace the original source of many vessels.
A case study — Navigators
In 2015, a New York-based company that specialises in marine insurance agreed to pay US$271,815 for violating multiple sanctions programmes of the US Department of Treasury by providing insurance to sanctioned parties.
Navigators Insurance Company and its London-based branch voluntarily reported to the Office of Foreign Assets Control (OFAC) that it violated sanctions programmes 48 times between 2008 and 2011 when it provided insurance and processed claims payments involving OFAC-sanctioned targets in and from Cuba, Iran, North Korea and Sudan. Navigators insured North Korean-flagged vessels and covered incidents that occurred in Iran, Sudan and Cuba. At the time of the apparent breaches, Navigators had no formal OFAC compliance programme, and its senior executives knew, or had reason to know, that the majority of the insurance policies and claims payments involved OFAC-sanctioned countries.
After self-reporting, Navigators took remedial measures that included the creation and implementation of a comprehensive OFAC compliance programme.
Mitigate your risk — the convenient solution
Given that risks in the maritime industry are often difficult to identify, The Red Flag Group® offers the IntegraWatch® | Vessels Screening solution. This IHS Markit Ship Owner Information database sits alongside the IntegraWatch® | Compliance Screening database and helps our clients identify potential risks when engaging with any vessel or its related third parties. IHS Markit is the sole appointed authority for assigning and validating the International Maritime Organisation number, and it maintains data for over 200,000 ships.
Using our ComplianceDesktop® platform and searching by the International Maritime Organisation numbers or the vessel names, one can identify associated companies and individuals along with additional information about that vessel across our 23 risk areas.
IntegraWatch® I Vessels Screening provides detailed information of the vessel and its associated parties, including its operator, technical manager, ship builder, group beneficial owner, group operated fleet, ship manager, document of compliance company and registered owner.