Maritime Sanctions Environment Update
As the world grapples with the complexities of Russian oil exports, the maritime industry’s role in circumventing sanctions has come under intense scrutiny. In 2020, the US Office of Foreign Assets Control (OFAC) identified deceptive shipping practices, prompting efforts to mitigate sanctions risks associated with the transport of goods. Over the past year, these efforts have been tested by attempts to bypass sanctions against Russia.
According to estimates, at least 22 million barrels of Russian crude and diesel were re-routed through ship-to-ship transfers in February this year. Today, authorities are seeing increasingly sophisticated techniques, including AIS spoofing and the use of “shadow fleets.” These developments underscore the need for maritime industry participants to reassess their potential sanctions risk exposure and corresponding risk appetite.
The EU’s 11th sanctions package imposed the most extensive measures on the maritime industry yet, aimed at tackling circumvention. Industry experts anticipate similarly aggressive sanctions to be replicated for other foreign policy objectives. In light of these developments, it is clear that compliance with previous guidance will not guarantee sufficient management of maritime sanctions risk.
Key Considerations for Shipping Groups and Traders
To combat the risk of sanctions breaches, maritime industry participants must have a robust maritime sanctions compliance framework in place. The bedrock of this is a thorough and detailed maritime sanctions risk assessment, which reviews the inherent risk exposure of business operations, the effectiveness of existing controls, and identifies any residual risk.
Risk assessments are often carried out by Compliance functions, but to accurately evaluate the risk associated with shipping practices, maritime expertise is also required. Without this insight, risk assessments can fail to account for the nuances of how risks materialise in physical operations and become little more than tick-box exercises.
The best risk assessments typically involve individuals with both hands-on business and risk management expertise to bring the depth of understanding required. Additionally, risk assessments are not a one-off exercise; they require periodic and event-based reviews, such as in response to emerging circumvention typologies.
Lessons Learned from Conducting Maritime Sanctions Risk Assessments
Leadership buy-in is critical to ensuring the relevant business areas are fully engaged and understand the importance of the risks being managed. The complexity of marine-based transactions requires sanctions, shipping, and risk management expertise to accurately evaluate the risks associated with maritime operations.
As the maritime sanctions landscape continues to evolve, it is essential that industry participants reassess their potential sanctions risk exposure and corresponding risk appetite. By conducting robust risk assessments and defining risk appetite, organisations can ensure the residual risk exposure is within agreed and communicated tolerances.
Original Article: Responding to an increasingly complex maritime sanctions landscape — Deloitte