UK publishes sanctions compliance guidance for the maritime industry

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UK publishes sanctions compliance guidance for the maritime industry

At a Glance…

On 27 July 2020, the UK Office of Financial Sanctions Implementation (OFSI) published its Maritime Guidance providing “financial sanctions guidance for entities and individuals operating within the maritime shipping sector”. The 12-page document is key reading for those in the maritime industry, conducting business in or connected to the UK.

The Maritime Guidance comes hot on the heels of the Global Human Rights Sanctions Regulations 2020 which impose the UK’s first autonomous sanctions regime post-Brexit (see our previous client alert), deepening suspicions that the UK is likely to diverge from the EU’s sanctions position and become a more active player in this field (see our TradeWinds article for more information).

Authors: Leigh T. Hansson, Alexander Brandt, Eli Rymland-Kelly, Claire E. Don and William Young

What does the Maritime Guidance cover?

The Maritime Guidance identifies a number of illicit and suspicious shipping practices. OFSI encourages parties to be aware of such practices and to ensure that compliance and due diligence procedures take account of them. The listed practices largely echo the activities identified by similar guidance issued by the UN and OFAC and so will be familiar to many operating in the maritime industry:

• Ship-to-ship transfers to conceal the origin and/or destination of cargo

• Disabling the automatic identification system (AIS)

• Cyber activity including cyberattacks

• Use of cryptoassets to avoid financial sanctions such as asset freezes

• Financial system abuse to conceal illicit activities

• False documentation, including bills of lading, invoices and insurance documents

• Action taken to conceal illicit cargo

The Maritime Guidance also provides an overview of the restrictions in place in respect of what it terms “High-profile sanctions” for the Democratic People’s Republic of Korea, Iran, Libya and Syria, and clarifies the approach taken to a number of key definitions for the purposes of UK sanctions, including ownership and control and funds and economic resources.

Whilst it is for each organisation to put in place sufficient measures to ensure it does not breach financial sanctions, OFSI has offered general guidance on due diligence measures including:

• Ensuring a robust understanding of the sanctions in place in high-risk jurisdictions and operating a risk-based approach to conducting enhanced due diligence to understand the full range of activities and persons involved in supply chains.

• The inclusion of ‘AIS switch off’ clauses in contracts and screening of AIS.

• Due diligence on ownership structures, flag information and recent port calls.

• Considering documentation carefully and investigating any suspected fraudulent documents with the relevant issuing institution or entity.

Comment

As the UK starts to implement its own autonomous regime, the Maritime Guidance emphasises the importance for those operating in the maritime industry in the UK to ensure that appropriate due diligence and compliance measures are in place.

The Maritime Guidance serves to re-iterate the importance of establishing and maintaining comprehensive sanctions compliance programmes, which respond to the actions and guidance of key sanctions jurisdictions. Reed Smith is well placed to assist in this regard.