2020 has seen the maritime industry move to the front and centre of the increasing focus of sanctions enforcement bodies on the role that seaborne trade plays in the world economy. With over 90% of world trade carried by sea, regulators have focussed in recent months on the role played by shipowners, charterers, insurers and traders in the industry and set their expectations of how these key industry participants comply with sanctions.
Earlier today, OFSI, the body responsible for the implementation and enforcement of financial sanctions in the UK, published a "Maritime Guidance" document, providing guidance for entities and individuals operating within the maritime shipping sector on complying with sanctions.
This follows guidance in May 2020 from OFAC, the US body responsible for the enforcement of US sanctions, directed at the "Maritime, Energy and Metals Sectors and Related Communities" providing extensive recommendations on sanctions compliance.
Both guidance notes focus extensively on highlighting deceptive practices commonly deployed in the shipping industry to hide sanctions evasion, including ship-to-ship transfers of cargo, AIS manipulation and the falsification of shipping documentation, encouraging participants to be on the lookout for such deceptive practices.
To mark the publication of these two key advisory notes, and the update earlier this year of the standard BIMCO sanctions clauses for charterparties, Clyde & Co is producing a series of articles focussing on sanctions compliance for the maritime and commodities industries. The series will look at the implications of the OFSI and OFAC guidance for the maritime and commodities industries (including marine insurers) consider the appropriate due diligence that should be undertaken by industry participants, provide an overview of the new BIMCO clauses and look at how best to use sanctions clauses in contracts, and highlight some of the particular risk mitigation methods referred to in the guidance including the notion of a "AIS Switch off clause".
It is no coincidence that two of the world's leading sanctions enforcement bodies have both issued guidance notes to the maritime industry within months of each other. Industry participants have been warned: there are now very clear expectations of what good sanctions compliance looks like –a failure to meet those expectations could prove costly.
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