According to Seatrade Maritime News, the joint statement by
the G-7 Finance Ministers for the month of September confirmed as much when
they said, “We underscore our shared commitment to our determined and
coordinated sanctions imposed in response to Russia’s war of aggression.”
Russia
now faces the highest number of sanctions in the world. The figure stood
at 5,581 in March, some way ahead of Iran and Syria. By August 7,750
individuals faced sanctions along with 1,452 entities, 91 vessels and six
aircraft.
Even if
a ceasefire in the current Ukraine war were agreed tomorrow, the sanctions
would continue since it would take so long for Russia to be accepted as a
normal trading partner by the G7 countries and their allies.
The
important point is that everyone engaged in international trade must accept the
semi-permanence of anti-Russian sanctions and ensure they take every step
possible to adhere to them. Carriers, forwarders, charterers, insurers,
importers and exporters and port authorities, all need to know who they
are dealing with more than ever and be fully alert to the possibility of
Russian proxies masquerading as legitimate entities.
From now on, due diligence means screening all vessels and
trade transactions to pick up suspicious activity by shell companies or front organizations
that link back to Russia, which is capable of highly sophisticated workarounds
when it comes to sanctions?
While Iran has been increasingly cunning in side-stepping
sanctions, Russia is a larger economy with many more established contacts
beyond its vast borders. For all organizations engaging in trade, monitoring
for sanctions or trade-based money laundering is more of a necessity than ever.
In Britain, the urgency for organizations to screen and
monitor for illegal Russian trading activity has increased with the
introduction by OFSI (The Office of Financial Sanctions Management) of a strict
liability test for sanctions breach investigations.
But around the world, more countries are taking different
aspects of sanctions seriously, especially in relation to cargo-carrying
vessels.
In Asia it was the Monetary Authority of Singapore that took
the strongest line on such matters.
In April, in a sign that times are changing, the Central
Bank of Bangladesh mandated the country’s banks to implement vessel-tracking to
cut down on money laundering.
All legitimate organizations involved in trade need to
increase the scope of routine and ongoing activity such as KYC and TBML
monitoring and screening. They must have the ability to spot the indicators of
illicit Russian activity or illegal trade with “Russian owned or affiliated”
entities.
There are several areas that need close attention, which
include:
Complex
or changed ownership structures in companies supplying vessels for transactions:
While there are often valid reasons for complex ownership, organizations
need to watch out for shell companies, and questions of registration, domicile
and control. This is more than simply looking at public details. Technology
drawing on many sources can now see more deeply into ownership structures,
which is an important first step.
Histories:
Organizations need to avoid use of vessels or carriers with records of
infringement or “going dark” by switching off AIS beacons, or which have a
history of visits to areas or ports known for sanctions-flouting. Switches to
flags of convenience or sudden changes of ownership should be warning lights in
the current climate.
Obscure
supply chains: It is important to know which banks are financing
transactions and who the parties and beneficiaries are. In the physical supply
chain, anyone financing or participating in a transaction needs to know where
the goods or commodities are coming from and where they are going. Just looking
at vessels listed is not enough.
Vessel
monitoring: Organizations need the end-to-end visibility to see ports of
origin and ports of loading in any transaction. But they also must track vessels
carrying the cargo across the oceans and be aware when they linger in areas
known for illegal ship-to-ship transfers, or visit ports recognized as
high-risk for sanctions flouting. Having the technology to check certificates
of origin, bills of lading, consignees and so forth is vital, especially for
banks financing or facilitating thousands of trade deals and shipments every
day.
Vague
drafting of sanctions: Knowing who or what is “Russian-owned and
affiliated” can be difficult to nail down. It is understandable that port
authorities, for example, do not want to make wrong moves that prove to be
costly, such as impounding vessels where lawyers can make a strong case for
legitimacy, or where ownership and responsibility are difficult to establish. Many
ports lack sufficient screening technology, which is a deficit they need to
address.
With thousands of transactions underway at any moment, the
burden of ensuring continuing compliance with a mounting body of sanctions is
immense.
Success will only be achievable through technology that can
pull in all the relevant data at scale and analyses it in near-real time as
part of an integrated monitoring and compliance solution.
Many financial organizations, for example, already have
compliance technology into which they could integrate advanced
sanctions-screening solutions.
Sanctions
are unlikely to become any less complex and those against Russia are here to
stay for years. For any organization participating in cross-border trade, it is
surely worth avoiding any failure in screening or monitoring that could result
in hefty fines and significant long-term reputational damage.
