OFAC Issues New Sanctions Guidance for Maritime Industry

On October 31, 2024. Office of Foreign Asset Control (OFAC) of the United States Treasury Department published “Sanctions Guidance for the Maritime Shipping Industry”.

This publication is the subsequent version of OFAC’s previous guidelines, “Sanctions Advisory for the Maritime Industry, Energy and Metal Sectors, and Related Communities” released on May 14, 2020.

Recent publications oblige maritime sector stakeholders to comply with US sanction laws, specifically ship management service providers, insurers, port authorities, commodities brokers, and ship brokering companies.

In December 2023, the Treasury and 4 other US departments: the Department of Justice, State, Commerce, and Homeland Security, reinforced best practices for maritime cargo transportation by issuing a joining Compliance Note known as “Quint-Seal Compliance Guidance”.

OFAC & these state departments are increasingly focused on third parties involved in illegal financial transactions, including logistics service providers, transport intermediaries, freight forwarders, and shipping companies.

In July 2024, the Bureau of Industry and Security (BIS) updated its older publication, highlighting the potential consequences of exploiting US sanctions and export controls.

The Role of Deceptive Shipping in Concealing Sanctions Nexus

OFAC also published guidelines for buyers, sellers & vessel charterers involved in illegal activities, concealed sanctions violations, and reduced manipulation of the vessel’s location. This process is executed through an automatic identification system (AIS) to hide the origin of oil cargo.

OFAC also warns insurers to avoid a few AIS abnormalities, including extended periods without AIS transmission, misclassification of the trade class & vessel, and abnormal voyage or traffic patterns.

Unintentional Involvement in Transactions with Sanctioned Individuals or Entities

The document describes scenarios where US maritime stakeholders may inadvertently breach sanctions rules by dealing with a Specially Designated National (SDN).

OFAC has identified several red flags that maritime stakeholders should consider to avoid potential sanctions violations, including:

• Modifications to the original records or letters of engagement in a commercial transaction conceal or eliminate proof of a link to the sanctionable activity.
• Sudden changes in shipment instructions that are not consistent with regular business practice.
• Refusal to release further information in response to reasonable and industry-standard requests.

According to OFAC, non-US persons may face enforcement for causing or evading US sanctions, including secondary sanctions for dealings with blocked persons. US and non-US firms must create compliance procedures to prevent working with SDNs.

Opaque Vessel Ownership

OFAC advises entities or individuals involved in vessel sales to be aware of the illegal attempts of money launderers. Vessel contractors can mitigate money launderers by conducting a risk-based approach to secure every party involved in financial transactions or vessel sales.

Mid & Post Voyage Notification

In this guidance, OFAC assists maritime stakeholders in becoming aware of issues of sanctions violations during or after a voyage, including ship-to-ship transfers. Stakeholders should conduct due diligence to assess sanctions risk.