Over 70% of the world’s service is covered by water. It is by sea that energy resources – like coal and oil – are transported. Coincidentally, energy resources are a significant export of many nations subject to U.S. sanctions programs – the Russian Federation, Venezuela, Iran, etc. Due to the extensive nature of these sanctions programs, many illicit actors persist to pursue methods of avoidance.
Bloomberg recently reported three new methods, by which sanctioned nations are avoiding the sanctions restrictions on energy exports transported by sea.
- Gone Dark: ships are disappearing from radar by switching off the “Automatic Identification System, an electronic device that pinpoints a ship’s location.”
- Ship-to-Ship Transfer: while dark ships rendezvous and transfer cargo to a non-sanctioned vessel to continue different routes.
- Fake Destinations: ships keep changing their destination and ultimately do not off-load at any disclosed.
- Re-branded Barrels: labeling is doctored to associate with non-sanctioned countries (i.e. labeling a barrel Iraqi rather than Iranian because the shared oilfield may yield similar characteristics in the product).
These methods undermine the effectiveness of sanctions and amplify the challenge of compliance for shipping companies and financial institutions to remain sanctions- compliant. Some new red flags that may help highlight these activities are:
- Payments between shipping companies with an unclear purpose or lack of contract
- Increase in exports from a nation neighboring a sanctioned country
- Bills of Lading missing information or containing general information
- Payment issued from a company in a country not previously disclosed as the recipient
Ultimately, compliance programs should consider performing a review of clients in industries related to this activity and that may border a sanctioned nation with a significant energy export to ensure there is no new risk present.
Ships vanishing from tracking screens, clandestine transfers on the high seas and fake destinations are among some of the tactics used to hide the business from authorities, according to analysts who track flows around the world. These maneuvers have helped Iran continue with about 300,000 a day of oil exports in June, half of which went to China, according to Bloomberg Intelligence.