These practices increase the sanctions risk for parties involved in the shipping industry, including insurers, flag registries, shipping companies, and financial institutions.
OFAC calls all parties subject to US. and/or United Nations (UN) sanctions to be aware of these practices in order to implement appropriate measures to ensure compliance with their legal requirements.
In the following list, OFAC provides examples of the types of tactics North Korea uses to obscure the identity of the vessels, the goods being shipped, and the origin or destination of cargo:
- Physically Altering Vessel Identification: North Korean-flagged merchant vessels have physically altered their vessels to obscure their identities and attempt to pass themselves off as different vessels. These physical alterations include painting over vessel names and IMO numbers with alternate ones.
- North Korean Ship-to-Ship (STS) Transfers: North Korea operates a fleet of 24 tankers capable of engaging in STS transfers of refined petroleum products and other banned goods.
- Falsifying Cargo and Vessel Documents: OFAC says that North Korea falsifies vessel and cargo documents to obscure the origin or destination of cargo.
- Disabling Automatic Identification System (AIS): North Korean-flagged merchant vessels intentionally disable their AIS transponders to mask their movements.
- Manipulating AIS: Such manipulation could include altering vessel names, IMO numbers, Maritime Mobile Service Identities (MMSIs), or other unique identifying information.
In order to mitigate the risk posed by the above mentioned actions, OFAC suggests that the following measures should be implemented:
- Monitor for AIS Manipulation: Ship registries, insurers, charterers, vessel owners, or port state control entities should consider investigating vessels that appear to have turned off their AIS while operating in the area surrounding the Korean peninsula.
- Conduct Research Prior to STS Transfers: Vessel operators should ensure that they have verified the vessel name, IMO number, and flag before engaging in such a transfer, and ensure there is a legitimate business purpose for the STS transfer.
- Review All Applicable Shipping Documentation: Shipping documentation should reflect the details of the voyage and reflect the relevant vessel(s), cargo, origin, and destination. Any indication that shipping documentation has been manipulated should be considered a red flag for potential illicit activity and should be investigated fully before continuing with the transaction.
- Clear Communication with International Partners: Clearly communicating US and UN sanctions obligations and discussing sanctions compliance obligations with parties to a transaction can ensure more effective compliance with relevant sanctions programs.
- Leverage Available Resources: Many organizations provide commercial shipping data, like ship location, ship registry information, and ship flagging information. This data should be incorporated into due diligence practices, with available information from OFAC, the UN, and the Coast Guard.
Individuals and entities engaged in shipping-related transactions should be aware of the potential consequences for engaging in prohibited or sanctionable conduct.
As informed, Persons that violate U.S. sanctions with respect to North Korea can be subject to civil monetary penalties equal to the greater of twice the value of the underlying transaction or $289,238, per each violation.
The UN also maintains various enforcement mechanisms for ensuring compliance with its requirements. It may direct a member state and the relevant shipping registry to drop registration of a ship designated by the UN for violating sanctions and may also direct that it be denied entry at all ports. Ships suspected to be carrying UN prohibited cargo may be inspected at sea upon the consent of the flag state, or directed by the flag state to proceed to a specific port for inspection. Vessels whose registration cannot be confirmed or who are deregistered by the flag state may be treated as a vessel without nationality and be subject to the laws of the nation conducting the inspection.