The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has issued an advisory to alert persons globally to the significant U.S. sanctions risks for parties involved in petroleum shipments.
OFAC highlights that commercial entities are strongly encouraged to conduct sufficient due diligence to ensure that transactions do not run afoul of U.S. sanctions, which, in addition to sanctions risks, can create exposure to business and reputational risks. The risk of engaging in prohibited activity or processing prohibited transactions can potentially be mitigated by implementing the following measures:
Strengthen anti-money laundering/countering the financing of terrorism (AML/CFT) compliance: Financial institutions and companies are strongly encouraged to employ risk mitigation measures consistent with Financial Action Task Force standards designed to combat money laundering, terrorist financing, and proliferation financing. This includes the adoption of appropriate due diligence policies and procedures by financial institutions and non-financial gatekeepers and promoting beneficial ownership transparency for legal entities, particularly in scenarios outlined above.
Monitor for AIS manipulation: There can be legitimate reasons for AIS to be turned off or “go dark” (e.g., passage through high-risk piracy waters or other security considerations). In such situations, ships may turn off AIS to evade threats, and this should not automatically be considered a red flag for illicit activity. However, ship registries, insurers, charterers, vessel owners, or port operators should investigate vessels that turn off their AIS transponders for extended periods or unknown reasons while operating in the Mediterranean and Red Seas. Other signs of AIS data manipulation should also be considered red flags for potential illicit activity and should be fully investigated before continuing to provide services or engage in transactions involving these vessels.
Review all applicable shipping documentation: Individuals and entities processing transactions related to shipments potentially involving petroleum bound for Syria or oil from Iran should request and review complete and accurate shipping documentation. This documentation should detail the voyage, including vessel(s), flagging, cargo, origin, and destination. Any indication of manipulated shipping documentation should be considered a red flag for illicit activity and investigated fully before proceeding with the transaction. Additionally, documents related to STS transfers should confirm that the underlying goods were delivered to the port listed in the shipping documentation.
Know your customer: Those involved in the maritime petroleum shipping community, including vessel owners and operators, are advised to conduct Know Your Customer (KYC) due diligence. KYC helps ensure awareness of activities, transactions, parties, geographies, and the country-of-origin and destination of goods involved in shipments. This includes researching companies, individuals, vessels, vessel owners, and operators involved in contracts, shipments, or related maritime commerce. Best practices for KYC on a vessel include researching its IMO number, which may provide a comprehensive picture of the vessel’s history, travel patterns, potential ties to illicit activities, and associated sanctions risks.
Clear communication with international partners: Parties to a shipping transaction may be subject to different sanctions regimes depending on the involved parties and jurisdictions. Clear communication is critical for international transactions. Discussing applicable sanctions frameworks with transaction parties ensures more effective compliance.
Leverage available resources: Several organizations provide commercial shipping data, including ship location, registry information, and flagging details. This data should be incorporated into due diligence best practices, along with information from OFAC as outlined in the “Syria Sanctions Resources” section of this advisory.
