5 Houthi Attacks and Will OFAC’s Advisory Change Risk Approaches? 

Five Houthi attacks on vessels in a week and a new advisory from OFAC that could change financial institutions’ approach to risk? 

This week’s Maritime Global Trade Roundup explains how the Houthis seem to be going back on their word regarding Russian vessels, the potential wide-ranging effects of OFAC’s new advisory for financial institutions, and how to quickly and painlessly comply with this new advisory. 

Enjoy these easily digestible Maritime AI™ insights!

Five Recent Red Sea Attacks 

• The Houthis carried out multiple attacks on merchant vessels over the last week, a distinct escalation in their Red Sea attack pattern:
  • The rebel group announced they attacked two merchant vessels on June 7 in the Red Sea and the Arabian Sea: the Elbella (IMO: 9312640) and the AAL Genoa (IMO: 9393553). The Elbella, a 176-meter container vessel sailing under the Malta flag, is owned by a Greek company, “Eastern Mediterranean Maritime Limited.” 
  • The AAL Genoa is a 160-meter general cargo sailing under the Cyprus flag. It is owned by the Singapore-based company, “AAL Shipping.” Both vessels arrived at the Red Sea from the Suez Canal. The AAL Genoa arrived in the Red Sea from Poland, while the Elbella arrived from Russia. 
  • The Houthis attacked two more merchant vessels on June 10 – the MSC Tavvishi (IMO: 9189366), a 278-meter container vessel owned by MSC, and the MV Norderney (IMO: 9506124), a 108-meter bulk carrier sailing under the Bahamas flag. Norderney is owned by a German company, “Sunship Schiffahrtskontor Kg.” Both vessels arrived at the Red Sea from South of the Bab-el-Mandeb Strait: the Tavvishi from Singapore and the Norderney from Madagascar.

The Houthis also attacked the Tutor (IMO: 9942627) using a sea drone. The Tutor is a 229-meter bulk carrier sailing under the Liberia flag. It is owned and operated by a Greek company “Evalend Shipping Co S.A.”. The Tutor arrived at the Red Sea from Russia and engaged in dark activity after it entered the Red Sea on June 9. It should be noted that this was the Tutor’s first and only dark activity.

• There has been an increase in the number of attacks carried out by the Houthis during the past two months against merchant vessels in the Red Sea and Arabian Sea, which will affect the  global maritime trade in the Red Sea. Additionally, as seen in the cases of  the AAL Genoa and Tutor, the Houthis are still attacking vessels that arrive from Russia, although they promised to grant vessels related to Russia “safe passage” in the Bab el-Mandeb Strait. This is an interesting development…

Has OFAC Changed its Approach Towards Risk? 

OFAC has undertaken some recent actions to “take sweeping aim at foundational financial infrastructure and access to third country support.” 

OFAC’s updated sanctions advisory for practical guidance on how to identify sanctions risks and implement corresponding controls is of particular interest (bold text indicates Windward’s emphasis, not OFAC’s):  

“To mitigate sanctions risk, foreign financial institutions should take steps to identify and minimize their exposure to activity involving Russia’s military-industrial base and those that support it. These steps are in addition to baseline customer due diligence (CDD) procedures and other anti-money laundering (AML) controls, which can be critical for detecting, stopping, and reporting attempted or suspected sanctions evasion. OFAC recognizes that there is not a “one-size-fits-all” approach to identifying and mitigating exposure to activity involving Russia’s military-industrial base, and thus foreign financial institutions may take various approaches to identifying and mitigating their relative sanctions risk.  Each institution should implement controls commensurate with its risk profile and current exposure to Russia’s military-industrial base and its supporters. 

For example, small- and medium-size financial institutions located in jurisdictions that continue to engage in significant trade with Russia may present a particularly high risk of providing services involving Russia’s military-industrial base.” 

Most of the advisory focused on the need of foreign financial institutions to conduct recurring reviews of their customer base to determine which customers are at greater risk of supporting Russia’s military-industrial base and violating secondary sanctions. OFAC directed them to go beyond name screening to create their own risk-based approach as OFAC understands that “there is not a ‘one-size-fits-all’ approach.” 

We’ve Got the Solution  

Windward recently redefined risk management with the industry’s first fully configurable risk type. Organization Defined Risk (ODR) enables users to define their own behavioral indicators to meet unique business and risk needs. Indicators can be applied to both behavioral and static screening data sets.

A truly configurable approach empowers organizations to define and apply individual risk parameters that resonate with their specific needs, scenarios, industries, and teams. Entities can ensure that their risk management strategies are in perfect alignment with their operational and strategic risk mitigation and growth objectives.

To give just one example: companies operating in high-risk jurisdictions might want to configure a high risk alert for every vessel meeting with a Russian-affiliated vessel. Organizations in lower risk jurisdictions may only define such behavior as an indication to stay proactive…

Blown Cover 

Regarding Russia and risk, many trading and shipping companies have been saying, “We cover the regulations.” This approach is no longer sufficient – covering the regulations is not the maximum, it’s now the bare minimum that is required. 

A proactive approach is a must and only Windward’s ODR capability can help implement the approach recommended in the advisory, while ensuring you do more business with less risk. 

Additional OFAC Actions 

More than 300 companies in Russia and other supporting countries – China, Cyprus, India, etc. were sanctioned, including a port operator in Turkey for providing material assistance to blocked vessels. This is the first time a port operator has been sanctioned for supporting another country’s military efforts. The EU 11th sanctions package has addressed the responsibility of port authorities – it banned the entrance of vessels engaged in price-cap-breaching suspicious STS operations. Together with this recent listing, it’s becoming clear that port authorities and operators can no longer wing it and must create proper sanctions workflows to avoid financial and reputational damage. 

I’m Interested in a New Risk Approach