The timing was excellent – or unfortunate – depending on your perspective. Just a week before South Korean President, Moon Jae-in, jets to Washington to talk DPRK denuclearization, it was reported that a South Korean oil tanker had been detained.
The P PIONEER – the first local vessel seized by South Korean authorities — is among four detained by Seoul. All are suspected of violating United Nations sanctions on fuel shipments to North Korea.
Just last month, the UN Security Council (which uses Windward technology) published its latest report on North Korea. It laid out in graphic detail Pyongyang’s evolving tactics in evading sanctions, and the maritime compliance risk faced by anyone connected – however unwittingly – to vessels engaged in this kind of activity.
The P Pioneer
According to reports, the P PIONEER was detained last October on suspicion of shipping oil to North Korea via clandestine ship-to-ship transfers, and is “an indicator of the increasing pressure the U.S. is exerting on foreign governments and businesses to crack down on North Korean sanctions evasion”, according to Tahlia Townsend and Joseph Grasso, who head the International Trade Compliance and Insurance Practice Group at U.S. law firm Wiggin and Dana.
Analysis of the vessel’s behaviour in the 12 months leading up to its detention reveal a pattern of dark activities in several parts of the East China Sea. In total, we detected 13 separate occasions when this happened – the kind of deceptive shipping practices routinely employed by North Korea, as highlighted by an updated advisory published last month by the U.S. Treasury’s Office of Foreign Assets Control. During our analysis, another notable pattern of behaviour emerged: in the 12 months before it was detained, the P PIONEER only visited ports in South Korea. In other words, every voyage the vessel undertook began and ended in South Korea.
Searching in the Dark
Detecting such behaviour just by searching for “dark activity” won’t get you very far. Indeed, if you use this behaviour as a proxy for illicit activity in the East China Sea, you’ll end up with a shortlist of 20,000 vessels during the past 12 months (the East China Sea is notorious for poor AIS coverage, meaning many vessels that “go dark” don’t do so deliberately). Of these, 1,200 were tankers – a number way too big to differentiate between innocent vessels just passing through, and those potentially engaged in illicit oil trading with North Korea. If that was all we could do, compliance officers, charged with ensuring vessels they deal with are complying with sanctions, would probably jump overboard.
Where we can narrow things down for maritime compliance risk is by looking at how frequently vessels went dark – where it was an integral part of a vessel’s modus operandi. As the chart below shows, most tankers had no more than one dark activity in the area; only 3.5% of them did it more than five times. Using this as a signal, we can then look more closely at these repeat offenders, to find those that might be evading sanctions (it’s also worth noting that our algorithms can detect which turn-off-transmissions are due to lack of reception and which due to skulduggery).
Another way to whittle down the list of potential miscreants is to look at trade patterns. As discussed above, most vessels passing through this area were heading to ports in the region. The P PIONEER’s voyages always started and finished in South Korea (with a dark activity in between), a pattern we see in just 81 other vessels over the past 12 months.
If we narrow down our time window to the past 60 days, we find only 17 vessels were engaged in this pattern of behaviour – a much more manageable data set. Within those 17 we find one, very interesting, vessel, called the P CHANCE.
Like the P PIONEER, it’s a tanker; it’s flagged in South Korea; it had 21 dark activities in the region in the past year – including one last month. Oh, and it belongs to the same registered owner (see below).
Looking at the P CHANCE’s economic utilization profile, one can spot the same risk indicators but from a different perspective. With more than 15 dark activities in the East China Sea in 2018, the vessel spent only 31 days in port (compared with 80 days for similar tankers) – an unreasonably large number of days for a ship that needs to be commercially viable (and another reason why this vessel was flagged by the Windward system as being high-risk).
To be sure, this isn’t a smoking gun – it just means that out of the thousands of vessels transiting the East China Sea every month, this vessel stands out, indicating that further investigation may be warranted.
Maritime Compliance Risk
The deceptive shipping practices discussed in this article were once only relevant to intelligence agencies and NGOs that monitored and enforced sanctions. But as we’ve seen in the recent OFAC advisory, and the UN Panel of Experts report, sanctions enforcement is no longer something only bad actors need worry about; counterparty due diligence (CDD) teams in every industry that interacts with shipping now need to up their game considerably. Indeed, when list managers or compliance officers consume data feeds and black lists, the recent OFAC advisory might now require them to prepare and consume a global daily review of dynamic sanctions evasions tactics, to mitigate compliance risk. With the right technology, they can do so – while keeping their businesses running as usual.
Omer Eilat is Director of Business Development at Windward
This is Part 2 of the Sanctions Series, for more insights, read Part 1: The Data Science of Compliance; Part 3: The Multinational Story Behind the Grace 1; and Part 4: When it Comes to Sanctions, Grey is the New Normal.
To understand the legal framework this is based on, please read Navigating New Maritime Sanctions Compliance Requirements written together with Wiggin and Dana LLP.