Trends in sanctions compliance for shipping

Growing trade sanctions and evolving regulator expectations are driving a revolution in global standards when it comes to compliance for shipping.

We recently hosted the first Windward Executive education series to discuss the new shipping and maritime guidance advisories and the impact on compliance and regulation changes.  Over 1,100  executives and analysts from over 466 companies based in 69 countries and from all continents (except Antarctica) took part. The participants represented the entire maritime ecosystem, with shipping, insurers, financial institutions, commodity traders, energy companies, maritime authorities, and other professionals.

The first session, led by Mr. Nick Turner, a leading sanction compliance expert, and lawyer at Steptoe and Johnson in Hong Kong, summarized the latest shipping advisories and explained how they are driving new standards for sanctions compliance in the shipping sector.

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To enable this shift, the first session highlighted the key areas to adapt to these new trends:

1. Shift to a risk-based analytical approach

OFAC and OFSI advisories both encourage shifting from check-the-box list matching to a risk-based analytical approach. KYV (Know Your Vessel) processes and screening for deceptive shipping practices are key to unveiling hidden risks

2. The maritime ecosystem must solve this challenge together

Weak links expose others to risk; that is why the entire ecosystem must work together to meet the new bar of standards. P&I clubs want to help shipowners implement controls, and banks want to help clients strengthen their processes.

The need for mutual responsibility is growing with the need to ensure counterparty compliance. 

3. From data point to decision point

Obtaining data is one of the most significant challenges organizations will face meeting the new standards, based on the poll during the sessions. However, while obtaining the right data is necessary, by itself it cannot support decisions. Organizations must get the data, understand it, and accurately analyze it to effectively meet the new standards. In the maritime domain, where the data is noisy, automated analysis can help gain clarity and provide decision-ready data.

4. All hands must be on deck

Compliance is leading the charge when it comes to meeting the new standards, but all aspects of the business need to step up to the challenge. Technology will play a large part in how an organization can meet the new standards, which is why IT teams within organizations must be actively involved.  While most organizations already have business buy-in, all teams will need to get on board to ensure standards are met. 

5. Lack of legal obligation is not an exemption

As Nick Turner stated: While the OFAC and OFSI guidelines are not legally obligating, they do have weight when it comes to expectations. The guidance documents provide interpretations, clarify the scope of existing legal authority, and alert the public to trends and typologies in designations, enforcement actions, etc. If an organization is caught inadvertently violating sanctions, how they have implemented the advisories into their due-diligence process will impact the final fine. That is why organizations should treat the guidelines as regulations, even though they are currently still categorized as advisories.