Compliance risk management
What is compliance risk management?
Compliance risk management in the maritime industry is the process of identifying, assessing, and mitigating the risks associated with non-compliance with laws, regulations, sanctions, and standards that apply to the industry. This includes risks related to crew and cargo safety, environmental protection, labor standards, and the countries where cargo is loaded and unloaded.
Why is compliance risk management important?
Here are some reasons why compliance risk management is important:
- Maintaining compliance is essential for minimizing legal, financial, and reputational risks, including sanctions violations and financial crimes. Non-compliance with laws and regulations can lead to legal action being taken against a company, which can result in heavy fines and other penalties. It can also damage a company’s reputation, creating negative consequences for the business. Companies strive to protect themselves from these potential consequences by proactively managing compliance risk with the assistance of technology
- It helps to ensure the safety of maritime operations and the people involved in them. This includes the safety of crew members, passengers, and others who may be affected by maritime activities. Non-compliance with safety regulations and standards can lead to accidents and injuries, which can have serious consequences for all involved.
- Compliance risk management is important for protecting the environment. The maritime industry has the potential to significantly impact the environment, both positively and negatively. Ensuring compliance with environmental regulations and standards can help minimize negative impacts and protect natural resources.
A good compliance risk management strategy
It’s essential for companies to complete their due diligence and establish a compliance and risk management strategy to lower the risk of non-compliance. This includes verifying the following issues:
- Vessel behavior in your fleet
- Cargo data
- Countries where the ship will dock
- Ownership structure
By following Know Your Vessel (KYV) principles, there won’t be any surprises from the behavioral and historical actions of the ship. Such solutions provide real-time, actionable data regarding potential risk exposure, compliance issues, and more.
It’s important to know the latest updates, advisories, and warnings from agencies like the Office of Foreign Assets Control (OFAC), Office of Financial Sanctions Implementation (OFSI), and the UN.
How to navigate compliance risk management
The compliance risk landscape is constantly evolving and shipping companies must be proactive to ensure they evolve with, and stay ahead of, sanctions. To maintain a high standard of risk compliance and avoid any unwanted surprises, companies should:
- Access the latest real time data: viewing reports with the latest maritime data is the best way to execute successful sanctions screening and compliance checks. Having software that handles these functions significantly streamlines the processes.
- Know the latest regulations and guidelines:the rules are constantly changing and it’s up to everyone in the maritime ecosystem to understand the latest standards and regulations. It’s crucial to stay up to date with international commerce policies, common sanction evasion tactics, and environmental issues.
- Learn to manage risk effectively:pinpointing illegal or “borderline” actions can be complex and “false positives” for deceptive shipping practices can be crippling for the business/trading side. Being able to isolate an issue and rework it to mitigate risk can require coordination between multiple tasks, or organizations. Having an open line of communication is essential to lowering the risk of non-compliance.
Use all available resources:having access to the right tools is an important factor in lowering your risk profile. Whether that means getting access to artificial intelligence (AI), hiring a compliance risk management specialist, or a combination of the two, make sure to carefully consider your organization’s specific risk appetite.
Avoid financial crimes with AI-based compliance risk management solutions
Using an AI solution can be a real game-changer when it comes to identifying and stopping financial crimes, such as Trade Based Money Laundering (TBML) and fraud from various actors in the maritime industry. The software can provide real time information about the client and their relationship with any high-risk ships, including tracing back through seven levels of ownership, all the way to the UBO.
Effective technology can improve the speed and accuracy of compliance screening. It scans the latest sanctions lists, to quickly identify sanction violations or deceptive shipping practices. Lastly, it provides a full rundown of the Bill of Lading. This will automatically pair the documented trade data with all aspects of the shipping process, including its AI-generated risk score.
Using a compliance risk management solution
Having the right compliance risk solution is one of the keys to lowering your compliance risk and avoiding sanctions. The software is designed to assist the company with alerts, updates, and warnings when it detects non-compliance with laws, regulations, or regional standards.
There are different types of compliance risk management solutions. There are basic tools that help track compliance requirements and deadlines, and advanced AI software that scans hundreds of data points and provides real-time analysis of the ship’s compliance management. Some common features of compliance risk management solutions include the ability to:
- Monitor and track compliance requirements
- Automate compliance processes and procedures
- Generate reports and alerts to help organizations identify potential compliance risks
- Provide guidance on how to address compliance issues
- Integrate with other systems and tools to help organizations manage compliance more efficiently
These types of solutions can assist organizations to ensure that they are meeting the necessary requirements and help them avoid fines, penalties, and other negative consequences that can result from non-compliance.