Global trade financing is an increasingly complex task for financial institutions, especially when vessels are involved. Many authorities now expect financial institutions to implement sophisticated controls when it comes to shipping. These include screening and monitoring for potential sanctions violations, trade-based money laundering, and other high-risk transactions.
Recently, the U.S. Office of Foreign Assets Control (OFAC) put out a new advisory describing common deceptive shipping practices. It also recommends a list of due diligence procedures for organizations across the maritime ecosystem to implement.
Given the large volume of transactions and the need for timely processing of transactions, it is not feasible to complete Enhanced Due Diligence (EDD) on every transaction. Financial institutions must rely on a risk-based approach to protect themselves and keep their business on track.
Know Your Vessel: Case Studies in Steering Clear of Sanctions Evasion examines two public examples where standard screening tools failed to identify red flags associated with a vessel involved in a transaction and reviews the resulting risks to the transaction parties.
It goes on to explain how a Know Your Vessel (KYV) process such as considering the vessels’ prior behavior would have flagged the transaction. It ends by describing how KYV can be incorporated into the transaction screening process.