Today, it is not enough to “Know Your Customer” (KYC); in the dynamic world of trade sanctions, you need to know more – you need to “Know Your Vessel” (KYV).
As trade sanctions increase worldwide, knowing which vessels you can safely do business with is of increasing importance across the wider business environment.
We recently brought together leading experts in sanctions compliance and maritime intelligence to present real-world cases of ships concealing sanctioned trade, explain how to identify common red flags and provide insight into how these bad actors could have been spotted in advance using KYV.
To view the webinar discussion, click here.
What are the top five things you need to know about KYV? Continue reading below:
Andrew Fierman, Sanctions Compliance Officer at Societe Generale, kicked off the webinar by talking about the importance of taking proactive measures such as KYV to mitigate designation risk fully.
While talking about changes companies must undergo to go beyond the OFAC SDN lists, he mentioned building up domain knowledge, incorporating new data sources, and implementing training for all relevant teams as key methods. Over 70% of participants were in agreement as they considered “designation risk” of critical importance when screening clients and/or transactions.
In addition to talking about the importance of KYV for proactive screening, we also discussed how KYV can help you focus on what you don’t see. When examining the extent of deceptive shipping practices, ‘going dark’ is the leading red flag when it comes to sanctions evasion. However, it is hard to accurately detect when ships “go dark” due to routine AIS transmission gaps. By applying KYV screening to focus on the ship’s uneconomic behavior, such as missing port calls and aimless journeys, it becomes easier to see beyond what you don’t see.
What does it take to distinguish between ‘lost’ and ‘dark’? Omer Primor, Head of Marketing at Windward and a former Intelligence officer, suggested three tips for flagging true “dark activity”:
To understand the impact of KYV in the long run, Nick Turner, a lawyer specializing in sanctions at Steptoe, joined us. According to Turner, cases can often take years to see the light of day, making effective KYV crucial in mitigating designation risk. Turner shared a recent example of an OFAC enforcement action involving a shipping company violating sanctions on Myanmar. This despite Myanmar being sanctions free since OFAC removed sanctions in 2017.
Nick also provided an overview of the risks that organizations doing business with these entities could encounter, such as possible requirements to file a Suspicious Activity Report (SAR), government investigations, and being black-listed by Financial Institutions. Companies that want to avoid these risks can use advisory lists as an opportunity to get ahead of potential enforcement actions. Companies that fail to do so risk falling behind.
Shipowners and managers are not the only ones that need to care about KYV. Since the 2008 designation of the Iranian fleet, sanctions have increasingly focused on industries dependent on shipping and not just the ship owners and operators. We brought Stephanie Rice, a former investigator U.S. Treasury’s Office of Foreign Assets Control (OFAC) to discuss the importance of KYV for ship managers and owners.
According to Stephanie, the latest maritime sanctions advisories increase the risk mitigation expectations for companies across the maritime ecosystem with a corresponding rise in enforcement risk.
The global and interdisciplinary nature of sanctions compliance was reflected in the 188 participating organizations and is spread across the entire maritime ecosystem. The impact is felt globally with representatives from over 36 different countries in six continents over a variety of industries, including finance, insurance, energy, commodities, shipping, and more.
The number of SDN designations issued by OFAC against vessels soared from 40 in 2016-17 to 321 in 2018-19
Lucas Kuo, Senior Analyst at C4ADS, demonstrated how they uncovered a large DPRK fuel smuggling network by using open-source data to build a list of high-risk entities. By combining KYV red flags on a single ship alongside network analysis of ownership data, C4ADS was able to expose a previously unknown network of sanction evading operations.
According to Lucas, C4ADS routinely uses a variety of publicly and commercially available maritime databases to obtain information on a vessel’s owners and managers. Lucas outlined publicly available guides to deceptive shipping practices, including the UN Panel of Expert Reports, advisories from sanctions authorities, and media articles, all showcasing the benefit KYV has together with Network Analysis.
At the end of the day, the ever-evolving and expanding trade sanctions make it increasingly difficult for organizations operating in the maritime ecosystem to know which vessels are safe for business. In addition to standard screening, organizations need KYV to steer clear of sanctions evasion risks.
As one participant said:
“KYV is both a trigger to screen ship activity for sanctions risk and a reminder on how to do it.”
To view the webinar presentation, click here.