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Jul/Aug 2020
Detecting Deceptive Shipping Practices: How Much Responsibility Can Banks Reasonably Handle?
Following release of a US Government joint advisory document, “Guidance to Address Illicit Shipping and Sanctions Evasion Practices”, one prominent trade finance specialist reviews its key elements and collects feedback from fellow bankers on what it means for practice.
7 min read
How far are financial institutions obligated to ensure that the documents they handle representing and supporting goods being transported by sea from one destination to another do not relate to illicit shipping and sanctions evasion?
On 14 May 2020, the U.S. Department of State, U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), and the United States Coast Guard issued a 35-page joint advisory document, “Guidance to Address Illicit Shipping and Sanctions Evasion Practices”.[[1]]
According to the Advisory, around 90% of global trade involves maritime transportation and criminal elements are constantly seeking new and effective ways to exploit global supply chains for their benefit. The Advisory aims to provide those reputably involved in trade in the maritime industry, energy, and metal sectors with information, tools, and strategies to counteract current and emerging trends related to illicit shipping and sanctions evasion.
The Advisory reflects the U.S. Government‘s commitment to work with the private sector to prevent sanctions evasion, smuggling, criminal activity, facilitation of terrorist activities, and proliferation of weapons of mass destruction (WMD) with particular focus on Iran, North Korea, and Syria. The guidance is intended for the full array of individuals and entities involved in or supporting some facet of trade conducted by maritime means including ship owners, managers, operators, brokers, ship chandlers, flag registries, port operators, shipping companies, freight forwarders, classification service providers, commodity traders, insurance companies, and financial institutions. For purposes of this article, I will focus on guidance as it relates to financial institutions.
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