The global maritime and transportation industries have long played a vital role in facilitating the movement of goods and people across borders. However, these industries are vulnerable to exploitation by illicit actors who seek to transport contraband goods, evade sanctions, and launder money. In a recent announcement, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) highlighted the growing threat posed by illicit cargo shipments and called for heightened vigilance from all stakeholders in the maritime and transportation sectors. Captain Steve Bomgardner explains more, and points out the deceptive shipping practices that malignant actors deploy when transporting cargo illicitly; and how compliance measures emphasised by OFAC can be supported and met with greater and more effective maritime intelligence, to combat the challenges that the industry and sector face…

Deceptive Shipping Practices

Malignant actors employ a variety of deceptive shipping practices to conceal the true nature, origin, or destination of their illicit cargo – of which there are four major methods often used to be aware of. For instance, location or identification data is often manipulated and malign actors may tamper with vessel tracking systems, falsify vessel documentation, or use false identities to obscure the identity or location of cargo.

Another method that is regularly deployed is to falsifying cargo and vessel documents. This practice sees bad actors counterfeiting shipping documents, changing the descriptions of goods, or forging certificates of origin to disguise the true nature of the cargo. Ship-to-ship transfers is another approach generally deployed. Malign actors might transfer cargo from one vessel to another at sea, making it difficult to track the cargo’s origin and destination.

Aside from this, complex ownership or management structures relating to the ownership or control of vessels is often deployed by malicious entities. They might, for example, obscure their ownership or control of vessels or companies through complex corporate structures, making it difficult to identify the true beneficiaries of illicit shipments.

Five Key Measures Emphasised by OFAC

These deceptive practices pose significant risks to the maritime and transportation industries, as they can lead to the diversion of legitimate cargo, the proliferation of illicit goods, and the erosion of trust in the global supply chain. To mitigate these risks, OFAC emphasised the importance of implementing robust compliance measures. These top five measures follow.

• Establishing effective sanctions and export control compliance programs: Companies should develop comprehensive policies and procedures to identify and mitigate potential sanctions violations. This includes screening transactions against government lists, conducting due diligence on counterparties, and training personnel on compliance requirements.
• Implementing location monitoring best practices:Organisations should monitor the location history of vessels, vehicles, and aircraft to identify prior manipulation or disabling of location or identification tracking data. This can be done through a variety of methods, such as Automatic Identification System (AIS) monitoring, satellite imagery, and physical inspections.
• Conducting thorough “Know Your Customer” (KYC) investigations: Companies should conduct rigorous background checks on counterparties to ensure their legitimacy and adherence to relevant regulations. This includes verifying their legal registration, financial standing, and business activities.
• Exercising supply chain due diligence: Entities should evaluate the potential risks associated with their supply chains and take steps to mitigate those risks. This includes verifying the authenticity of shipping documents, ensuring that cargo is not diverted to prohibited destinations, and conducting due diligence on all intermediaries involved in the supply chain.
• Sharing information with law enforcement: Companies should report any suspicious activities to relevant authorities promptly. Information sharing plays a crucial role in disrupting illicit trade networks and identifying the perpetrators of these crimes.

Greater maritime intelligence provides an answer

Naturally, combatting deceptive shipping practices and meeting the five key measures set out by OFAC is not straightforward. However, access to better maritime intelligence technology and risk intelligence can enable the maritime and transportation industries to address these challenges. This technology does this by providing these industries with comprehensive visibility into global supply chains and enables the proactive identification of potential red flags.  Further, the latest technologies available typically provide access to advanced data analytics and machine learning – which helps organisations detect anomalous patterns, suspicious transactions, and potential violations of sanctions and export control regulations.

In addition to this, the most progressive versions of these solutions come with powerful compliance capabilities that provide effective and useful risk mitigation tools. For instance, this might include access to the capability to achieve consolidated screening, and to seamlessly integrate with various sanction and export control databases, to screen transactions and counterparties against authoritative lists. Or, they might provide enhanced due diligence resources that allow organisations to conduct in-depth investigations into entities and individuals to assess their compliance risks and verify their legitimacy.

Supply chain mapping and visualisation is becoming increasingly useful to organisations too. Having the ability to easily visualise and analyse supply chains, to identify potential vulnerabilities and network connections that could be exploited for illicit purposes is becoming increasingly popular and sought after too.

Conclusion

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) recently underscored the escalating threat posed by illicit cargo shipments. The OFAC has called for increased vigilance from all stakeholders in the maritime and transportation industries. By implementing robust compliance measures and developing greater access to maritime and risk intelligence technologies, the maritime and transportation industries can effectively combat the illicit shipment of cargo and safeguard their businesses from the associated risks.