Author: Stephanie Farrugia
The world, including the maritime sector, is facing an increasingly complex sanctions climate. As the conflict in Ukraine continues to escalate, sanctions regulations are rapidly evolving and the whole maritime sector is required to keep vigilant to ensure constant compliance.
In reaction to the disjointed nature of information sharing between flag registries and recognising a need for mutual collaboration on a global scale, the Government of Malta through the Sanctions Monitoring Board and together with the United Nations Office on Drugs and Crime (UNODC), recently held a virtual symposium titled ‘Consolidating Maritime Security Partnerships and presenting Malta’s proposal for the establishment of a database for global sharing of information’. This symposium included an international panel of experts in the field to discuss matters and opinions relative to the risk indicators and red flags used to identify vessels engaged in deceptive shipping practices, the existing legal and regulatory frameworks and finally, a proposal by Malta to have an international data sharing platform on problematic vessels engaged in illicit or sanctionable activities.
The proposed sharing of information would be on a need-to-know basis, in a way that will not compromise its confidentiality. The rationale is one of collaboration and mutual support in the fight against bad actors at sea: limited access to data would provide visibility of vessels’ profiles and performance history, which would help prevent the potential reflagging of sanctioned ships or ships owned by sanctioned persons.
Vessels that engage in illicit activities at sea; be it fuel smuggling, trafficking of arms, narcotics, contraband, prohibited goods, importation of crude oil and petroleum from sanctioned countries or in any shape or form circumventing sanctions; generally, use several means to disguise themselves and obscure their identity to avoid detection. A good reference that provides a summary of the common deceptive shipping practices used by bad actors at sea and which gives suggestions on how different players within the industry could identify and combat such techniques are the guidance notes that were published by the US Department of State, the US Department of Treasury (OFAC) and the US Coast Guard in May 2020. These notes outline examples such as:
- the intentional switching off or manipulation of AIS (automatic identification system) to conceal a vessel’s movement;
- the physical alteration of the name of the vessel or its unique IMO number;
- the falsification of vessel and cargo documents, to disguise the origin and destination of cargo;
- ship to ship transfers, which are transfers of cargo done between ships at sea to conceal sanctioned or prohibited cargo;
- voyage irregularities such as unscheduled detours or re-routing to create confusion and mask the actual route;
- flag hopping, which as the name suggests, is when a vessel hops from one registry to another;
- false flags, when a vessel continues to fly a previous flag following its closure from a previous registry; and
- complex ownership or management structures, used to disguise the vessel’s ultimate beneficial owner who may be a sanctioned person.
SOLAS rules provide for limited exceptions to the general requirement imposed on vessels on international voyages to have AIS always switched on and whilst there could be a situation of genuine malfunctioning or coverage issue, suspicious AIS transmission gaps are a red flag to be investigated.
It is also not an uncommon practice for a vessel to have a flag change; however, when done regularly, with registration maintained for very short periods, with frequent name changes and when the chosen flags are considered the higher risk flags of convenience, the purpose of the flag change may be with a view to concealing the vessel’s profile.
Risk mitigation can be done with appropriate due diligence measures, using compliance program tools, giving adequate training, providing involved personnel with the resources to know what red flags should be examined, and establishing and promoting AIS best practices and continuous broadcasting. ‘Industry Information Sharing’ is another recommendation in the guidance note abovementioned – with the intention of generating industry wide awareness on the threat picture of a particular vessel.
The symposium also hosted speakers from a couple of flag registries who communicated their ideas and opinions on information sharing. The speaker from the Liberian Registry spoke about the Registry Information Sharing Compact (“RISC”), an agreement which was set up by Liberia, Panama and Marshall Islands and a few other maritime flags to be a means for flag states to give notifications for denial of vessel registrations or deregistration due to suspected sanction evasion or illicit activities. A speaker from a smaller maritime flag was also given the floor to discuss how helpful it would be even from smaller flag states’ perspective to have access to certain information such as reasons for deregistration.
The Authority for Transport in Malta explained that having States co-operate with each other through information sharing, under conditions that ensure legitimate interests are safeguarded, would help address sanction violations and could assist in weeding out bad actors at sea. This proactive initiative is testament to the good-governance-approach by which the Authority for Transport in Malta runs its Shipping Registry.
We will of course endeavour to share any further updates received as this developing data strategy takes shape.
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©Fenech & Fenech Advocates 2022
 The Sanctions Monitoring Board is the Maltese authority tasked with ensuring the effective implementation of UN, EU and national sanctions.