Addressing the Most Common Sanctions Evasion Tactics in the Maritime Sector
"Countries and other entities use numerous tactics and approaches within the maritime sector to work around trade sanctions, and with the rise in technology, the number of methods and support vehicles is increasing drastically."
Until recently, the maritime industry has remained more or less out of the spotlight of sanctions compliance scrutiny. However, that has changed rapidly over the past decade, with more and more instances of maritime sanctions evasion occurring every year.
Are you surprised?
Neither are we. Countries like Russia, North Korea, Venezuela, and China continue to take on numerous trade sanctions from the US and the UN, leaving them to actively and intentionally seek new ways to circumvent sanctions efforts.
Most recently, oil sanctions have been slapped on Russia for invading Ukraine, which was meant to weaken the regime by reducing its GDP. It makes sense, in theory, considering about 20% of Russia's GDP comes from oil and gas. But even with sanctions from most of the western world and a constantly watching eye through the ongoing conflict in Ukraine, Russia is still managing to overcome the bulk of the fallout.
Countries and other entities use numerous tactics and approaches within the maritime sector to work around trade sanctions, and with the rise in technology, the number of methods and support vehicles is increasing drastically.
Below, we walk through some of the most commonly used sanctions evasion tactics in the maritime sector and address the key indicators for each, allowing maritime organizations and authorities to better prepare for compliance and trade enforcement.
Common Maritime Sanctions Evasion Tactics and Their Indicators
Dark Shipping: AIS Manipulation
Dark shipping is among the most common tactics supporting entities seeking to circumvent sanctions using maritime pathways. Dark shipping describes a situation where a vessel is operating with its AIS transponder turned off. AIS transponders, in short, ping a ship’s location, identification, and historical data to nearby vessels and maritime authorities. These systems were initially created and used to reduce the risk of collisions at sea but have since taken hold as a way to keep an eye on vessels - particularly those with a history of sanctions evasion or other illicit activity.
The biggest issue with AIS systems is that a ship’s operator can simply switch them off and back on at any time.
While AIS outages could undoubtedly point to nefarious activity, some legitimate reasons exist for turning the systems off. Either way, dark shipping is among the most commonly used vehicles for those looking to make undocumented calls to port, ship-to-ship (STS) transfers, or off-navigation transits to support sanctions evasion.
Key Indicators of Dark Shipping: The most apparent and obvious indicator of dark shipping and other AIS manipulation events is a single or repeated history of AIS outages or strange AIS tracking pattern without a fully-corroborated reason for the events (i.e., ship maintenance, storm-related outages, or vessel inactivity). By closely monitoring ships that pose a significant risk of sanctions avoidance or by monitoring those entities with a history of illicit activity, regulatory agencies can better prepare and respond to outage events and uncover the reality of a situation.
Another common pathway for maritime entities to circumvent sanctions is intermediary trading. In the most basic sense, intermediaries are “middlemen” between the sanctioned entity and the supplier, where the third-party entity facilitates the onward transfer of goods or materials despite existing sanctions.
Key Indicators of Intermediary Trading: By assessing the past, current, and future shipping routes of a vessel suspected of holding a role in intermediary trading, authorities gain valuable insight into risk assessment. If an entity is deemed high-risk, authorities may investigate further to uncover any relations with sanctioned organizations or countries.
In 2020, the US Office of Foreign Assets Control (OFAC) issued an advisory that brought the issue of flag hopping to center stage. Flag hopping is a commonly used tactic for sanctions evasion at sea, where a vessel repeatedly or quickly changes its flag of origin or operates under a "flag of convenience." It is generally seen as an unethical practice and is most often used for sanctions avoidance and actions of non-compliance.
Key Indicators of Flag Hopping for Sanctions Avoidance: A standard method for identifying or flagging vessels for flag hopping is by evaluating a ship’s AIS data and comparing it with official maritime organization (IMO) records. These records are available in the IMO database, the EU Equasis, and the Global Integrated Shipping Information System (GISIS). IMO has put tools in place that allows vessels to be flagged for suspicion of flag hopping - which maritime authorities can use to support their situational suspicions.
Ship-to-Ship (STS) Transfers
Ship-to-Ship (STS) transfers are commonly used for legitimate maritime trade, which makes it challenging for authorities to determine when an incident is illicit. In many cases, ships are too big to enter a terminal, or they may just want to avoid port fees, so they choose to load or offload goods or materials with an STS transfer. Still, these open-water transfers have become more common as a tactic to trade sanctioned goods, namely oil. STS transfers are also often used alongside other evasion tactics like dark shipping, further covering a vessel's actions or interactions with other ships.
Key Indicators of Non-Compliant STS Transfers: Ship-to-ship transfers may occur in various locations depending on the sanctioned entity in question. One way maritime authorities can begin to minimize and regulate these illicit occurrences is by identifying areas that pose a significant risk of such events. For example, North Korea often transfers sanctioned goods in some regions of the Yellow Sea or the East China Sea, while Iran and Venezuela often make these transfers near specific ports in the UAE. By understanding where and when these transfers often happen, authorities can develop strategies to stifle this type of trade.