Lack of Vessel Ownership Data an Indicator of High Risk

69.2% of vessels with unknown beneficial owners have engaged in risky or sanction-violating behaviour, report finds. 

IIBLP (Institute of International Banking Law & Practice), GFI (Global Financial Integrity), and S&P Global have jointly released a new whitepaper examining the connection between the availability of a vessel’s beneficial owner information, and the risk of criminal or sanction-violating behaviour.

The paper notes that advisories issued in May 2020 by OFAC and in December 2020 by OFSI have made it necessary for financial institutions to combat sanctions and financial crime compliance evasion by monitoring suspicious vessel behaviour.

“While not previously expected of trade finance operations, a nuanced understanding of the maritime shipping industry has become a critical aspect of regulatory compliance, such as identifying commodities and trade corridors where transshipment and ship-to-ship (STS) transfers may occur,” the paper says.

The paper presents findings from a statistical review that sought to determine whether the availability of vessel ownership information is linked to a vessel’s compliance behaviour.

Of the 68,218 total vessels reviewed, 87.8 percent had a known owner, while the remaining 12.2 percent had an unknown owner.

The report finds that 69.2 percent of vessels with unknown owners had “Warning” or “Severe” as their compliance status, meaning they have engaged in risky or sanction-violating behaviour.

When the owners are known, only 28.8 percent of vessels had “Warning” or “Severe” as their compliance status.

The paper offers recommendations to improve transparency in the maritime shipping industry.

In particular, it says that financial institutions should consider vessel ownership as a “primary risk indicator”, i.e. when the owners of a vessel are unknown, there is a 69.2 percent chance it carries a “Warning” or “Severe” compliance status.

The paper also says it should be a requirement to list the Group Owner of a vessel in order to obtain an IMO number, given that vessels without such listings are “the riskiest group of vessels”.

The paper also says government regulators and port security officials should consider requiring Group Ownership information prior to port calls, and further down the line, establish a beneficial ownership registry to ensure additional transparency.

The paper is published here.

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