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Sanctions Busters Use Unconventional Routes to Evade Financial Restrictions
Report Highlights Tactics Used by Sanctions Evaders
A recent report by regulatory bodies has shed light on the unconventional routes and methods used by sanctions evaders to circumvent financial restrictions. The report identifies several typologies employed by these individuals and entities, including:
- Ship-to-ship transfers
- Rotations of owner and manager companies
- Open registries
- New vessel acquisitions
- False or fraudulent documentation
Masking True Origin or Destination
According to experts, these tactics are often used to mask the true origin or destination of covertly transferred commodities, making it challenging for authorities to track and trace the movement of goods.
“Circumvention Hubs”
The report notes that some countries and territories have become “circumvention hubs,” where sanctions evaders use their flags to distance themselves from perceived connections to sanctioned jurisdictions or entities. The vulnerable registries identified include:
- Gabon
- Dominica
- Mongolia
- Togo
- Sierra Leone
- Tanzania
- Comoros
- Vanuatu
- Albania
- Algeria
- Moldova
- Cameroon
Notorious Open Registries
The report also highlights that certain open registries have become notorious for their lack of transparency and effective enforcement of sanctions regulations. The top five flags for “dark” and “grey” fleets from sanctioned countries are:
- Panama
- Liberia
- Marshall Islands
- Malta
- Russia
Consequences of Breaching Sanctions Regulations
Consequences of breaching or facilitating a breach of financial sanctions can be severe, with penalties ranging from fines to imprisonment. The UK’s Office of Financial Sanctions Implementation (OFSI) has the power to impose monetary penalties on organisations that breach sanctions regulations, with penalties reaching up to £1 million or 50% of the estimated value of the breached funds.
Mitigating Risks
To mitigate these risks, experts recommend that organisations within the maritime and offshore industries implement robust sanctions compliance programmes. These programs should include:
- Continuous sanctions education
- Robust due diligence processes
- Comprehensive sanctions compliance policy
Failure to Implement Sufficient Measures
The report concludes that a failure to implement sufficient measures to manage an organisation’s sanctions exposure can increase the likelihood of inadvertently facilitating sanctions evasion and may be considered an aggravating factor by OFSI when determining enforcement action.
Reviewing Sanctions Compliance Policies
As international trade and financial sanctions regimes continue to evolve, it is essential for organisations to review and update their existing sanctions compliance policies and ensure regular audits by qualified third parties.