Sanctions And The Maritime Industry - Overview Of OFAC And OFSI Advisory Notes

Published date31 August 2020
Subject MatterFinance and Banking, International Law, Transport, Compliance, Financial Services, Marine/ Shipping, Export Controls & Trade & Investment Sanctions
Law FirmClyde & Co
AuthorMr John Keough and Patrick Murphy

In this first in a series of articles on sanctions and the maritime industry, we provide an overview of the recent advisory notes issued by OFAC and OFSI, the US and UK bodies responsible for the implementation and enforcement of their respective sanctions, and look at what they mean for the maritime and commodities industries.

The shipping and commodities industries have found themselves at the forefront of sanctions developments in recent months. In May 2020, the US Departments of State and Treasury (the latter of which includes OFAC) and the US Coast Guard provided a sanctions "Advisory" directed at the Maritime, Energy and Metals Sectors and Related Communities (the OFAC Advisory). The UK's Office of Financial Sanctions Implementation produced a similar advisory on 27 July 2020 (the OFSI Advisory). It is no coincidence that these key sanctions bodies are looking closely at the maritime sector.

OFAC has historically leveraged its reach by co-opting critical elements of the global economy into enforcing its sanctions objectives. It has traditionally looked to the banking industry to spearhead compliance given its gateway involvement in financial transactions, requiring it to filter out transactions that might be related to sanctioned persons or jurisdictions. Now, as the United States continues its "maximum pressure" campaign of sanctions against Iran, North Korea, Syria and Venezuela in particular, OFAC is ratcheting up its intense focus on the maritime and commodities industries to require sanctions compliance.

OFAC's growing focus on due diligence in shipping surfaced in a series of advisory notes issued to the maritime industry from 2018 onwards - in respect of North Korea (February 2018 and March 2019), Iran (September 2019) and Syria (November 2018 and March 2019). But the OFAC Advisory of May 2020 is far more comprehensive in both its scope and detail than any of the earlier notes.

Firstly, it is not limited to guidance in respect of specific sanctions targets such as North Korea or Iran (although it does update earlier advisory notes for each of those regimes). Rather, it is expressed to be comprehensive sanctions compliance guidance to the maritime community generally - as well as to the energy and metals sectors which were not so obviously targeted in the earlier notes. In this regard the OFAC Advisory can be seen as an industry specific development of an earlier OFAC guidance, its "Framework for OFAC Compliance Commitments" published in May...

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