Navigating through the darkness: tech’s role in sanctions compliance

International sanctions are rapidly evolving due to shifting geopolitical tensions, making compliance more complex. Manni Sasani, Marcura’s Commercial Manager for Compliance urges ship owners and operators to actively work with trusted tech partners to assess sanctions risks and ensure compliance, avoiding severe legal, reputational and financial consequences.

In today’s volatile geopolitical environment, sanction regimes have increased in volume and complexity. Ship owners and operators must find smarter ways to navigate this complicated and fast-moving landscape – failure to comply can result in severe legal, financial and reputational consequences with fines ranging from millions to billions of dollars.

In this high-risk environment, shipping companies need instant access to the most updated sanctions information, which can change daily, and truly know the companies and wider stakeholders they are working with. This requires round-the-clock monitoring to ensure that your company and wider stakeholders are not inadvertently or wilfully falling foul of sanctions.

To do so, companies need access to high-quality, up-to-date maritime company data, checks that consolidate and accelerate multiple lengthy and manual processes through automation, teamed with a host of maritime experts that ensure the accuracy of compliance processes that currently cannot be performed through fully automated means or utilisation of AI.

Of course, all companies will have some experience in managing these risks. Sanctions are nothing new, they have always been a part of global trade and they are vital economic and foreign policy tools to circumvent or add pressure on countries in conflict or have gross human rights violations.

However, with the Russia-Ukraine conflict, tensions in the Middle East and the Red Sea, as well as rising tensions in the South China Sea, the sanctions landscape is now far more complex than it ever was and can be incredibly difficult for any one staff member or team to stay on top of.

And the pace of change has been rapid. For example, the economic sanctions on Iran were adopted over a few years, however, the sanctions imposed in February 2022 on Russia following the invasion of Ukraine were implemented within a few days.

Sanctions are imposed as tariffs, quotas, asset freezes and trade embargoes, and the dynamic nature of sanctions means there are frequent changes and updates ranging from additional sanctioned entities to new embargoes and tariffs put in place.

And it can get more confusing. Sanctions are created and enforced by multiple bodies and jurisdictions. The main global regulatory bodies that impose sanctions are the Office of Financial Assets Control (OFAC – USA), the Office of Financial Sanctions Implementation (OFSI – UK), UN Security Council and the European Commission (EU).

While sanctions are generally multilateral in exerting maximum pressure on the intended party, the sanction can still vary for each jurisdiction. For example, one country could sanction Russian-flagged ships, while for another, it would mean that no vessel can carry Russian cargo or have Russian nationals as crew.

It is important to stress how high the stakes can be. A single oversight in doing business with, or being affiliated with, a sanctions-breaking company would mean you too are violating international sanctions and could lead to multi-million dollar fines, asset seizures, and damage to the company’s reputation.

To mitigate against the high level of risk that a violation can bring, companies must take proactive and protective measures (as their staff cannot manage it alone). Too often assessing sanctions risks has fallen to a single person in a company, who may not have any prior experience in this area, and be an additional task to their daily core role.

This could all too easily lead to mistakes or oversights.

Staying ahead of today’s volatile sanctions landscape is a burdensome and full-time job requiring high levels of attention to detail and expertise. The only way maritime companies can truly stay on top of these risks is to leverage third-party digital solutions that have the data and resources (both digital and human) to stay on top of these complex and fast-moving sanctions risks for them.

Appearances can be deceiving

Knowing your customer has become more difficult. As sanctions have grown and become more complex, so too are the methods sanctioned companies use to conceal their identity. To know if a company is sanctioned, shipowners, operators and managers need to know the true ownership structures of their business partners, intermediaries and even individual crew members and their nationalities.

However, the maritime industry is complex due to its global nature and the convoluted company structures of the merchant fleet. The latter can provide the perfect cover for evading sanctions; concealing identities, vessel identity laundering, and exploiting disparities in sanction enforcement between countries to name a few.

This creates an “evolving entity”, where the name, registration details and the jurisdictions a company may operate in change constantly, making it difficult to detect any discrepancies that reveal they are on a sanctions list.

Without extensive and regular screening of this information, your company could inadvertently be doing business with sanctioned entities or individuals resulting in grave repercussions. Penalties for a sanction breach can range from monetary, to deferred prosecution agreements and can be as severe as criminal prosecution.

Being alert to a company’s vessel information and movements is also key. According to the Control Risk Report on Navigating the Global Sanctions Landscape in 2024, “many actors involved in sanctions circumvention are already experienced in hiding from international regulators and misleading their business partners, exposing them to sanctions risks.”

How do they do this? Switching off the automatic identification system (AIS) and altering output information of their location, vessel identity laundering, which is done by changing the flag state, and also transmitting AIS information of another ship.

For example, as explained in the MCaaS Maritime Compliance Report, the chemical/oil tanker Billions 18 was subject to a UN Member States investigation in May 2021 where several attempts had been made to disguise the vessel’s true identity. It was sailing as Mongolian flagged vessel Apex, and the AIS information transmitted was that of the Shun Fa.

Ship-to-Ship (STS) transfers is a method that involves moving cargo at sea as opposed to in a port. By doing so, the origin, destination and even type of cargo can be concealed.

At MCaaS, we screen the cargo by extracting unstructured commodity descriptions and data from booking files, flag missing or incorrect HS Codes, and match commodity descriptions with the proper HS Codes.

We have developed an extensive database of over 130+ trade restrictions lists, including Dual-use items, Military-use items and US/UN/EU trade control lists. In this way, we can support our customers to remain compliant and mitigate any reputational repercussions.

The alteration of documents such as Bills of Lading, proof of insurance, ship registration and operating invoices are frequently altered to avoid sanctions. By thoroughly reviewing such documents through the MCaaS database, together with screening by our experts, we can detect such falsifications.

Sanction evaders also manipulate complex ownership structures. This method includes changing company names, setting up shell companies, varying levels of ownership, management and overlap of employees between organisations. As such it is essential to work with a tech solutions partner with depth of data.

To detect this level of detail requires a database of maritime companies that is checked and updated regularly – on a weekly or daily basis – and is reliably sourced, which enables them to identify fraudulent parties and transactions.

For example, a major ship owner and operator based in the Asia Pacific region approached Macura’s MCaaS team to review 4,000 entities that they were trading with. During our screening process, we found a supplier in the Middle East represented by a name which we knew to be different from a year ago and was associated with a Russian-sanctioned entity.

A partner that knows maritime

There are firms out there who may offer sanctions compliance screening but owners and operators should consider working with one that truly knows maritime and has built up proprietary data and expertise in this field. For example, Marcura has worked in the maritime industry for more than two decades.

By leveraging artificial intelligence (AI), real-time data feeds that automatically track changes in sanctions regulations across multiple jurisdictions, and sophisticated algorithms, digital solutions such as MCaaS can monitor global sanctions developments continuously, screen vessels, cargo and business partners against sanctions lists and provide the latest sanctions updates.

We can provide an in-depth analytical picture of the organisations, vessels and cargo that our customers work with. Such solutions can dig deep into ownership structures and uncover links with sanctioned entities.

This kind of solution also resolves a time-consuming issue: false positives, where a company is falsely flagged as being sanctioned. For example, one of our customers who works with over 6,000 counterparties from the Middle East and Asia was using a screening tool that was giving many hits every single time they did a sanction screening of counterparties.

The tool was creating the hits as the company names were similar to those of sanctioned entities, which meant that they had to manually check every single positive to make sure it was correct.

The MCaaS team supported the customer by first cleansing the counterparty master data and providing accurate legal business names, removing errors and enriching it further with data that drives sanctions screening accuracy and user confidence.

Such efforts on master data accuracy combined with MCaaS’ service members, who performed false-positive checks, we were able to ensure that our customers had the correct information, which in turn removed the need for them to review false positives.

This saved our customer a staggering 47 business days per year in removing one manual and repetitive task for their risk management team.

While technology is vital to navigate the sanction compliance landscape human intelligence and interpretation are essential because we are working in a constantly changing grey area that has political, economic, regulatory and security implications. Shifting from reactive to proactive compliance is essential for the maritime industry.

By adopting technology solutions like Marcura’s MCaaS maritime companies can navigate through the dark waters of sanction compliance, providing the agility required for the long-term viability of their operations while safeguarding them from any legal, financial, regulatory and reputational consequences.

About the author

Manni Sasani
Commercial Manager

Manni provides commercial support to new and existing clients on a wide array of compliance products and services.

With over 10 years of experience assisting complex businesses to transform compliance through digitisation, Manni is able to design high ROI solutions that minimise regulatory and treasury risk whilst delivering operational efficiency.

Through MCaaS’ integrated data services and cutting edge solutions focused on maritime trade execution Manni is able to leverage MCaaS’ capabilities to deliver our clients operational and compliance goals.

Based in London and engaging with customers across the globe, Manni is also responsible for partnerships with MCaaS.