Obfuscation and Illicit Networks Stretch Sanctions Risk Across Maritime Supply Chain

The maritime industry must navigate complex sanctions risk as punitive measures levied by the United Nations, United States and European Union touch more than 6,100 actors across the supply chain, according to a new report.

The Kharon study of illicit maritime networks supporting regimes in North Korea, Syria, Iran and Crimea — along with networks shipping oil from Venezuela to Cuba and elsewhere — stressed the importance of weighing
“the broader array of actors across global supply chains that may be exposed” from agents and brokers to financial institutions, and noted that “shifting ownership structures can also disguise sanctions related risk in the maritime industry.”

“Sanctioned actors’ maritime activities can present exposure to global supply chains in three ways: (1) supplying goods and materials to sanctioned parties; (2) shipments to and from embargoed jurisdictions; and (3) distributing or shipping prohibited goods,” the report said. “Sanctions network risk can appear in all stages of the supply chain.”

More than 250 sanctioned vessels have undergone name changes, with more than 200 vessels owned by sanctioned individuals or entities. More 1,300 vessels have “a material connection to a sanctioned network or involvement in sanctions-related activity.”

Muddying the waters even further, more than 1,300 entities or vessels “have overlapping owners/operators with sanctions-related maritime actors.” There are more than 1,200 actors with commercial relationships tying them to sanctions-related maritime actors.

There are more than 410 sanctioned facilitators and agents, and more than 730 facilitators and agents of sanctions-related maritime actors.

In March, the Treasury Department advised everyone with a part in the maritime supply chain “including ship owners, managers, and operators, brokers, flag registries, oil companies, port operators, shipping companies, classification service providers, insurance companies, and financial institutions” to exercise awareness and “implement appropriate controls to identify North Korea’s illicit shipping practices.”

The Kharon report noted that “risks are amplified when sanctioned networks obfuscate the beneficial ownership and control of affiliated companies, thereby masking the risks behind these commercial activities, which span the entire supply chain.”

For example, Pink Whale, a trading firm in Vietnam, shipped LG and Panasonic washing machines to the North Korean firm Korea Mandae Trading Co. in 2017 using Taiwanese shipping line Evergreen Marine Corporation and two months later shipped coffee products to Korea Moran General Trading Corporation, which shares an address with the sanctioned North Korean shipping firm Liaoning Danxing International Forwarding Co. Ltd. A UN report in March found that North Korea continues to evade sanctions “through a massive increase in illegal STS transfers of petroleum products and coal” with illicit ship transfers growing in “scope, scale and sophistication.”

“Often times, vessels disable their AIS transponders while completing illicit shipments, posing a significant challenge to detecting their movements and addressing the subsequent risk of diversion to international markets,” the report noted, highlighting as an example the North Korean vessel Wise Honest that was seized by the U.S. in April for operating with a false certificate of origin. “…Unreported in the headlines was the key role that agents and brokers played in coordinating Wise Honest’s shipments of North Korea-origin coal.”

Similarly, energy brokers have played “critical roles” in keeping Syrian dictator Bashar al-Assad supplied. Vessels involved in Syrian fuel shipments “are based and registered in several international jurisdictions, including the EU.”

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Bridget Johnson is the Managing Editor for Homeland Security Today. A veteran journalist whose news articles and analyses have run in dozens of news outlets across the globe, Bridget first came to Washington to be online editor and a foreign policy writer at The Hill. Previously she was an editorial board member at the Rocky Mountain News and syndicated nation/world news columnist at the Los Angeles Daily News. Bridget is a senior fellow specializing in terrorism analysis at the Haym Salomon Center. She is a Senior Risk Analyst for Gate 15, a private investigator and a security consultant. She is an NPR on-air contributor and has contributed to USA Today, The Wall Street Journal, New York Observer, National Review Online, Politico, New York Daily News, The Jerusalem Post, The Hill, Washington Times, RealClearWorld and more, and has myriad television and radio credits including Al-Jazeera and SiriusXM.

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