Regulatory compliance has long been an aspect of business operations. Still, over the last 2 years there has been an increase in activity on both the regulatory side and the adoption of technology available to better identify whether business operations are compliant or not.
The consequences of non-compliance are clear. OFAC, the financial intelligence and enforcement agency of the U.S. Treasury Department, issued a total of 45 fines over 2019 and 2020, totalling USD 1,362m. Most individual fines were over USD 100k, and some over USD 100m.
As one of the most prominent regulatory bodies, OFAC reference seven specific tactics that malign actors could use to facilitate sanctionable or illicit maritime trade. These are:
- Disabling or Manipulating the Automatic Identification System (AIS) on Vessels
- Physically Altering Vessel Identification
- Falsifying Cargo and Vessel Documents
- Ship-to-Ship (STS) Transfers
- Voyage Irregularities
- False Flags and Flag Hopping
- Complex Ownership or Management
Monitoring the practices above in addition to sanctions lists covering vessels and companies across a portfolio can be a very manual task. Processes are rarely automated, tools and workflows are disjointed, and internal lists can vary in structure. Existing data sources may also have insufficient coverage or be outdated.
Concirrus’ Compliance report addresses the above and seamlessly screens all vessels listed in a Quest Marine portfolio to identify clear breaches and indicators of sanctioned activity. Its insight provides clear and actionable intelligence to support further investigation by compliance officers or legal teams. As expected, sanctions lists are leveraged as part of the process to ensure that business with any organisation listed is highlighted. Quest Marine has a comprehensive database of every registered shipping organisation in the world, therefore making this process seamless.
To produce a report, our team generates a list of unique IMO numbers relating to on cover vessels. This can be drawn automatically from a Quest Marine environment without manual intervention. IMO numbers are then analysed against a broad range of criteria to provide a complete picture of potential illicit activity and ownership. Reports are provided on a periodic basis based on client requirements.
The report is provided in two sections: a portfolio alert summary, and individual vessel reports. The portfolio alert summary provides a clear and concise overview of all identified breaches that warrant further investigation. For each vessel that appears in the summary, a detailed report is then generated to give granular detail on what has occurred to support an investigation.
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Data Quality and Reduction of False Positives
A key aspect of an effective compliance solution is to reduce as many false positive alerts as possible. Given the nature of an investigation and implications of accusation, we’ve taken set criteria and applied rules to mitigate potential false positives. Rules apply to the following criteria and ensure that their influence is warranted given known technological limitations.
When monitoring dark activity, it would not be sufficient to simply identify when a vessel AIS signal has not been received since there are many explanations for why this may occur. The vessel could be carrying out maintenance, traveling through challenging reception areas (e.g. South China Sea), visiting a shipyard, in layup, be in an area lacking AIS coverage (increasingly rare), etc. If the above instances were not effectively filtered out, a very large number of alerts would be created making the task of finding real breaches laborious. Algorithms, rules on criteria, and strict adherence to data quality ensure this variable is applied in a way that it supports any subsequent investigation process.
Ship to ship activity
Ship-to-ship (STS) transfers is another activity that can lead to a very large number of false positive alerts without robust identification processes in place. For example, vessels will often be near each other for long periods of time, such as during shipyard or berthing operations. To successfully identify STS activities, a comprehensive set of rules is utilised to filter out locations that would not normally lend themselves to this kind of activity and identify logical vessel pairings.
Port call compliance
Satellite and terrestrial AIS data sources are used to accurately track vessel movements. When this data is combined with a highly accurate and comprehensive database of ports, anchorage zones and other key navigational features it is possible to confidently report on the activities and port calls that a vessel has completed. This detailed log of vessel activity helps to provide the context often needed to support a sanctions investigation.
To ensure discrepancies in location data are mitigated, Concirrus utilises multiple data partners when it comes to geolocation. The combination of data sources ensures that if one shows a lack of signal, it’s clarified by another. Multiple methods of data collation mean that data relating to navigation and abnormal behaviour is reliable by reducing the potential unknowns from technological limitations.
The extract below displays one of the tables relating to the individual performance of a ship. We can see that there are severe warnings around dark activity and sanctioned port calls.
Fig 1: Extract of a single screening table from a compliance report
Port call alerts are triggered when the vessel enters a sanctioned port, and as such there is clear reason for further investigation into why this has happened and what kind of trading activity has taken place. This vessel has also triggered a dark activity alert. To support the investigation process and provide more context around possible activity during this period, one of four options will be presented from the below.
- Dark for an extended period in a high-risk area
- Port call possible during dark period
- STS operation in sensitive area possible during dark period
- No AIS signal for extended period worldwide
The above options for identifying potential activity during the dark period are generated by a complex set of algorithms which ultimately provide more context around the event to help the user in the decision-making process.
This is one example of how we’re delivering bespoke insight into unique investigations. To learn more or to find out how we could help your business, get in touch.