It has been a whirlwind of an event season for us this October, with our team representing Complidata across multiple cities—Bratislava, Vienna, and Beijing. We’ve gathered a wealth of insights from key industry events such as the Lloyd’s List Intelligence Conference, the GTR Roundtable, the BACEE 48th International Banking Conference, and Sibos 2024. Here are some of the most pressing themes and takeaways we encountered.
Evolving Sanctions Environment and Maritime Risks
Sanctions continue to be a hot topic, particularly in the shipping and oil sectors, where regulatory complexities have only intensified. OFAC’s definition of a "U.S. person" remains critical in global transactions, as even a minor association with a sanctioned entity can lead to secondary sanctions risks. OFAC’s 2019 shipping advisory and 2020 papers are still highly relevant, providing guidelines that now include specific vessel lists with SDNs and other restricted entities.
Managing sanctioned shipments, especially to destinations like Syria and Russia, requires constant vigilance, as compliance complexities make it easy for violations to occur unintentionally. Moreover, ensuring price cap adherence has emerged as a major challenge for companies working with high-risk commodities, as these regulations are difficult to monitor and enforce across large volumes of trade.
The Challenge of Tracking Vessels
Keeping track of sanctioned vessels has become more difficult due to frequent vessel name changes and the absence of IMO numbers on most bills of lading (B/Ls). This June and July, for instance, the UK and OFAC designated 23 vessels, illustrating how quickly new sanctions can impact operations.
As such, data and advanced tracking tools are now more essential than ever in assessing affiliated parties and coverage areas to mitigate risks effectively.
This is particularly important in high-risk regions like Turkey, the UAE, and areas with flagged vessels in Cyprus and Greece, where compliance challenges are intensified by a greater prevalence of sanctioned activities. Access to accurate, real-time data has become the cornerstone of effective risk management, with companies increasingly seeking out reliable tech solutions to keep up with regulatory changes.
Sanctions Trends and Secondary Risks
The burden of managing secondary sanctions has intensified, especially for financial institutions. EO 14024’s amendments now expose U.S. institutions to the risk of SDN designation or secondary sanctions, even for single transactions with Russian SDNs.
This tightening of regulations means that financial institutions must exercise more caution, particularly when working with countries like South Africa, India, and Turkey, which maintain ties with sanctioned entities. As these countries continue to engage in trade with Russia and other high-risk jurisdictions, institutions are forced to rely on detailed, third-party data and monitoring services to navigate these risks.
Compliance costs have also surged as banks divert more resources to monitor transactions in politically sensitive areas, and many banks are reconsidering their involvement in certain high-risk markets.
Ship-to-Ship Transfers and the Growing Risk of Sanctions Evasion
One of the most striking developments has been the sharp increase in ship-to-ship (STS) transfers, a practice that has quadrupled over the last three years as companies attempt to obscure the origin of sanctioned goods.
STS transfers are often used to bypass sanctions, with goods transferred between vessels outside jurisdictional waters to avoid detection. This rise has also placed strain on financial institutions, as maritime transactions, which once took only minutes, now often require up to half a day of compliance checks due to lender and insurer requirements. These intensified demands highlight the resource-heavy nature of sanctions compliance in the current climate. Compliance teams are increasingly exploring automation and advanced tech to keep up with the rapid escalation of monitoring requirements in this area.
Technology and Compliance: Managing Maritime Risks
The reliance on disruptive technology to address these evolving compliance risks was a strong theme across the events. Cutting-edge technologies like satellite-based tracking, real-time geo-location, and cyber-enabled systems are providing new ways to manage maritime risks effectively.
The Bureau of Industry and Security (BIS) has voiced its support for leveraging AI in monitoring unauthorized goods use (DUGs), indicating that digital solutions are a welcome addition to the compliance arsenal. These technologies have the potential to automate risk assessment and provide faster, more reliable insights, alleviating some of the heavy resource requirements that compliance teams face. However, integrating these tools into existing workflows comes with its own set of challenges, as firms must navigate not only the technical adoption but also regulatory compliance on digital data handling.
Technology is featuring more prominently in payments and trade finance operations, enhancing service delivery across financial institutions. This evolution aligns with industry-led standards and regulatory support, both of which are pushing toward a future of paperless trade finance.
Growing Global Trade Dynamics
As sanctions compliance becomes increasingly complex with rapidly changing export control policies, financial crime compliance remains a core focus, particularly around AML and anti-fraud measures in transaction banking. In this fast-evolving landscape, generative AI and large language models are opening new doors in banking, from customer service to transaction processing."
Asia’s rise in relevance for global trade finance, coupled with Africa’s emergence as a growing trade powerhouse, underscores the shifting epicenter of trade and economic opportunity toward these vibrant regions.
Looking Ahead: A Complex Compliance Landscape
From these events, it’s clear that compliance in the trade finance and maritime sectors is becoming more intricate. As regulatory requirements tighten and new compliance risks emerge, financial institutions and corporates are increasingly turning to third-party providers for data and monitoring support. However, resource constraints and rising compliance costs are causing some institutions to reevaluate their roles in certain markets.
The insights we’ve gathered this October underscore the growing importance of staying agile and leveraging innovative technologies to keep pace with a fast-evolving compliance landscape. Looking forward, collaboration across sectors and continued investments in digital solutions will be essential for companies aiming to navigate these complex challenges effectively.
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