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The US government has instructed financial institutions, shipping companies and insurers to implement stringent “know your cargo” policies or risk enforcement action for violating sanctions. 

A compliance note jointly issued by five government departments this week says criminal actors “are constantly seeking ways to exploit global supply chains for the benefit”, including by passing sanctions or export controls. 

If companies involved in maritime trade and transport fail to implement or strengthen controls, they could face a range of retaliatory actions, including criminal or civil enforcement measures, “significant” monetary penalties and export bans, the note says. 

“These actors frequently deploy deceptive shipping or transportation practices to facilitate illicit transit of cargo connected to proscribed actors in places like Russia, Iran, and North Korea, which are subject to broad US sanctions and export controls, as well as China, which remains a major transshipment point for those seeking to engage in export controls evasion,” it says. 

“When such cargo later becomes the subject of US enforcement actions (whether criminal or civil), the costs and reputational risks can be significant.” 

The advisory – produced by the Departments of Commerce, Treasury, Justice, State and Homeland Security – reiterates earlier warnings over red flags that could indicate sanctions evasion. 

It urges companies to monitor for vessels that manipulate location signals or identification data, falsify documents or show complex ownership and management structures. 

It also says the destination or origin of a cargo can be disguised by indirect routing, unscheduled detours or transshipment through third countries. 

Ship-to-ship transfers, a practice that has become increasingly associated with movements of Russian oil, are also flagged as an indicator of possible illicit activity – particularly when they take place at night or in high-risk areas. 

The note tells companies to assess the location history of vessels and other vehicles used to move cargo, and in the case of financial institutions and insurers, to encourage continuous reporting of location information and investigate gaps in that data. 

And it instructs entities to verify “the true nature, origin, and destination of the cargo they are involved in transporting”. 

Unlike previous advisories around maritime trade, much of the note is dedicated to possible enforcement actions if controls are not up to scratch. 

It points out the Department of Justice (DOJ) has brought “multiple actions in recent years” related to the circumvention of sanctions on Iran, and can pursue civil and criminal measures in the case of breaches. 

Two other agencies – the Bureau of Industry and Security and the Directorate of Defense Trade Controls – can bring administrative enforcement actions including fines, restrictions on certain activities and even criminal prosecutions. 

And the Office of Foreign Assets Control (OFAC), which sits within the Treasury, can impose “significant monetary penalties”, and “uses its enforcement discretion robustly” in the case of violations by non-US entities. 

Though OFAC actions are often widely publicised, trade compliance expert David Tannenbaum says the advisory “highlights the less-talked-about role of the DOJ in enforcing sanction law”. 

“It states, in pretty blunt terms, that the DOJ is pursuing cases of maritime-related sanctions violations, as well as cases of sanctions evasion,” says Tannenbaum, a director at consulting firm Blackstone Compliance Services. 

“Importantly, it reminds readers that the maritime industry is not just responsible for adhering to the price cap on Russian oil, but also detecting and preventing deceptive maritime practices relating to Iran, North Korea, and other sanctions programmes.” 

The government guidance also singles out freight forwarders, reminding them they are responsible for making correct representations when filing export control documents. 

It cites a US$6mn fine levelled against Australia-headquartered freight forwarder Toll last year for facilitating payments worth over US$48mn involving entities linked to North Korea, Iran and Syria.  

Although Toll is based outside the US, the transactions were processed through the US financial system, OFAC said at the time. 

Tannenbaum adds it “wasn’t an accident” that the note used case studies involving non-US companies. 

“It also highlights how transactions may cause US persons, such as financial institutions, to violate sanctions even if the other parties aren’t in the US,” he tells GTR.