World ECR | Treasury issues new ‘shadow’ advisory warning

The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) has released its latest advisory for the offshore oil industry and related industries, warning of increasing risks from a growing “shadow fleet”, particularly those used by Russia to circumvent sanctions and of ships. Leading to potentially unsafe oil trading practices.

A consultation published on 21 October with other price cap coalition members (G7, EU, Australia and New Zealand) highlights the growing safety and environmental concerns posed by aging ships operating outside normal regulatory frameworks.

“‘Shadow’ trade has become more visible, often involving actors and goods associated with sanctioned countries and/or individuals, or with other illicit activities,” the advisory states, describing A vessel that has generally exceeded its normal life and may continue to operate. Lack of proper security certification.

Of particular concern is the possibility that ships in operation are not adequately insured against potential disasters. The advice warns that ships in the shadow trade “may rely on unknown, untested, piecemeal or fraudulent insurance” and may “be unable to cover the costs of incidents in which they are involved, including oil spills, which can cause huge environmental damage and safety risks and associated costs.

The consultation outlines 11 specific recommendations for industry stakeholders:

1. Appropriate insurance requirements: Vessels must maintain “continuing and adequate marine insurance.” The recommendation emphasizes that ships should be “insured by a legitimate insurance company with adequate coverage for liability under the Civil Liability Convention and the Petroleum Pollution Act.”
2. Classification criteria: Vessels shall be classed by a member of the International Association of Classification Societies (“IACS”). The advisory states that the information “helps insurers, port states and other stakeholders make informed decisions about a ship’s seaworthiness”.
3. ship tracking system: Vessels should maintain continuous operation of the Automatic Identification System (“AIS”). The advisory advises that “if a ship needs to disable its AIS due to reasonable safety concerns, the ship should document the circumstances that require disabling.”
4. Monitor ship-to-ship transfers: The advisory warns that while legal in many cases, these transfers “can also be used to conceal the origin or destination of goods to circumvent sanctions or other regulations.” Such transfers outside safe waters “can exacerbate environmental and safety risks,” the report states.
5. cost transparency: The guidance warns that “inflated transportation and ancillary costs, or the bundling of such costs, may be a tactic used to conceal Russian oil purchase prices above price caps.” It requires “accounting of all agreements that have been negotiated at the outset of a trade deal.” Costs will be broken down item by item.”
6. Strengthen due diligence: Stakeholders should step up monitoring of ships that have “subjected substantial administrative changes (such as flag changes, name changes and ownership changes)” or that have a “higher risk profile based on age, accident history, deficiencies and/or inspection history” Vessel review.
7. reporting requirements: Industry participants aware of “potentially illegal or unsafe maritime oil trade, including suspected violations of oil price caps” should report it to the appropriate authorities.
8. international safety standards: Flag states must comply with the standards stipulated in SOLAS, MARPOL, STCW and CLC conventions. “Port state control also has an important role to play in ensuring that foreign-flagged tankers entering ports comply with international regulations,” the advisory noted.
9. Tanker Sales Monitoring: Stakeholders should “remain wary of potential circumvention or illegal purchase structures and end-uses, particularly of aging tankers, including tankers previously earmarked for recycling.” This includes “enhanced due diligence on these transactions, including ultimate beneficial ownership “.
10. sanctions compliance: The advisory warns stakeholders to “constantly monitor their exposure to ensure they do not interact with sanctioned parties,” noting that sanctioned vessels may be compromised by “renaming, relabeling, obscuring their IMO numbers or falsifying documentation.” to try to deceive.
11. Training and transparency: Industry stakeholders should “develop targeted training programs for their employees and relevant partners that focus on the risks of shadow fleet activity and deceptive practices.”

The advisory updates previous guidance and reflects growing concerns about sanctions evasion in maritime oil trade, particularly related to the enforcement of Russia’s oil price caps. It builds on a number of previous recommendations issued by coalition members in 2023 and early 2024.