Sanctions Risks Related to North Korea's Shipping Practices (2018-02-23)

Summary

This is an advisory circulated by the BVI Financial Services Commission reproducing a U.S. Treasury (OFAC) advisory on deceptive shipping practices used by North Korea to evade U.S. and UN sanctions. It is informational rather than regulatory: it alerts insurers, flag registries, shipping companies and financial institutions to red-flag tactics and recommends risk mitigation steps, and includes annexes summarising US/UN sanctions prohibitions and a list of North Korean vessels capable of ship-to-ship transfers.

• Deceptive tactics flagged: Physically altering vessel names/IMO numbers, ship-to-ship transfers at sea, falsifying cargo and vessel documents, and disabling or manipulating AIS transponders.
• Recommended mitigation measures: Monitor for AIS manipulation, conduct due diligence before ship-to-ship transfers, review shipping documentation carefully, communicate clearly with international counterparties, and use available commercial and government shipping data sources.
• Sanctions exposure: Annex 1 summarises US prohibitions (transactions with the DPRK government, exports/imports, port bans, vessel registration/insurance) and UN prohibitions (vessel ownership/insurance, bunkering, STS transfers, port entry bans) and lists goods subject to import/export bans.
• Vessel list: Annex 2 lists 24 named North Korean vessels (with IMO numbers) known to be capable of ship-to-ship petroleum transfers, noting names/numbers may change.

The advisory does not itself impose new licensing, filing, or reporting requirements on BVI regulated entities; it functions as a risk-awareness notice to help firms strengthen AML/sanctions due diligence in shipping-related dealings and to avoid facilitating prohibited North Korea-related transactions.

Key obligations

• Firms involved in shipping-related transactions (insurers, flag registries, shipping companies, financial institutions) should investigate vessels showing signs of AIS manipulation or disabled AIS before continuing to deal with them
• Firms should verify vessel name, IMO number and flag, and confirm a legitimate business purpose, before facilitating or processing ship-to-ship transfers
• Firms should request and review complete, accurate shipping documentation and treat signs of falsification as a red flag requiring further investigation before proceeding with a transaction

Applies to

insurers, flag registries, shipping companies, financial institutions