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What do you do when the Bank has a transaction on behalf of a vessel that stopped in a sensitive/sanctioned port?

Andreea Tampu

Let it be clear from the beginning that I am not talking about trade finance.

The international shipping scenery is characterized by the presence of numerous intermediaries that offer different services to vessels that cross international waters and stop in international ports.

Andreea Tampu is a Certified Compliance Officer with a bank in Romania

Basically, a vessel that arrives in a foreign port cannot do the necessary activities linked to its staying in that port by itself or through its Captain and must work with intermediary companies. These companies receive the necessary amounts from the ship-owner via international wire transfers and offer their services for a commission. To make things even more attractive, ship owners are very often located in offshore territories.

Thus, besides the ship-owner (Ro “Armator"), the following actors are the most common in this domain:

- ship agents/brokers – they offer administrative services to vessels staying in a port. They may handle the entire servicing of a vessel in a port (they present the necessary documents to the National Authorities in advance so that the vessel can enter the national territorial waters, pay the port taxes, arrange for repairs of the vessel, for the cashing-in of the salaries of the vessel crew, etc.) or just part of this. The ship agent receives the necessary amounts via international wire transfers from the ship-owner and makes all the necessary expenses on behalf of that specific vessel (including cash withdrawals for the salaries and expenses of the vessel crew).

- ship agents that offer bunkering services – they ensure the fuel supply to vessels. They are paid by the ship owners via international wire transfers.

- survey agents – they conduct inspections, surveys or examinations of marine vessels, obtain technical certificates, etc. They are paid by the ship owners via international wire transfers.

- ship repair companies – they offer repair services to vessels. In the Romanian landscape they are most often paid by ship agents which in turn receive the money from the ship owners via international wire transfers. They usually don’t work directly with the ship owners, but there are cases when they have a direct relation.

In this article I am talking about the situation when the bank customers are the a.m. intermediaries, which receive considerable amounts via international wire transfers on behalf of vessels that cross international waters and stop in several international ports during their journeys.

The “fun” of this domain to the Bank lies in:

- Considerable amounts received via international wire transfers, sometimes from offshore territories;

- Depending on its activity, the bank customer can make domestic payments, but also subsequent international transfers on behalf of that vessel (for eg. to pay for a certificate in a different country);

- If the intermediary company must make salary payments to the vessel crew, it will make considerable cash withdrawals (the so-called “cash to master”, representing cash that must be made available to the captain to cover crew wages or other expenses on board the ship);

- These intermediaries can offer services to vessels that are in national ports, but also to vessels that stopped in other ports, depending on their activity domain;

- The amounts routed by these bank customers are on behalf of vessels that have international journeys. In many cases the intermediary company doesn’t have access to the documents regarding the carriage of the vessel, so the bank cannot know what the vessel is carrying and if that carriage can be subject to international sanctions. It can only rely on statements, but not on documents. We all know that the international sanctions regimes prohibit direct and indirect provision of financial services. What if that vessel stopped in a sanctioned port during its journey? Does this make it a sanctioned entity? If the Bank allows a transaction on behalf of such a vessel, can this be considered an “indirect” provision of financial services?

“Fun” becomes “exciting” when:

- The payment order details do not contain the name and the IMO number (a unique identifier) of the vessel on whose behalf the payment is made – thus the vessel is not screened by the bank’s real time transactions monitoring system versus the sanctions lists;

- Correspondent banks refuse to process certain transactions because the vessel on whose behalf they were made stopped in a “sensible” port during its journey.

To this, please add the fact that it is absolutely impossible to monitor all the transactions of a bank customer before they are made. It is impossible and economically unreasonable.