Insurers play a pivotal role in assessing and mitigating risks associated with sanctions violations, and adjustments to the OPC scheme were effective from 19 February for the UK and US, and for cargoes loaded from 20 February for the EU, writes Daniel Tadros, chief operating officer, The American Club.

In an era of heightened geopolitical tensions and evolving regulatory frameworks, due diligence and compliance have become cornerstones of responsible business practice within the shipping and insurance sectors. With global trade intricately woven into the fabric of international relations, adherence to sanctions regimes is not just a legal obligation but a fundamental imperative for safeguarding the integrity and stability of the maritime industry.

oil gas sustainability

Having become the primary means of enforcing foreign policy objectives, sanctions serve as a powerful tool for governments to address security concerns, deter illicit activities, and promote diplomatic objectives.

Within the shipping sector, compliance with sanctions entails navigating a complex web of regulations that govern the movement of goods, vessels, and funds across international borders.

Similarly, insurers play a pivotal role in assessing and mitigating risks associated with sanctions violations, thereby safeguarding the interests of their clients and the broader maritime community.

It is against this backdrop that we explore the recent adjustments to the Oil Price Cap (OPC) scheme, effective as of February 19, 2024 (UK and US) and for cargoes loaded on or after February 20, 2024 (EU), which mark a significant milestone in the regulatory landscape governing the transportation and insurance of Russian CN 2709 and CN 2710 cargoes.

These changes, outlined in Circular No. 05/24 of February 2, 2024, reflect a concerted effort to strengthen compliance measures and enhance transparency within the shipping industry.

Central to these amendments is the introduction of mandatory voyage attestations on a per-voyage basis. Shipowners are now required to furnish these attestations to P&I clubs within a strict 30-day timeframe from the loading date. Additionally, a new provision mandates the recording and provision of itemized price information on ancillary costs upon request, reinforcing the need for greater accountability throughout the supply chain.

A pillar of integrity

Compliance with these regulations is not merely a matter of procedural adherence; it is an essential pillar supporting the integrity and stability of the shipping sector. By upholding these standards, stakeholders demonstrate their commitment to responsible business practices and contribute to the broader efforts aimed at curbing illicit activities and promoting fair trade.

The issuance of the Oil Price Cap Compliance and Enforcement Alert by the Price Cap Coalition on February 1, 2024, further underscores the significance of regulatory compliance in safeguarding the interests of all stakeholders involved in the trade of Russian oil and oil products. This alert serves as a timely reminder of the evolving nature of regulatory requirements and the imperative for industry participants to remain vigilant in their compliance efforts. Industry participants have been reminded time and again of their non-delegable duty to perform due diligence, including deep dive “know your customer” and “know your customer’s customer,” prior to engaging in any venture.

The fear of course being that “bad” actors take advantage of the good reputation and name of marine stakeholders to further their sanctions’ breaking intent. Considering the risks associated with being accused of breaking sanctions by anyone of the regulatory bodies, but especially US Treasury Department’s OFAC (where strict liability applies), stakeholders should be vigilant in their due diligence investigations and certainly should maintain records of their findings to defend against any regulatory audit.

Insurers play a pivotal role in supporting the shipping sector’s compliance initiatives. Through proactive risk assessment, enhanced due diligence, and robust monitoring mechanisms, insurers help mitigate potential liabilities and ensure adherence to regulatory standards. Moreover, insurers serve as valuable partners in providing guidance and support to their members, facilitating a collaborative approach to compliance that strengthens the resilience of the entire industry.

The recent amendments to the OPC scheme and the issuance of the Oil Price Cap Compliance and Enforcement Alert underscore the critical importance of regulatory compliance in the shipping sector. By proactively actioning these changes and prioritizing compliance efforts, stakeholders can uphold the integrity of their operations, mitigate risks, and contribute to a safer, more transparent global shipping environment, while at the same time avoiding any branding by the regulators of circumventing sanctions’ regimes.