The invasion of Ukraine triggered a wide range of sanctions with both direct and indirect effects on our industry. These sanctions, coming on top of other sanctions already in existence, have made insurance companies’ compliance departments busier than ever before, with their officers being asked to do detective work regularly.
In January this year, a tragic explosion onboard the tanker Smooth Sea 22 introduced us to a new type of fraud - Vessel Identity Laundering. The vessel, supposedly built in 2018, was, in fact, built in 1986 and had two IMO numbers. Vessel identity laundering is a novel tactic in which one or more vessels adopt a different identity on Automatic Identification System (AIS) transmissions in order to allow “dirty” (i.e., associated with illicit activities) ships to assume “clean” identities, and involves at least one vessel in this operation assuming an identity that is obtained by defrauding the International Maritime Organization (IMO) number (Unmasked - Vessel Identity Laundering (c4ads.org).
This new fraudulent practice adds to the concerns arising from the so-called ‘dark’ fleet that, according to some reports, might be close to 600 vessels. As sales of older tanker vessels are booming, there is a possibility that this may grow further soon. Obviously, reputable shipowners want to avoid getting involved in illegal trades. As a result, due to the limited supply of vessels willing to trade under these circumstances, transporting sanctioned cargo has become an extremely lucrative business for the minority prepared to breach sanctions.
We cannot turn a blind eye to these vessels sailing the same seas and facing the same risks as other vessels. They, too, have real people on board. The vast majority of marine underwriters honour their regulatory and ethical obligations and comply with the new laws. They do not insure vessels involved in this unlawful business. However, from the perspective of safety and environmental risks, the emergence of these shadow ships and the countries willing to harbour them concerns all stakeholders involved in the maritime industry.
The ‘dark’ fleet consists almost entirely of ships past their prime and on their way to the scrap yard, operating under flags of convenience that have less stringent regulatory requirements in place and allow lower maintenance standards. This can only put this fleet at a greater risk of accidents than the industry norm.
As marine underwriters, we are not here to question if the sanctions are right or wrong. However, stakeholders need to focus on the potential consequences if there is a major loss involving vessels from the ‘dark’ fleet. It is not sufficient to allow these vessels to go uninsured. It is imperative that all regulatory bodies around shipping – together with insurers, classification societies, and crewing agencies all doing their part by conducting thorough due diligence - act transparently and bring this ‘dark’ fleet to light. It is imperative to educate those owners involved in sanctioned trading on what the consequences could be in case of an accident. It is paramount to raise awareness so that the crews also fully understand the potential repercussions of being employed on board these substandard vessels.
In the era of ESG advocacy, it’s vital to recognise that the issues raised by the ‘dark’ fleet are complex and multifaceted. With a concerted effort and collaboration from all stakeholders, we can prevent substandard shipping from threatening our maritime industry and our environment.