• by Zingtim Gambo. ACArb.

Importance Of Carrying Out Due Diligence Prior To Vessel Acquisition And Key Points To Note

Introduction

Maritime due diligence is crucial in order to manage the risks associated with various parties such as customers, vendors, employees, contractors, and others, thereby safeguarding your business from regulatory and reputational risks. It is essential to have a clear understanding of the individuals or organizations you are engaging with in business dealings. Policies relating to global crimes have shifted towards a proactive approach, focusing on enforcing sanctions regimes rather than reactive investigation.

In the maritime industry, including energy and shipping companies, as well as financial institutions, there is a pressing need to thoroughly scrutinize the vessels with which business is conducted to ensure compliance with regulations. While vessel compliance is important, it is equally crucial to delve deeper into the company, its ownership, and associated fleet in order to carry out appropriate due diligence and uphold maritime compliance standards.

Access to detailed ownership data and insights is vital for identifying patterns of risky ownership and making informed decisions. This ownership information encompasses details such as the company's name, address, email address, and phone number, along with the different levels of vessel ownership including beneficial owner, registered owner, technical manager, ISM manager, commercial controller, commercial manager, and operator. Embracing advanced technological tools for analyzing vessel ownership and management is imperative in order to stay ahead of deceptive shipping practices, which are constantly evolving.

Key Points to Note in a Vessel Acquisition Process

Instead of attempting to disguise nefarious maritime activities by going "dark" and turning off the AIS system, malicious actors have shifted their approach to profit from illegal behavior while appearing as if they are conducting routine business operations or hiding in plain sight. This new strategy includes the use of deceptive tactics such as:

• • Spoofing: A term that encompasses various methods of deception, including utilizing fake identities, transmitters, and manipulating Global Navigation Satellite System signals.
• • Dual Transmission: Where a single vessel uses multiple AIS transmitters to transmit different information with separate International Maritime Organization numbers.
• • Flag Hopping: Where bad actors continually change the transmitted Maritime Mobile Service Identities (flags) to evade detection.
• • Zombie Vessel: Whereby a scrapped vessel's identity is used to conduct illicit activities without facing legal consequences.
• • AIS Handshake: Involves a decoy vessel assuming the identity of a clean vessel while sailing in close proximity to each other, allowing the clean vessel to travel undetected while the "dirty" vessel takes on its identity.

Summarily, the maritime industry has seen a shift in deceptive practices, with bad actors now opting to operate clandestinely while appearing to conduct legitimate business activities. These practices highlight the need for increased vigilance and regulation to combat illicit activities in the maritime domain.