Why KYC is so important, especially for the Maritime industry
At the most serious level, with the everchanging geopolitical landscape it is necessary for the global shipping industry to be fully cognisant of sanctions imposed by the government of your place of business. Financial sanctions which relate to a specific country or terrorist group are known as ‘regimes’ and include a full list of prohibitions relevant to each sanctioned country, organisation or individual. Those sanctions imposed by the UN are automatically applied by UN member states, but there may also be other international bodies, such as the EU, as well as individual nationally imposed regimes.
It is vital then, to ensure a potential counterparty is not subject to such sanctions. Both the US and UK governments have issued specific Maritime Guidance on this matter in 2020 and 2024, respectively, both believing that the maritime industry is a key risk area for sanctions evasion: https://www.gov.uk/government/publications/financial-sanctions-guidance-for-maritimeshipping/financial-sanctions-guidance-for-maritime-shipping
As part of this UK guidance, a strong recommendation was given for the maritime industry to improve KYC checks and perform regular counterparty checks. Please take the time to read the linked UK Government sanctions guidance document even if you are sitting outside of the UK.
Depending on your location, the consequences of a sanctions breach can include both criminal and civil action and enforcement to remedy the breach. This can include fines, seizure of assets, prison time, as well as loss of reputation. Performing a simple due diligence check on potential counterparties via the Baltic Exchange KYC Platform can therefore alleviate this serious risk.
There are of course many other reasons why you would wish to know more about who you are dealing with before entering into very high-value contracts. This includes reducing the risk of not being paid, preventing fraud, avoiding money laundering and terrorist financing, but also importantly to protect your own reputation. For further information on why Company and Due Diligence checks are vital for the security of your business, please read our Best Practice guide here.
Ultimately, the Baltic Exchange KYC Platform allows you to:
1) Identify and verify the counterparty identity using reliable, independent source documentation
2) Identify the Beneficial Owner and real-time alerts about any potential red flags using the premium ongoing monitoring option
3) Identify PEPs (Politically Exposed Persons), sanctions and other watchlists associated with the entity
4) Stay ahead of risks and make informed decisions
It should be noted that the Baltic Exchange KYC Platform should be viewed as one essential cog only of a wider KYC program within your organisation.