Why Checking for Sanctions is Important

Why Checking for Sanctions is Important

By Chris Edwards , Head of Legal, Thome Group

Thome Group Sanction Article Optimized


In the current day and age, it is inevitable that owners and their managers will become involved in trades to or from a country where sanctions have been applied. The U.S. Treasury Office of Foreign Asset Control (OFAC) lists on its website the countries to which U.S. sanctions legislation is currently applicable. So, the OFAC website makes a useful starting point on whether a country may be affected by U.S. sanctions legislation.

Whilst U.S. sanctions in the Middle East, and particularly with respect to Iran, are subject to significant press coverage, sanctions applicable to other countries and regions are less high profile. By way of example, we were recently asked whether a shipment of oil from Venezuela may be subject to sanctions. From our own research, confirmed by external legal counsel, we established that as from January 2019, OFAC subjected the Venezuelan state oil company, PdVSA to U.S. sanctions. Accordingly, any shipment involving PdVSA should avoid any connection with the U.S.

The general focus of sanctions legislation is the prohibition of dealings with designated entities and in the case of specified countries, prohibition of certain trades with such countries. Owners and managers can be exposed to potentially severe penalties if they knew or “should have known” that their actions were in breach of the applicable prohibitions. Therefore, to reduce the risk of any penalties being applied, it is important that owners and managers undertake sufficient due diligence to ensure that the shipment, cargo and all involved parties are not subject to sanctions legislation.

The nature and extent of the due diligence is likely to depend upon a number of factors including the particular trade or country involved. From our own experience, a preferred method is for all relevant details to be checked by a law firm specialising in sanctions. Assuming the checks come back clear, a confirmation is then issued by the law firm certifying that significant due diligence has been undertaken with no adverse results.

Owners should also keep their P&I Club closely involved if a shipment may be subject to sanctions legislation. The P&I Clubs have significant expertise in sanctions and regularly produce circulars to members updating them on recent developments. Owners will also want to obtain confirmation from the Club that cover is in place for such a shipment.