Introduction

As the U.S. continues to “maximize economic pressure on the Iranian regime” the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) and U.S. Department of State (DoS) have respectively issued important guidance and findings, which maritime stakeholders should be aware of and comply with.

The main points to note from these updates for maritime stakeholders are set out below.

Guidance for Shipping and Maritime Stakeholders on Detecting and Mitigating Iranian Oil Sanctions Evasion

On 16 April 2025, OFAC issued an update to its previous September 2019 advisory in respect of Iran. This update seeks to assist the shipping and maritime industry to identify sanctions evasion related to the shipment of Iranian-origin petroleum and related products. Also, the advisory seeks to assist the implementation of sanctions compliance practices to guard against sanctions risks.

In doing so, the advisory highlights a range of deceptive practices utilised by parties to avoid sanctions, such as:

• Use of ‘shadow fleet’ vessels (i.e. vessels which are older, poorly maintained and operate outside of standard maritime regulations) to disguise oil shipments.
• Use of a separate fleet of gas carriers which provide safety risks to transport LPG, mainly to China.
• Ship-to-ship (STS) transfers outside of the territorial waters of coastal states followed by clean (or non-sanctioned) vessels delivering the cargoes to third countries (i.e. countries other than the U.S.). Often this will involve multiple STS transfers without any legitimate purpose to assist in disguising the origin of cargoes.
• Creating fake cargo and vessel documentation to disguise the true origin of shipments.
• Manipulation of vessel identification and location data, such as the disabling of AIS during STS transfers and falsely adopting the legitimate IMO or MMSI numbers of other vessels.
• Use of special purpose vehicles (SPVs) and multiple shell companies to obscure Iranian interests.

To mitigate the risks of breaching sanctions, OFAC recommends that maritime sector stakeholders do the following:

• Request and assess complete and accurate shipping documentation from counterparties. These documents should cover the details of the proposed voyage, vessels, cargoes, and flagging information.
• Conduct KYC checks on counterparties, including their ownership. Also, checks should be completed on vessels for IMO numbers, voyage history, STS history, ownership and potential evasive behaviour.
• Undertake enhanced due diligence to ensure the vessels they engage with are not participating in the trade of Iranian petroleum, petroleum products, or petrochemicals.
• Verify the origin of petroleum or petroleum product shipments.
• Particularly scrutinise vessels known to be involved in deceptive practices.
• Undertake enhanced scrutiny of certificates of origin issued in jurisdictions known for hiding a cargo’s Iranian origin (such as the United Arab Emirates, Oman, or Iraq) or having a high number of Iranian STS operations in adjacent waters (such as Singapore or Malaysia).
• Ensure vessels they engage with have adequate and legitimate insurance coverage from non-sanctioned and proven insurance providers (or unproven insurers with a legitimate business reason).
• Check for ‘false’ or ‘unknown’ vessel flags and apply enhanced due diligence on any vessels which are registered in a jurisdiction known to service the ‘shadow’ fleet or which have changed their flags multiple times over a short period (e.g. where a vessel has changed its flag three times within a year).
• Look for the manipulation of vessel identification and location data.
• Incorporate appropriate contractual controls. Parties should incorporate warranties confirming counterparties are not and will not engage in activities in breach of U.S. sanctions or which would cause a U.S. person to breach sanctions. Also, contracts should have sanctions and termination clauses which allow parties to terminate the agreement where performance would breach U.S. sanctions or a counterparty is engaging in deceptive practices.
• Refuse services or port entries to sanctioned vessels.
• Utilise open-source resources to undertake due diligence and determine sanctions risks.

The advisory also confirms that U.S. persons are generally prohibited from engaging in transactions with blocked persons or involving Iranian-origin petroleum, petroleum products, and petrochemical products. Also, non-U.S. persons are prohibited from conspiring or causing U.S. persons to violate

U.S. sanctions or engage in conduct which evades U.S. sanctions.

OFAC reiterates that breaches of Iranian sanctions could result in serious civil enforcement actions or criminal penalties. This has been emphasised by OFAC’s pursuit of several shipping and logistics companies, some of which resulted in significant monetary penalties.

U.S. Findings on Iran Pursuant to the Iran Freedom and Counter- Proliferation Act (IFCA) of 2012

On 21 May 2025, pursuant to Section 1245 of the Iran Freedom and Counter-Proliferation Act (IFCA) of 2012, the DoS made two findings with sanctions implications for the maritime sector:

Finding 1 – Use of 10 strategic materials in connection with the nuclear, military, or ballistic missile programs of Iran

The DoS, working with the Department of the Treasury (DoT), determined that the following types of additional materials are being used in connection with Iranian nuclear, military, or ballistic missile programs:

• Austenitic nickel-chromium alloy
• Magnesium ingots
• Sodium perchlorate
• EDM-11
• EDM-14A
• EDM-15
• Tungsten copper
• AA2024-T351 aluminium sheets and/or tubes
• ISO-68
• ISO-69

Any person knowingly selling, supplying, or transferring, directly or indirectly, the above materials to or from Iran (irrespective of the material’s end-use or end-user) will be subject to mandatory sanctions.

Finding 2 – Islamic Revolutionary Guard Corps’ (IRGC) direct or indirect control of the Iranian construction sector

In addition, the DoS determined that the Iranian construction sector is controlled directly or indirectly by the IRGC, which is sanctioned by the U.S. pursuant to various Iran sanctions.

Any person knowingly selling, supplying, or transferring, directly or indirectly, to or from Iran, raw and semi-finished metals, coal, graphite, and software for “integrating industrial purposes” for use in connection with the Iranian construction sector will be subject to mandatory sanctions.

Members should ensure they do not provide or receive the 10 identified strategic materials or range of goods, specified as used in relation to the Iranian construction sector, to or from Iran.

Considerations for Members

In light of the ongoing situation in Iran, Members are strongly recommended to take appropriate measures to protect themselves against the risk of sanctions breaches which could result in them losing their P&I cover.

Members should undertake enhanced due diligence in accordance with the recommendations of OFAC throughout any transactions or activities involving goods with an Iranian connection. This due diligence should be undertaken alongside and in addition to the usual due diligence checks for any activities and transactions in respect of counterparties, goods/cargoes, vessels, and other parties who are or may be involved in the trade. Members should also ensure that they keep complete and up-to-date records of their due diligence and of any further investigations which they have carried out.

Cover is not available to Members for any trade or action that breaches applicable sanctions and a breach of the trading warranty will result in cesser of their P&I insurance.

Yours faithfully,

The Board of Directors

Maritime Mutual Insurance Association (NZ) Limited