Updated Russia Price Cap Guidance Offers Due Diligence Recommendations

An updated maritime industry advisory issued this week by the group of countries implementing the price cap on Russian oil includes new compliance recommendations, including ways to improve due diligence around tanker sales and tips to avoid deals with sanctioned counterparties.

The guidance, updated one year after it was first issued in October 2023 (see 2310120029), outlines best practices for the maritime oil industry as it works to comply with the price cap on crude oil and refined petroleum products being implemented by the Group of 7 countries, the EU, Australia and New Zealand.

One new section of the guidance asks industry officials, port operators and governments to “engage” with vessels that may not be complying with safety or environmental regulations, including by detaining them or preventing them from accessing their ports. “If an industry stakeholder is aware of potentially illicit or unsafe maritime oil trade, including suspected breaches of the oil price cap, they should report this to relevant authorities.” the advisory said.

It also asked people and companies that buy, sell or broker tankers to “remain vigilant of potential evasive or illicit purchase structures and end uses,” especially for older tankers. The price cap coalition countries said brokers should “conduct enhanced due diligence" on transactions with new firms in the tanker industry, including by finding out the counterparty’s owner and whether they are involved in “illicit or unsafe behavior.” That due diligence should include “obtaining information such as contact details, source of funds, and copies of identification of the buyer’s beneficial owner or owners,” and companies should verify that information against third-party databases, news reports and “market intelligence.”

The countries also urged companies involved in maritime oil trade to constantly monitor whether they’re doing business with a sanctioned party, especially because the price cap coalition has “taken a series of sanctions actions” over the last year against ships and businesses that have violated the price cap. They also said companies should launch “proactive investigations to ascertain sanctions exposure, including to understand whether their unsanctioned counterparties may have recently engaged with sanctioned entities.”

Companies should also train their employees on the risks associated with shadow fleets, which are fleets of older ships, usually with false registrations, that Russia has been using to transport sanctioned goods (see 2310240068 and 2405150025). Those trainings should help employees identify red flags and understand how the “deceptive practices” of shadow fleets can undermine a company’s compliance efforts, the advisory said. “Where possible,” companies should “prioritize open communication and collaboration to combat deceptive practices, including information and data sharing with industry partners."