On February 1, 2024, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) published an Oil Price Cap Compliance and Enforcement Alert to provide “[a]n overview of [five] key … evasion methods and [corresponding] recommendations for identifying such methods and [subsequently] mitigating their risks and negative impacts.” The price cap referenced by the Alert refers to the price caps on Russian oil and petroleum products imposed by an international coalition consisting of the United States, the G7, the European Union, and Australia to constrain two key revenue streams for Russia that could then be used to fund its ongoing full-scale invasion of Ukraine. See Updates of December 5, 2022 and January 2, 2024 for additional background.

The first three key evasion methods the Alert highlights are: (1) falsified documentation and attestations “used to disguise the true price paid” for Russian oil and petroleum products, as well other important transaction details; (2) opaque shipping and ancillary costs (including shipping, freight, customs, and insurance costs), which can “be used to obfuscate Russian oil and [petroleum] products being purchased above the price cap”; and, (3) third country supply chain intermediaries and complex and irregular corporate structures “to disguise the ultimate beneficial owner of Russian oil and oil products.” The Alert indicates that these evasion methods can be mitigated in a similar manner: enhanced due diligence across the supply chain. Accordingly, the Alert emphasizes Know Your Customer (KYC) and Know Your Customer’s Customer (KYCC) procedures as vital to minimizing illicit activity.

The Alert also warns of flagging and reflagging activities, which can be used to conceal a vessel’s true ownership and/or affiliation with Russia. To minimize such a risk, the Alert advises flagging registries to routinely inform registrants and vessel owners that sanctionable or illicit conduct is grounds for immediate removal of registration. Similarly, the Alert also recommends caution when dealing with the so-called “shadow” fleet (also referred to as the “ghost,” “dark,” or “parallel” fleet): older vessels engaged in various deceptive shipping practices and/or with opaque corporate ownership structures). The Alert notes engaging with the “shadow” fleet can be minimized by insisting upon reviewing a vessel’s maritime insurance policy, thereby ensuring coverage is continuous throughout a vessel’s entire voyage, appropriate given the ship’s purported activities, and derives from a legitimate insurance provider.

Finally, the Alert emphasizes wariness of voyage irregularities “from the port of loading to the final destination.” The Alert acknowledges changes to a voyage can occur for legitimate reasons, but stakeholders should be aware that changes can also be intentional to disguise a cargo’s origin, ultimate destination, or recipients. Accordingly, stakeholders should obtain sufficient explanations and shipment details to justify when changes are made, especially when they include indirect routing, unscheduled detours, or seemingly transshipment through third countries. 

The Alert concludes by providing an up-to-date list of price cap coalition members and how persons can report suspected breaches of either price cap to competent authorities within each country.