Flagging up flag fraud


Many ships at sea today are flying fraudulent flags. Some states do not seem particularly bothered that their national flags are being abused in this way and no one knows exactly how many dodgy ships there are.

Those are the key messages I took away from a symposium last week (5 March) organised by the International Maritime Law Institute (IMLI) and the World Maritime University (WMU), held at IMO’s headquarters in London. Its main objective was to consider a clause (clause 91, since you ask) in the United Nations Convention on the Law of the Sea (UNCLOS) that requires a ‘genuine link’ between a ship and the flag that it flies and fraud was just one of the aspects of that topic that was run up the flagpole that day.

Heroin

It is a big problem – bigger than I was aware of and big enough to be a leading topic on IMO’s Legal Committee’s agenda. It meets once a year and its next meeting was due to be next week, 16-20 March, but it is one of many IMO meetings that have been postponed because of concerns about coronavirus. A new date has not been set.

One of the speakers last week was Prof George Theocharidis, professor of maritime law and policy at the World Maritime University. I asked him what flag states could do to address the problem and his reply was not encouraging. “It’s sovereign states that you’re dealing with and whether [they] have a genuine interest to tackle the problem,” he said. Some certainly do and have approached IMO for help, but “I have serious doubts [about] other states,” he said. “The problem has to be tackled at supranational level. It cannot be tackled at national level, or we will have more problems.”

George Theocharidis prof Prof of Maritime Law and Policy WMU March 2020 GPG pic
WMU’s Prof George Theocharidis is worried that some flag states are not concerned about fraudulent ship registration (Image: ShipInsight)

As a leading figure at the WMU he is well placed both to glean the sort of insights that his comment revealed and to encourage his students – many of whom are destined for senior positions in their home countries’ maritime administrations – to take a more enlightened view when they attain positions of responsibility.

I am sure he gets that message across to his students but if there is no support at the top of their organisations when they return home at the end of their studies, I fear that that it will take some time for his assessment to change. He did not name any of the administrations he had in mind, but if this is the picture he is seeing from his WMU desk, I assume they are IMO members. I find that shocking.

IMO itself was duped

Someone who is closely involved in addressing the problem is Fred Kenney, director of IMO’s Legal Affairs and External Relations Division. He spoke of “the scourge of fraudulent registries” and told the gathering when and how flag fraud first came to IMO’s attention: it was in 2015 and IMO itself was defrauded by a group claiming to be working for the registry of the Federated States of Micronesia (FSM).

Although it is not an IMO member, FSM is a signatory to the STCW Convention and this group produced official-looking documents to show that it was authorised to issue STCW certificates for FSM and convinced IMO to list it as such on its website. The FSM government discovered that listing and contacted IMO to say that it did not, in fact, have a ship registry.

The same thing could have happened in 2018, when Nauru became an IMO member state. “Literally the next day we had an entity purporting to be Nauru’s registry. The government of Nauru caught on to it immediately and told us it was fraudulent,” Mr Kenney said.

Fred Kenney Dir Legal Affairs Ext Relations Div IMO March 2020 GPG Pic1
: IMO itself was duped by a bogus group claiming to issue STCW certificates, said Fred Kenney (image: ShipInsight)

But it was IMO member the Democratic Republic of Congo (DRC) that got the topic onto the Legal Committee’s agenda, in 2017. A ship, called Commander Tide and flying a DRC flag, had been detained in a European port because of some SOLAS deficiencies and port state control officers tried to contact the DRC’s registration officials.

But like FSM, the DRC has no ship register and by the time the PSC officials discovered this, the ship had cleared its deficiencies and sailed. It was arrested again soon after in international waters when Turkish forces acted on a tip-off and found more than a tonne of heroin on board, according to a Reuters report. The DRC then identified 73 vessels that were flying its flag fraudulently and asked IMO to start looking at the problem.

Mr Kenney identified three types of flag fraud. The most common involves situations such as the DRC, where a ship flies the flag of a country that does not have an international ship registry. This can take a while to spot: “If you don’t think you have a registry, you’re not going to be looking for it,” he said.

In other cases, a country may have severed ties with its contracted registry administrators, but they continue to present themselves as still having that authority. “That’s happened in at least three cases that we know of,” he recalled. And then there is the type of fraud seen in the FSM case, where entities try to defraud the IMO to gain legitimacy.

How many fraudulent ships are there?

How big is the problem? Mr Kenney showed a summary of reports from a number of flag states presented to last year’s LEG 106: It came to about 300 ships. Now, according to a submission prepared by IMO’s secretariat for what would have been next week’s LEG 107, this number has come down to less than 50. That report and its list are publically available via the IMODOCS website.

This remarkable reduction is mainly due to “simple transparency and dissemination of information,” he said. “I had a boss who used to say that sunshine is the best disinfectant. And I think that’s true in this case.”

This struck me as a remarkable improvement, especially since – as with the DRC example – fraudulent ships may remain hidden until they are detained for some reason and I suggested to him that the real figure must be higher.

He explained that flag states themselves are usually the first to alert IMO that there may be a problem. It then works closely with the contractor that maintains its ship and company number databases, IHS Markit. Its data included a number of ships whose registration was not known “and by working with the states we were able to verify that they were actually fraudulently registered.” As a result, “we are pretty confident in that data that we’re getting from IHS Markit as to the ships that remain fraudulently registered,” he told me.

Another initiative since this was first addressed at LEG 106 was a decision by IMO's Assembly in December to adopt a resolution to create a module within IMO’s Global Integrated Shipping Information System (GSIS) to maintain a register of registries.

IMO issued Circular Letter No.4190 about this in January which asks for basic information about a country’s ship registry and for contact details and says that the information “will be entered into the Registries of ships function in the Contact Points module in GSIS.” This module is currently under development and will be available soon in GSIS’ public area, an IMO secretariat spokeswoman told me. To be honest, I am surprised IMO did not already have this data.

Some flag states have already responded with information but Mr Kenney was encouraged that others have asked that they should be listed specifically to say that they do not have a ship registry. One purpose of this database is that port state control officers will be able to access it to help them check whether a ship in their port is legitimately registered so if a state is on the record as not having a ship register, that would immediately identify any ship flying its flag as fraudulent.

The investigations into fraudulently-flagged ships have revealed another worrying relationship: a significant number of ships listed by the UN Security Council as sanctions violators around the world are also fraudulently registered. IMO is now working with IHS Markit to identify those ships and name them on the GSIS database so that if such a ship applies for reregistration, it will be obvious that it has violated UN sanctions.

Another concern he has is that “we’ve seen situations where ships illegally transporting migrants are fraudulently registered.” These included one that was involved in an incident in 2015 in which the ship’s crew pointed it at the Italian coast and then abandoned it and its passengers to their fate. “The Italian Coast Guard made heroic efforts to stop the ship and prevent anyone from being injured or killed,” he said.

When the IMO Assembly adopted the resolution behind its circular letter (A 31/Res. 1142; also available via the IMODOCS website), its preamble acknowledged that, among other things, “the existing instruments of IMO or the United Nations do not adequately address the fraudulent registration and fraudulent registries of ships.”

I am pleased to see that IMO is taking this seriously. Mr Kenney pointed out that if a ship is fraudulently registered, “most likely every certificate on board is also fraudulent.” And, since IMO is a “certificate based regime … [this] threatens to undermine the entire integrity of our system,” he said. That is a huge claim.

This is an issue that has come from nowhere to become a leading global concern in just five years and I expect that it will be necessary to consider amendments to some important IMO conventions as its full implications continue to emerge. I hope that flag states that do not yet appear to take this seriously will put their weight behind efforts to stamp out this scandal.

• Has fraudulent ship registration affected you? How big a problem do you believe it to be? What should be done about it? Email me now about your experience.

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