The Decisive | Season 7 | Ep.2 - Maritime Risk: Who Really Owns the World’s Ships?

View Full Transcript

Kristen Hallam:

You're listening to The Decisive Podcast, insights and analysis to empower confident decision-making. Hello and welcome to The Decisive. I'm your host, Kristen Hallam. More than 90% of global trade moves by sea, making the maritime sector one of the essential engines of the world economy. But behind the ships that carry commodities, manufactured goods, energy products, and food around the globe, there is a more difficult question: who actually owns and controls these vessels? That question is becoming increasingly urgent. As vessel tracking, port controls, and compliance screening have advanced, beneficial ownership remains one of the hardest parts of maritime risk to see clearly. Complex corporate structures, shell companies, nominee arrangements, and ownership chains that span multiple jurisdictions can make it difficult to identify the people or entities ultimately profiting from a ship's activity.

In this episode, we're joined by Jeremy Domballe, our Solutions Director of Maritime Intelligence and Risk, to explore what he calls a hidden ownership crisis at sea, and why it matters for sanctions compliance, illegal fishing, money laundering, and broader supply chain integrity. We'll discuss the techniques used to conceal control, the gaps in current international rules, and how data-driven intelligence from network analysis to machine learning can help expose the real decision-makers behind maritime assets. Because in today's risk environment, knowing where a vessel is may no longer be enough. The Decisive question is knowing who stands behind it. Jeremy, welcome back to The Decisive.

 

Jeremy Domballe:

Great to be back. Thank you, Kristen.

 

Kristen Hallam:

So to start, Jeremy, could you explain why beneficial ownership transparency matters so much in maritime trade and why most people outside the industry rarely think about it?

 

Jeremy Domballe:

Yeah, it's a great start. So most people assume that when a ship docks at port or is operating, someone knows who owns it, and you can track a vessel's location in real time. You can inspect its cargo manifests, you can verify its flag and other documentation that might be on board. But the question of who actually truly owns and controls it beyond the listed registered owner is not immediately visible. And outside of naming conventions and color schemes that might advertise an association, it can be incredibly difficult to start creating those links between the registered owner company, the company that's been established to accommodate the vessel, and who actually stands behind that from a corporate structure perspective and ultimately owns and controls it.

 

Kristen Hallam:

Now, your report highlights that maritime shipping facilitates more than 90% of global trade, as I mentioned in the intro. Given the industry's importance, how did vessel ownership become such a blind spot in the global compliance framework?

 

Jeremy Domballe:

So, I would say that it's partly historical and partly structural too. So, the maritime industry has legitimately complex ownership arrangements. If you think about it, vessels operate across multiple jurisdictions, they use international crews, and face different legal exposures in different waters. Well, as such, the use of single-purpose companies, or SPCs, for individual vessels has been a standard practice for decades, primarily for legitimate risk management. But this complexity has created an environment where illicit actors could hide in plain sight or create convoluted structures to hide behind. And international conventions like UNCLOS and SOLAS mandate the disclosure of registered owners on documentation. But unlike registered owners, the beneficial owners, the natural persons who ultimately control and profit from the vessels, are not immediately identifiable or visible in documentation that's held.

 

Kristen Hallam:

That does indeed sound very complex. In the report, Jeremy, you also argue that the opacity surrounding vessel ownership is often intentional rather than accidental. What makes this issue so difficult to address and who benefits from maintaining that lack of transparency?

 

Jeremy Domballe:

Yeah, so the difficulty stems from different factors, and with most things, I would say that they, it's legitimate business practices that are often exploited or used in a way to facilitate more illicit activities. So in this case, we're talking about legal fragmentation, economic incentives, and enforcement gaps. And ownership chains can deliberately span across these multiple jurisdictions, each with different transparency and reporting standards. So, a vessel that might be registered in location A might be owned by a shell company in location B, might be managed by an operating company in country C, with the beneficiary party essentially being in a fourth location. So, we're talking about one vessel, but ultimately four different locations that have a stake in it. And that in itself would be a relatively straightforward setup where there are no intermediary tiers between the registered owner listed against the ship and the beneficiary party that's ultimately associated to the vessel. And so the challenge is that that same corporate structure used for purposes like risk management and financial arrangements and tax planning can be used in this sort of dual-use capacity, to, yeah, to create these levels of obfuscation.

And it can be quite difficult to distinguish between the two beyond looking at corporate, the facade, and identifying the natural persons in control. And ultimately, when we think, we have to think about this in the sense that those who benefit from that opacity, especially from an illicit perspective, have every incentive to keep it complicated because it keeps them apart from that direct link to a ship.

 

Kristen Hallam:

Yeah, when you were walking through there, Country A, Country B, Country C, I was thinking, oh, I really need a flowchart to keep track of all of this. You also identified in the report the 4 primary concealment techniques, which again, I mentioned some of these in the intro: shell companies, rapid ownership transfers, nominee directors, and complex multi-jurisdictional structures, which we've been discussing. Which of these poses the greatest challenge for regulators and compliance teams today and why?

 

Jeremy Domballe:

So if I had to choose, I'd say it's a combination of shell companies combined with rapid ownership transfers, what we call company hopping. And the reason is one facilitates the other. So it's the rapid creation of registered owners, which are that initial layer of anonymity, if you will, tied to a ship. That's the first part, but it's that rapid transfer which makes that anonymity dynamic and challenging to track, as well as establishing associated corporate structures. So you can't really have one without the other, and that's why I put these two together. And that in itself poses quite a challenge. We've seen unprecedented volumes of newly founded entities serving as registered owners out of specific jurisdictions in recent years. And a vessel can be transferred between corporate entities in rapid succession, often moving from one to another overnight based on circumstance.

And the challenge for compliance professionals is that by the time you've completed due diligence on one company, the vessel may have already moved on to another. And as such, you need continuous monitoring, network analysis to map the relationships between seemingly unrelated entities. And have the ability to track the beneficial ownership through these rapid changes, not just at a single point in time.

 

Kristen Hallam:

Sounds pretty labor-intensive right there. I think it would help if you could walk us through either a real-world example or a hypothetical scenario that illustrates how hidden beneficial ownership can be used to evade sanctions or facilitate illicit activity. Could you do that?

 

Jeremy Domballe:

Yeah, and I think I've alluded to one, but we will take an example of a tanker which is registered to Company X, which is incorporated in location A, in one location, with a brass plate address which could be shared by hundreds of other companies, right? Different names, same location, same given location. That registered owner might exist but has no employees, no operational presence, maybe no website, purely exists on paper. The vessel has a technical manager which is based in another location, we'll say Location B, and the commercial operator is in turn in another location, which we'll say Location C. With, like I said, we could have the beneficiary being in another fourth location. Now, when a regulator identifies or a company identifies that some dodgy dealings might have been associated to this Company X, they might impose sanctions. Now, that associated ship doesn't necessarily immediately stop trading because within a couple of days, a newly registered owner company can be set up in another jurisdiction, and that vessel might change its name. It might call into port, get a fresh coat of paint, but ultimately continues to trade.

And the technical manager and the crew might remain the same, and the beneficiary owner themselves also don't change with in that process either. The only thing that does change is this corporate wrapper and that initial link on the registered owner side. And this is why there's been such a focus on vessel-specific sanctions and why it's been so effective over the last few years, as it minimizes this transfer of asset from one high-risk entity to low-risk entity when faced with sanctions. And although I say this is a sort of a theoretical example, it is not just a hypothetical. Vessels continue to use this as a mechanism to change their associated owners and convolute their structures to ultimately hide their beneficiaries that hide behind the scenes. And we've seen that, we saw that several years ago when the conflict between Russia and Ukraine started. Many of the vessels associated to Russia very swiftly change their registration to disconnect themselves from the state and continue operating.

 

Kristen Hallam:

Now, international regulations require disclosure of registered owners, but not necessarily beneficial owners. How significant is this regulatory gap, Jeremy, and what risks does it create for governments, businesses, and financial institutions?

 

Jeremy Domballe:

So the gap is fundamental and it does create a cascading risk. What we have to remember is UNCLOS and SOLAS were designed for safety and navigation in mind primarily. So they require the disclosure of registered owners because that's what's relevant for maritime incidents and liability. And the registered owner numbering scheme was in turn designed to help create transparency and traceability. Oh, it doesn't address the question of beneficiaries and controlling interest. And as I just touched upon, even from a registered owner perspective, it also doesn't account for some of these business practices for company hopping. And so in turn, governments can't effectively enforce sanctions where they can't identify who truly controls those sanctioned vessels. Businesses themselves could face reputational or even legal exposure when they unknowingly transact with these vessels that could be linked to illicit actors, even when the registered owner appears clean. While on the financial side, these companies can be left extending lines of credit or issuing insurance policies to vessels that have hidden counterparty risk.

 

Kristen Hallam:

Thank you for that, Jeremy. Now, many organizations have invested heavily in vessel tracking technology and port security. Why isn't better tracking alone enough to solve the ownership transparency problem that we've been discussing?

 

Jeremy Domballe:

Fair question. Vessel tracking tells you where a ship is and can provide you operational oversight into its activities, but it doesn't tell you who controls it or who profits from its operations. Now, certificates will hold the registered owner information, but it doesn't tell you who controls it or who's profiteering from its operations. So if a sanctioned individual controls 10 ships, for example, through different companies, vessel tracking will show you 10 separate ships with possible, different possible registered owners, and you might flag suspicious behaviors and they might have the same management companies, but you won't necessarily connect them to the same beneficial owner. And so I think that having access to some of these datasets can be quite challenging sometimes as we're talking about corporate registries and not just corporate registries, but the individuals that stand behind those registries themselves.

 

Kristen Hallam:

So what would you say are the business and reputational risks for companies that unknowingly engage with vessels linked to opaque or hidden ownership structures, Jeremy?

 

Jeremy Domballe:

So the risk can be pretty substantial. First, there's the regulatory exposure side of things where financial institutions and businesses can face penalties for sanctions violations, so be issued a fine. There's reputational damage to consider. So if you imagine a major shipping company or a bank who discovered that they'd been facilitating trade for vessels linked to sanctioned entities. That could make headlines and ultimately damage stakeholder trust and could lead to loss of business from counterparties who now see you as possibly high risk. There are also financial risks. So, if you've chartered or financed a vessel that suddenly becomes exposed to sanctions or exposed to parties that were otherwise unknown and considered high risk, you may be unable to complete the voyage, recover your investment, or even enforce some of those contracts. And we have been seeing increased vessel abandonments over recent years linked to shell companies that just simply dissolve after an incident, leaving no accountable party in some cases.

And the last aspect too is the operational disruption to supply chains. So vessels with opaque ownership could face increased scrutiny in ports, and that could in turn cause delays in terms of clearance, especially if these vessels are being detained due to subpar practices and standards, and that in turn creates friction that affects everyone in the transaction chain while also incurring costs too.

 

Kristen Hallam:

Jeremy, you've painted a pretty clear picture of the present state of things, or at least as clear a picture as we can have of something that's opaque. Just pivoting to the future, looking ahead, what practical steps can regulators, port authorities, financial institutions, and maritime companies take to improve transparency without creating unnecessary friction for legitimate operators?

 

Jeremy Domballe:

So yeah, the key is moving from a reactive enforcement or a reactive approach to proactive transparency while trying to maintain operational efficiency. So firstly, mandatory declarations of beneficial ownership at registration or transfer points, which isn't about creating bureaucracy so much as it's establishing a baseline. And many companies do, as part of their due diligence process, ask about third parties, associations, and conduct surveys on company structures and whatnot. Second, as I would say, a more vessel-centric approach to due diligence, or what we would call KYV, or know your vessel. Rather than checking entities in isolation, you'd track the vessel's entire lifecycle. So changes on the company side, in management rotations, in beneficial interests, even in areas of operations perhaps. This integrates naturally within current KYC and KY3P frameworks that financial institutions and other businesses already use. I would say also maybe financial guarantees tied to verified beneficial owners, which would ensure a level of accountability beyond the registered owners themselves for when vessels are abandoned or there's someone identifiable who ultimately remains responsible when something goes wrong.

 

Kristen Hallam:

KYV, that's a new one for me. I'm going to remember that. Know your vessel. All right. So Jeremy, if listeners take away one message from your Maritime State of Play report, what would you want them to remember about the connection between ownership transparency, compliance, and the future of global trade?

 

Jeremy Domballe:

I think the message is that beneficial ownership transparency isn't just a compliance checkbox. It's a fundamental and foundational aspect to maritime safety and security, and in this context, also to legal compliance. It's important now more than before to have robust systems and checks in place which account for these phenomena. As I said, a greater focus on KYV, on Know Your Vessel, and to ultimately practice vigilance and diligence, which sits at the forefront of risk mitigation, not just in shipping, but generally.

 

Kristen Hallam:

All right. All that's left for me to do is to thank you, Jeremy, for joining us on The Decisive. Until next time. Thank you for listening to The Decisive podcast from S&P Global. Please subscribe and join us for next week's episode. Until then, stay curious and stay informed.