Fraud and corruption: The background noise facilitating maritime criminal activities

The port of Sihanoukville, Cambodia (Source: Risk Intelligence)

5 March 2024

The UK Bribery act and similar laws put a big dent in corrupt activities; however, to various degrees merchant shipping can still be impacted by related consequences.

By Thomas Timlen, Analyst

Cargo vessel operators have encountered blatantly corrupt activities at ports throughout the world. For decades the activity continued unabated until 2011 when the UK Bribery Act came into force and its far-reaching consequences well beyond the United Kingdom came to light.

The UK Bribery Act was not the only corruption-fighting legislation to come on the scene. Once these new laws got the attention of global businesses, not only were concerns raised regarding facilitation payments, but every aspect of corporate entertainment, including the provision of meals and other client perks, came under scrutiny in an effort to reduce exposure to the penalties presented by the new and far-reaching laws. Concerns amongst maritime stakeholders reached a point at which related provisions were added to charter parties to assign responsibilities should violations be detected in multiple jurisdictions.

These consequences posed unique challenges for maritime shipping, as the nature and degree of bribes were present in various forms globally. One well-known example is the Suez Canal, where transits would involve the distribution of assorted gifts to various service providers and officials in the form of cigarettes, soft drinks and spirits. More costly cash payments were encountered on the Black Sea when arriving ships sought ballast water sample test results that were compliant with national regulations, payments that at times involved six-figure amounts.

Thirteen years after the UK Bribery Act took effect, although corruption in various forms does persist, much of this activity has significantly dissipated. Today, vessel operators face fewer demands for gifts during Suez Canal transits, and organisations such as the Maritime Anti-Corruption Network have reported that since 2020 there has been marked improvement with regard to the behaviour of Ukrainian ecological inspectors.

Other positive indicators have been observed that stand in contrast to otherwise damning survey results conducted by corruption watchdogs like Transparency International (TI). For example, while Cambodia scores poorly on the annual TI Corruption Perceptions Index, Risk Intelligence on-site field work revealed that port agents at Sihanoukville can refuse requests from some officials to issue port clearance and other required documents with no adverse consequences. It is assessed that representatives of cargo ships on international voyages have a distinct advantage when dealing with officials as compared with domestic vessel operators, who are likely to be forced to comply with such demands.

While things have generally improved, and there are no recent reports of cargo vessels facing significant delays or consequences related to facilitation payments, small scale activity does continue. This can involve harbour pilots, port agents, customs officials, port state control inspectors, immigration officials and sanitary officers. The situation is aggravated in countries lacking transparency. When the official levels of fines are not published, the accused parties are at the mercy of enforcement officials who can individually determine the amount that the penalty will incur.

The unfortunate consequence of this continuing activity is that corruption amongst port officials also facilitates activity related to smuggling and cargo theft from port facilities, as well as the activities of the dark fleet where fuel is bought, sold and stored via STS operations, all of which at some point will link back to activity at a port, where documentation will be required for a number of reasons. In many cases, fraud and corruption is just background noise – but it can also be facilitating more serious maritime criminal activities.

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