"Due diligence" and "Know Your Customer" procedures in shipping between economic sanctions and anti-money laundering legislation

Genova – "Know Your Customer - KYC" means a series of procedures to which various subjects (such as, for example, financial institutions and professionals) are required, in order to assess potential risks relating to a certain economic operation through the verification of the identity of its customers, and therefore, in the more frequent case of companies exercised in the form of a company, the reconstruction of the corporate structure and the identification of the natural persons who assume the fundamental roles of the same.

In parallel, and more generally, "due diligence" literally refers to the degree of diligence that must be adopted in carrying out an investigation activity aimed at collecting and verifying certain information. As such, it has broad application depending on the purposes for which such an investigation is intended.

Both expressions ("due diligence" and "Know Your Customer") therefore refer to an activity of gathering documents and information aimed at verifying and ascertaining a factual situation, and are now widely known to the various subjects who operate in shipping due to their vast application.

In fact, the adoption of "Know Your Customer" procedures has become mandatory for an extensive series of business and professional categories and has therefore become enormously widespread after the entry into force of the anti-money laundering legislation envisaged by the legislative decree of 21 November 2007, no. 231, most recently amended by Legislative Decree 4 October 2019, n. 125.

Since the various subjects covered by the anti-money laundering legislation include financial institutions, banks and various professionals (notaries, lawyers, accountants), it is common that the various operations of the maritime sector require the completion of "Know Your Customer" operations by subjects required to comply with legal obligations, especially involving transactions of a financial nature that are instrumental or functional to the completion of sales, transport or complex projects.

To the investigations required by the anti-money laundering legislation, which are subjective in nature (aiming at verifying the client who takes part in the economic operation), the economic sanctions imposed in recent years by various political entities (including the UN, the European Union, the Office of Foreign Assets Control - OFAC of the United States) have imposed the carrying out of further "due diligence" checks - mainly of an objective nature because they are linked to certain types of activities - to ascertain that the operations and business generally performed do not fall within the restrictions set by them.

If it is true that such restrictions have existed for some time, since embargo measures or other measures restricting free economic initiative date back to a rather remote past, it is also true that the obligation to carry out "due diligence" checks has certainly increased following of the restrictions imposed by the European Union, as well as by other institutions, following the war attack by Russia against Ukraine.

With the various "packages" adopted during 2022, a complex system of sanctions was in fact established which is divided into absolute bans on carrying out certain activities or dealing with certain subjects (specifically and identified by name, or included in broader subjective categories), and in restrictions relating to certain activities, products and/or services.

The complex nature of the sanction system established by the European Union, as well as by other authorities and institutions, translates into an obligation to carry out particularly vigilant and thorough "due diligence" checks for those who intend to conduct business with Russian entities or related to assets or relevant services with Russia, within the limits still permitted, but also for all those who operate in "border" situations, approachable to Russia due to the particularities of trade or business, which may be affected by the application of the same legislation.

Considering also that the Italian implementing legislation punishes infringements of the European legislation on restrictive measures with imprisonment or with considerable fines, it is clear that the verification of the lawfulness of the business carried out or the demonstration of one's non-involvement with respect to unauthorized activities constitute a primary interest for companies, which can only be satisfied through serious and specialized "due diligence" investigations, as well as the orderly conservation of the related documentation.

*Lawyer, Studio Dardani