Senior Associate James Broomhall discusses the expanding network of shadow fleets currently in operation, outlining the legal and regulatory minefield their emergence presents, in Maritime Risk International.

James’ article was published in Maritime Risk International, 4 July 2025.

As sanctions regimes intensify across the globe, maritime operators find themselves on the front line of enforcement. Yet while legitimate actors adapt to new compliance obligations, a parallel network of rogue vessels, the so-called “shadow fleet”, is expanding with growing sophistication.

Often made up of aging, deregistered tankers operating under obscure ownership and dubious flags, this fleet is used by sanctioned states such as Iran, Russia, North Korea, and Venezuela to move billions of dollars’ worth of oil and arms, well outside the bounds of international oversight. Their emergence presents a significant legal and regulatory minefield for shipowners, P&I clubs, port authorities, and marine insurers.

The rise of subterfuge shipping

Subterfuge shipping is now the most opaque and dangerous corner of global energy trading. Over the past 36 months, the shadow fleet has grown in scale and coordination, consisting of over 1000 tankers, many of them very large crude carriers, suezmax, and aframax tankers, all near or beyond 20 years of age.

These vessels operate without classification society approval, often without valid third-party liability insurance, and under a carousel of flags from under-resourced registries. Their cargos are typically Iranian or Venezuelan crude, often destined for China or Syria via a patchwork of transshipment hubs stretching from the Middle East to West Africa and Southeast Asia.

The scale of the operation is staggering. Collectively, these vessels account for around 13%-17% of the global crude trading fleet by tonnage. Yet few are listed on OFAC or EU sanctions lists. Their success lies not in overt defiance, but in a carefully maintained grey zone – layered ownership, falsified documentation, and evasive routing that avoids clear attribution.

The playbook: how sanctions are evaded

A hallmark of shadow fleet operations is the manipulation or disabling of Automatic Identification System (AIS) transponders. While some vessels “go dark” entirely, others spoof their location, broadcasting false coordinates to simulate innocent activity.

Iranian tankers, for example, have been observed entering the Strait of Hormuz declaring Basrah, Iraq, as their destination, only to vanish and conduct ship-to-ship transfers in international waters, re-emerging later with a revised cargo manifest and false documentation.

The hub-and-spoke model is central to subterfuge logistics. Cargoes may change vessels multiple times between their origin and destination. These transfers often occur at anchorages near Fujairah, Sohar, Malaysia, Indonesia, and off Lomé, Togo – locations chosen for lax oversight or friendly jurisdictions.

A key tactic in the shadow fleet’s playbook is “flag-hopping”, the systematic switching of vessel registration between jurisdictions to obscure ownership and evade scrutiny. While flags of convenience have long been a feature of the maritime sector, the shadow fleet exploits registries with minimal oversight, poor verification standards, and, in some cases, entirely fictitious operations.

Upwards of 165 tankers have been confirmed as operating under fraudulent or non-existent flags, issued by entities claiming to represent states such as Samoa, Nauru, São Tomé & Príncipe.

These states either lack internationally recognised maritime registries or have had their names fraudulently used by unauthorised registrars. The vessels in question carry certificates issued from fabricated addresses or shell companies acting as so-called “registrars,” often impossible to verify.

Even when legitimate registries such as Panama, Liberia, Belize, the Cook Islands, and Gabon deregister suspicious vessels, these ships frequently reappear under new, low-profile flags within weeks. This carousel of flag changes is supported by a cottage industry of third-party registry operators and management firms with little accountability.

Registries exploited by the shadow fleet include Panama, Liberia, Togo and Mongolia.

Many of these registries subcontract management to commercial firms, lack technical review capacity, and conduct minimal verification of vessel histories or ownership. Some accept applications without documentation beyond payment, enabling sanctioned or high-risk ships to hide in plain sight.

The implications are serious. Ships flying fraudulent or loosely controlled flags can operate without valid class, evade port state control, and avoid civil liability for pollution, wreck removal, or crew safety. For compliance professionals, flag scrutiny must now go beyond name recognition, flags should be verified against IMO databases and scrutinised for links to high-risk jurisdictions.

Ownership of the shadow fleet is shielded through a web of anonymous, single-purpose entities. Management companies are frequently registered to fake addresses (in one case, a parking lot in Ningbo, China; in another, a bathroom supply showroom in suburban Dubai). These are not simply oversight failures, they are strategic evasions.

Bills of lading and manifests are often forged, and tankers have been documented altering their physical appearance – such as painting over identifying marks while loading at Venezuelan terminals to evade satellite or aerial detection.

Risk exposure for legitimate operators

Those who inadvertently engage with the shadow fleet, by chartering, insuring, or facilitating port entry may face secondary sanctions, asset freezes, or regulatory penalties. Following OFAC’s 2020 blacklisting of Greek-owned tankers linked to Venezuela, Greek operators exited the trade en masse. That was seen as a direct warning from Washington.

A significant number of shadow fleet vessels have been stripped of cover by the 13 P&I Clubs that make up the International Group (IG), which insures over 90% of the world fleet. Lloyd’s List reports that hundreds of tankers have lost IG coverage in the past two years alone.

In their place, a fringe market of non-IG insurers has emerged, including entities in Liechtenstein, the BVI, and the UAE. Some clubs, such as the “East of England P&I Association”, have used names suggestive of IG members, though no affiliation exists.

Many offer blue cards with sanctions clauses that void liability if the vessel is found to be breaching sanctions, rendering these certificates effectively meaningless in civil liability cases.

Class societies play a crucial but often overlooked role in maritime oversight. Recent investigations have found shadow fleet vessels using fraudulent or expired class certificates, or having been expelled by IACS-recognised members. Without class, these ships are not subject to periodic safety inspections or technical audits, raising serious environmental and safety concerns.

Regulatory response: OFAC, the EU and the technology push

Regulators are adapting. OFAC has issued multiple advisories calling for shipping companies to vet ownership chains, cargo origins, vessel history, and AIS behaviour. It expects firms to assess not only direct business counterparts, but also layered exposure through insurers, registries, and trade finance intermediaries.

The UK’s Office of Financial Sanctions Implementation (OFSI) and the European Commission have issued similar guidance. Increasingly, port authorities and insurers are deploying vessel risk profiling tools to track behavioural red flags: unusual voyage patterns, long-term AIS dark activity, or repeated flag changes.

Private sector partnerships are helping bridge the gap. Platforms such as Windward, Lloyd’s List Intelligence, and Pole Star provide AI-powered analytics to monitor high-risk fleets in real time, enabling compliance teams to move from static, list-based due diligence to proactive threat detection.

The shadow fleet is no longer a marginal phenomenon, it is a systematised global trade network that undermines sanctions regimes, environmental protection standards, and maritime safety frameworks. For legal and compliance professionals in the shipping sector, the implications are profound.

Traditional safeguards such as class certification, insurance, flag registry, and vetting are being bypassed through fraud, deception, and regulatory arbitrage. Due diligence practices must evolve from checklists to dynamic, intelligence-led frameworks.

Shipowners, P&I clubs, terminal operators, and financial institutions face increased liability if they fail to identify these risks. The international shipping industry is at a critical juncture, either it sharpens its oversight mechanisms, or it risks being complicit, however unintentionally, in enabling a shadow economy that operates with impunity.