Simon Ring is the Global Head of Financial Markets Compliance at Pole Star, a maritime technology and regulatory compliance firm. Working in close collaboration, Pole Star and Marco Polo are seeking to solve some of the many issues that seem to be piling up for the maritime and wider trade financing industry, whether that’s digitisation, sanctions compliance or access to finance. In this next instalment of Marco Polo’s ‘The Innovator’ series, he shares his thoughts on the steps that the two partners are taking to become the single service that caters to all of that.
Q: What would you say are the biggest challenges that companies and financial institutions operating within the maritime sector face today in terms of regulations and sanctions?
Ring: Sanctions have been the focal point for financial institutions for a long time now, but it’s only recently that regulators have started looking more broadly at all companies involved in maritime trade. There’s been a diversification away from just banks or big companies being in the regulatory spotlight. The gamechanger happened in May 2020 when the Office of Foreign Assets Control (OFAC) issued guidance around sanctions evasion practices in the shipping industry, including a detailed set of best practices for entities across maritime supply chains to consider adopting to mitigate exposure to sanctions risk.
Regulators were very engaged with industry as they tried to work out a reasonable approach. 80% of world trade is done on open account and banks don’t receive information to enable a holistic review of transactions. As such, the regulators took a view to widen the scope of who is expected to play a role in ensuring vessels do not violate sanctions. The approach is based on the premise that if you’re involved in facilitating a trade, then you have a duty of care, not just to the regulators, but to your own business as well. Because for some companies, there’s no way back from getting this wrong, and the cost of the compliance is small compared to the penalties.
But not only are market players having to look at staying on the right side of regulations and sanctions, they’re also having to keep up with a raft of new ESG-related directives, such as measures being designed to reduce greenhouse gas emissions from shipping.
Pole Star’s PurpleTRAC regulatory technology, designed specifically for companies involved in maritime trade, screens ships and their associates for sanctions compliance and monitors historical and real-time movements. We’ve recently brought PurpleTRAC to the Marco Polo Network to provide a single point solution for automated vessel sanctions screening, vessel tracking, and risk management.
We also recently partnered with carbon accounting solutions provider CarbonChain to combine our technologies and enable the industry to simultaneously screen vessels for both sanctions compliance and emissions reporting in a simple and streamlined manner.
Q: Tell us more about how Marco Polo and Pole Star are collaborating on addressing the challenges you’ve outlined and facilitating better access to trade finance and working capital programmes for the shipping industry.
Ring: We’ve been working with Marco Polo for about 18 months now, having both determined that each of us are experts in our fields and the technologies we provide. Together we deliver what the trade industry needs: Pole Star’s PurpleTRAC digitises compliance sanctions and financial crime risk, and Marco Polo automates trade finance with their unique Receivable Finance and Payment Risk Management solutions.
As part of this collaboration with Marco Polo, we have been working together on a Payment Risk Management solution that caters specifically to the maritime industry, and uniquely integrates the Pole Star PurpleTRAC technology.
As we know, irrevocable Payment Risk Managements are essentially a way of automating and streamlining treasury, or working capital, operations, and our solution targets a number of applications across the maritime industry.
One of these is bunker fuel purchases. 70% of any vessel’s outgoings is fuel. In the current climate, the main facilitators of fuel – the big energy and oil majors and the trader markets – have started to cut their limits to owners and operators. What our joint solution does is bring together the individual maritime actors and the financiers, enabling financial institutions on the Marco Polo Network to step in and provide working capital programmes that work for both buyers and suppliers.
Pole Star’s role is to automate and support the screening of vessels that the financial institutions are financing. Financiers need to look at these vessels’ ownership, management, benefactors, movement history, and so forth. PurpleTRAC automates that process quickly, efficiently and at the right level, through a node on the Marco Polo Network.
Armed with this insight, buyers are given the ability to extend payment terms, and suppliers benefit from early payments from the buyers’ banks. This is critical support to keep vessels moving, which is especially necessary right now with the pandemic, and the global need for food and medical supplies.
The other propositions we are rolling out relate to canal transit toll fee financing and port services disbursement account financing.
Q: What makes the partnership with Marco Polo work? Why choose them as a partner in the first place?
Ring: We both believe in the digitisation of global trade, and that in order to solve big industry issues, you have to collaborate. We’re both big believers in the need for trade processes to be automated and streamlined, not only because this raises the level of compliance and risk management, but also because it lowers costs, which is important.
The other key point, for me, is that Marco Polo is the largest working capital finance network in the world being built for both financiers and corporates.
The Payment Risk Management solution targeting the maritime industry allows us to integrate both our technologies and our reach: from Pole Star’s perspective, we work with 1,200 shipping companies, while the Marco Polo Network has the support of most of the major banks.
I believe it’s the first of many solutions we will roll out together.
Q: What do you think the future looks like for the maritime industry in terms of financial support, especially given the current pandemic and recent fraud-related scandals?
Ring: These issues that the industry is dealing with all increase the drive towards digitisation. We’re now seeing institutions and regulators giving more clearance to things like electronic documentation, which is key. Remote working has really helped that cause by accelerating the need for digital processes. This is accelerating what trade and the maritime industry that supports it has needed for a long time to get to the next level and get rid of time-consuming and risky paper-based processes.
As new risks and regulations roll in, what most mainstream institutions want is single service solutions. They don’t want another piece of technology. They want something that unifies processes, automates them, records them, makes them super-efficient and preferably cheaper as well. Collaboration is extremely important to becoming the single service that caters to all of that.
Find out more about the Pole Star and Marco Polo collaboration here.
Simon Ring heads up Pole Star’s financial markets & compliance division, working with trade finance banks, commodity trading companies, maritime insurers, flag administrations and governments with sanctions and regulatory exposures in maritime transportation and supply chains.
Under his leadership, the company’s PurpleTRAC regulatory technologies have been awarded for innovation in RegTech solutions by MAS, Citi Bank, Microsoft, and recognised by the World Economic Forum, the UN and the US Peace Tech Accelerator Program.
Prior to joining Pole Star in 2010, Simon worked in financial services, acting as the divisional managing director of derivatives at Tullett Prebon in London and spending eight years in Geneva as the Managing Director of Cedef Capital Markets.
About the author
Shannon Manders is an editorial consultant and award-winning international trade finance journalist with over a decade of experience reporting and producing print and online publications on the global trade and trade finance sector. She is also the editorial director of international trade finance publication GTR, where she has been working since 2008.