On November 6, the Bureau of Industry and Security (BIS) and the Financial Crimes Enforcement Network (FinCEN) issued a third joint alert on export controls evasion. While the previous two BIS-FinCEN joint alerts have focused on Russia-related export controls evasion (which are discussed here and here), the new joint alert goes beyond the Russia export controls evasion and addresses broader, global export controls evasion.
FinCEN has created a new Suspicious Activity Report (SAR) key term "FIN-2023-GLOBALEXPORT" that can be used to report transactions that potentially involve evasion of U.S. export controls in general. Financial institutions are advised to continue to use the key term "FIN-2022-RUSSIABIS" for reporting potential Russia-related export control evasions. Financial institutions also need to be mindful of the investigative issues and subsequent grand jury subpoena that may follow once export-related SARs are filed, because every SAR using these key terms will be reviewed by law enforcement (unlike millions of SARs that are filed that may not receive careful review).
The joint alert reflects the U.S. government's continued focus on export controls and sanctions evasion and its expectation that the financial institutions' diligence and review of international trade transactions include review of potential export controls violations. The new key term and the SARs will provide additional resources for BIS in identifying and bringing enforcement actions against potential export controls evasion. In issuing the joint alert, Assistant Secretary of Commerce for Export Enforcement Matthew S. Axelrod stated that "[t]his powerful new SAR key term will enable even more BIS investigative and Entity List actions against global threats."
Red Flag Indicators of Export Control Evasion Identified in the BIS-FinCEN Joint Alert
- Purchases under a letter of credit that are consigned to the issuing bank, not to the actual end-user. In addition, supporting documents, such as a commercial invoice, that do not list the actual end-user.
- Transactions involving entities with little to no web presence, such as a website or a domain-based email account.
- Customers who lack or refuse to provide details to banks, shippers, or third parties, including details about end-users, intended end-use(s), or company ownership.
- Transactions involving customers with phone numbers with country codes that do not match the destination country.
- Parties to transactions listed as ultimate consignees or listed in the "consign to" field that appear to be mail centers, trading companies, or logistics companies.
- Items (commodity, software, or technology) that do not fit the purchaser's line of business.
- Customer names or addresses that are similar to one of the parties on a proscribed parties list, such as the BIS Lists of Parties of Concern (e.g., Entity List, Unverified List, Denied Persons List), Treasury's List of Specially Designated Nationals and Blocked Persons (SDN List), or State's Statutorily Debarred Parties List. Special attention should be paid to the basis for listing on the Entity List or SDN List, as linkages to weapons of mass destruction programs or military-intelligence end-users or end-uses implicate broader controls regardless of whether an item is subject to the EAR.
- Transactions involving a purported civil end-user, but basic research indicates the address is a military facility or co-located with military facilities in a country of concern.
- Transactions involving companies that are physically co-located, or have shared ownership, with an entity on the Entity List or the SDN List.
- Transactions using open accounts/open lines of credit when the payment services are conducted in conjunction with known transshipment jurisdictions; and/or the products listed in payment memos align with those identified by BIS as a disruptive technology (see page 5 of the alert) or are included on the Commerce Control List (CCL).
- Customers that significantly overpay for an item based on known market prices.
- Transactions involving a last-minute change in payment routing that was previously scheduled from a country of concern but now is routed through a different country or company.
- Transactions involving payments being made from entities located at potential transshipment points or involving atypical shipping routes to reach a destination.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.