On 11/6/23, the Department of Commerce’s Bureau of Industry and Security (BIS) and FinCEN issued a joint notice regarding export control evasion highlighting a new Suspicious Activity Report key term (“FIN-2023-GLOBALEXPORT”) for financial institutions to reference when reporting potential efforts by individuals or entities seeking to evade U.S. export controls NOT related to Russia’s invasion of Ukraine. The Joint Notice:
- is part of the ongoing efforts by BIS and the U.S. Department of the Treasury to strengthen export controls and prevent global evasion of U.S. export controls. By working together and leveraging their respective expertise, BIS and FinCEN aim to disrupt illicit acquisition activities and enhance the overall security and integrity of the international trade and financial systems.
- emphasizes the importance of financial institutions applying a risk-based approach to trade transactions and remaining vigilant against efforts by individuals or entities seeking to evade export controls globally.
- highlights global red flag indicators of export control evasion, with a focus on advanced and critical technologies, that also can be applicable to due diligence efforts of exporters in addition to financial institutions.
The Joint Notice applies to export control evasion occurring in support of other nation-state adversaries and illicit actors globally and provides U.S. financial institutions with red flags to assist them in identifying transactions potentially tied to the illicit acquisition of items subject to the Export Administration Regulations (EAR).
Financial institutions and other entities conducting business with U.S. persons, within the United States, or with businesses dealing with U.S.-origin goods or services or in foreign-origin goods otherwise subject to U.S. export laws, ought to be vigilant against efforts by individuals or entities to evade U.S. sanctions and export controls as follows:
- Financial institutions, particularly banks, credit card operators, and foreign exchange dealers may be involved in providing financing, processing payments, or performing other services associated with international trade.
- Financial institutions with customers in export/import industries, including the maritime industry, should rely on the financial institutions’ internal risk assessments to employ appropriate risk-mitigation measures consistent with their underlying BSA obligations.
- Financial institutions directly involved in providing trade financing for exporters also may have access to information relevant to identifying potentially suspicious activity. This may include the financial institutions’ customers’ end-use certificates, export documents, contracts, or other documentation, such as those associated with letters of credit-based trade financing.
Export Control 13 Red Flags
- Purchases under a letter of credit that are consigned to the issuing bank, not to the actual end-user. Supporting documents, such as a commercial invoice, 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.
- A customer lacks or refuses 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 appear to be mail centers, trading companies, or logistics companies.
- The item (commodity, software, or technology) does not fit the purchaser’s line of business.
- The customer name or its address is similar to one of the parties on a proscribed parties list, such as the BIS Lists of Parties of Concern (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 involve 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 that use 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 or included on the Commerce Control List.
- The customer is significantly overpaying for an item based on known market prices.
- Transactions involve a last-minute change in payment routing that was previously scheduled from a country of concern but now routed through a different country or company.
- Transactions involve payments being made from entities located at potential transshipment points or involve atypical shipping routes to reach a destination.
Financial Institutions have additional reporting options for Suspected Export Control Evasion
In addition to filing a SAR, financial institutions may wish to consider reporting suspected export control evasion activity directly to BIS through its web-based confidential Enforcement Lead/Tip form, located at: https://bis.doc.gov/index.php/component/rsform/form/14-reporting-violations-form?task=forms.edit
FinCEN’s mission is to safeguard the financial system from illicit use, combat money laundering and its related crimes and promote national security through the strategic use of financial authorities and the collection, analysis, and dissemination of financial intelligence.
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