Joint Notice from FinCEN and BIS on the U.S. Export Controls

The recent notice from the U.S. Government i.e. the third joint notice emphasizes some red flags on the US export controls.

While the preceding notices were Russia-centric after Russia's Ukraine invasion, the latest advisory broadens the scope, cautioning U.S. institutions about individuals and entities attempting to circumvent U.S. export controls. Issued by the U.S. Department of Commerce's Bureau of Industry and Security (BIS) and the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN), this notice urges vigilance against nation-state adversaries and illicit actors seeking items subject to the EAR (Export Administration Regulations). These technologies could bolster adversaries' military capabilities or facilitate mass surveillance, enabling human rights abuses.

It's imperative for businesses subject to global trade compliance to scrutinize all export transactions, including assessing end-use, end-user, ultimate destination, and item classification. The government is now aiding companies by outlining new red flags for transactions.

What are these new red flags for the US export controls?

Here are some of the examples which prompt exporters to pause and delve deeper:

• Transactions involving letters of credit consigned to the issuing bank rather than the actual end-user, accompanied by supporting documents that don't specify the actual end-user.

• Engaging with entities having minimal or nonexistent web presence (e.g., lacking a website or domain-based email account).

• Customers withholding or refusing to provide essential details about end-users, intended end-use, or company ownership.

• Transactions linked to phone numbers with country codes differing from the destination country.

• Involvement of parties appearing as ultimate consignees or listed in the "consign to" field but seem like mail centers, trading, or logistics companies.

• The purchased item not aligning with the buyer's line of business.

• Similarity between customer details and those on prescribed parties lists.

• Transactions involving purported civil end-users, yet research suggests a military facility or proximity to one.

• Dealing with companies physically co-located or sharing ownership with entities on prescribed parties lists.

• Using open accounts or lines of credit for payments, particularly concerning known transshipment jurisdictions or items identified as disruptive technology or on the CCL (Commerce Control List).

• Overpayment for an item compared to known market prices.

• Last-minute changes in payment routing, especially diverting from a country of concern through a different country or company.

• Involvement of entities from potential transshipment points or unusual shipping routes.

How to ensure an effective implementation of this latest notice?

Here are actionable steps to effectively align with this latest announcement on the US export controls:

• Comprehend geopolitical realities and their impact on your business.

• Conduct screening of current partners for restricted parties and end use to assess existing risks.

• If expanding into new markets (e.g., Uzbekistan, Kazakhstan), be diligent in managing requests from these regions.

• Integrate these new red flags into your customer and supplier vetting procedures.

• Consult BIS or Treasury for guidance before engaging in any questionable transactions.

• Update your export program to align with these red flags and the evolving landscape.

Implementing these measures can significantly fortify your business’s defenses against potential risks and ensure compliance with evolving regulations.