Regulatory intelligence for US exporters

New Joint Alert With FinCEN Will Result in More Export Enforcement Leads, BIS Says

The Bureau of Industry and Security and the Financial Crimes Enforcement Network this week issued another set of export control evasion red flags for financial service firms along with a new key term that banks and others can include in their suspicious activity reports to FinCEN. The new term will “enable even more BIS investigative and Entity List actions against” people and companies looking to evade U.S. export controls, said Matthew Axelrod, BIS’ top export enforcement official.

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The joint alert, the third issued by the two agencies since June 2022, said financial firms should include the term “FIN-2023-GLOBALEXPORT” in their SARs when they are reporting potential efforts by other parties to evade export controls that aren’t related to Russia’s invasion of Ukraine. BIS and FinCEN said banks should continue to use the term FIN-2022-RUSSIABIS, introduced by the two agencies’ May joint alert, for suspected violations of Russia-specific controls (see 2212160027 and 2207130014). Axelrod in September said FinCEN and BIS had already received 333 reports that referenced the new code, and some reports showed U.S.-origin goods being directly delivered to military-related end-users in Russia (see 2309110049).

The latest code could help BIS gather leads on export control violations involving items illegally delivered to other countries, BIS said, including advanced semiconductors, quantum technologies or hypersonics sought by “nation state adversaries to support military modernization efforts” designed to threaten U.S. national security. Axelrod said disrupting the illegal flow of these goods “is our highest priority.”

Financial institutions should “include any and all available information relating to the products or services involved in the suspicious activity,” including documents related to the transportation and trade financing of the transaction, the accounts and locations involved, identifying information of any “legal entities or arrangements involved or associated with beneficial owners, and any information about related persons or entities (including transportation companies or services) involved in the activity,” the alert said. Companies also should provide information on other domestic or foreign financial institutions and businesses involved, or persons involved in the activity.

The new joint alert includes a list of 13 red flags that may help financial institutions identify transactions tied to export control evasion. The red flags, some of which have been outlined in previous alerts, include:

  • A purchase under a letter of credit is consigned to the issuing bank and not to the actual end user, and the commercial invoice and other supporting documents don’t list the actual end user
  • A transaction involving entities with little to no web presence
  • A customer that refuses to provide details about end-users, intended end-uses or company ownership, or a customer with a phone number that doesn’t match the destination country
  • Parties or ultimate consignees that appear to be mail centers, trading companies or logistics firms
  • The customer name or address is similar to a party on a government proscribed parties list, including the Entity List or Unverified List
  • The transaction involves a purported civil end-user, but basic research shows the address is a military facility or physically “co-located” with a party on the Entity List or subject to sanctions
  • Transactions that use open accounts or open lines of credit when the payment services are “conducted in conjunction with known transshipment jurisdictions”
  • The customer significantly overpays for an item or asks for a last-minute change in payment routing
  • The transaction involves payments being made from entities in potential transshipment points or involve “atypical” shipping routes to reach a destination.