BIS Official Says More Enforcement Coming; Better License Screening Underway
Companies should expect the U.S. government to continue to prioritize enforcement of export controls in the coming months, including by issuing new penalties for export violations, said Matthew Axelrod, the Bureau of Industry and Security’s top export enforcement official. He also revealed that BIS is using a new tool to better screen foreign parties listed on license applications, and he said a recent shift in how the agency uses metrics has allowed it to devote more attention to cases involving the most sensitive technology.
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“Over the past three years, our aggressive and prioritized enforcement posture has become business as usual. It’s our basic operating level,” Axelrod said. “And I anticipate that you’ll continue to see significant enforcement announcements in the weeks, months, and years to come.”
Axelrod, speaking during a conference this week hosted by the Practising Law Institute, said the BIS Office of Export Enforcement over the last three years has helped to nominate 900 parties to the Entity List, including more than 320 to the Entity List and nearly 40 to the Unverified List this past fiscal year. “This represents an all-time high for export enforcement,” Axlerod said, according to his prepared remarks.
He also said the Disruptive Technology Strike Force -- the group created alongside DOJ to prioritize investigations involving illegal exports of sensitive technology (see 2411250027) -- has charged 25 criminal cases since it launched in early 2023, a 50% increase compared with the prior two years. BIS also has issued temporary denial orders against nearly 30 entities.
Axelrod said those actions have helped to raise the “profile” of the BIS export enforcement work, which has had spillover effects on exporters, trade lawyers and others looking to comply with U.S. export regulations. He said industry now knows the U.S. is in a “new era for export enforcement,” and companies are reevaluating their compliance programs to avoid facing “multimillion-dollar penalties for violating our rules.”
“Word is out that export violations can no longer be considered just the cost of doing business,” Axelrod said. “Instead, violations now present enterprise risk, which means that investment in compliance is crucial.” He said export enforcement is “at the red-hot center of protecting our national security,” and that’s likely to continue “given our current geopolitical environment.”
BIS has taken several steps under Axelrod’s tenure to reform the way it approaches voluntary self-disclosures, including by codifying new rules in September that could help BIS more quickly resolve minor voluntary disclosures and increase penalties on exporters who choose not to report serious violations, among other things (see 2409120017).
At the time, BIS said it was already seeing an increase in more serious disclosures. Axelrod this week said the agency has tracked a nearly 70% increase in more serious disclosures compared with the 18 month-period before some of those policies were first announced by Axelrod last year.
Axelrod also pointed to a new “metrics initiative” he revealed earlier this year to measure how well the field offices of OEE managers are focusing on work connected to the agency’s “highest-priority areas,” including export violations involving foreign military and security agencies, weapons of mass destruction and human rights abuses. He said OEE increased the percentage of its cases that involve a “prioritized technology, end user, or end use,” from 70% to more than 85% last year. Axelrod also said more than 95% of OEE’s leads last year were tied to one or more of those categories.
He also highlighted the work of BIS with other government agencies, saying it recently partnered with the National Security Agency to build and deploy a new system that allows BIS to screen every foreign party involved with a license application against “certain intelligence holdings.” BIS previously had to screen against those parties manually, and could only get to around 800 applications each year. Now, Axelrod said BIS can screen “all of the approximately 40,000 applications that BIS receives annually.”
The new tool, called the Commerce Screening System, went live in October. Axelrod called it a “game-changing information technology tool,” saying BIS has already screened more than 7,300 license applications and identified over 420 unique licenses where the “intelligence holdings needed further review by a licensing officer prior to the licensing decision being made.”
Axelrod also said BIS has done more work with the Office of Foreign Assets Control during the last few years, saying he has biweekly calls with the OFAC director. He also pointed to the $3.3 million combined settlement that Microsoft reached with both agencies in April after the government said the technology company’s foreign subsidiaries committed export control and sanctions violations (see 2304060054).
Axelrod said BIS now has a “close relationship” with OFAC. “You can expect to see additional coordinated enforcement actions from us in the near future.”