On June 28, 2022, the Financial Crimes Enforcement Network (FinCEN) and the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) issued a rare joint alert focused on the intersection of anti-money laundering and anti-money laundering. export control compliance. Aimed at financial institutions covered by the Bank Secrecy Act (BSA), the joint alert aims to help these entities identify reportable cases of potential export control fraud in relation to the Russian invasion of Ukraine.
In response to Russia’s invasion of Ukraine, the BRI implemented a series of controls targeting, among others, the Russian defence, aerospace and navy sectors. In particular, the controls place significant restrictions on exports, re-exports, and even intra-country transfers to Russia, as well as products destined for Russia and manufactured abroad with certain U.S. technologies and/or de minimis American content.
To help financial institutions identify suspicious transactions related to a possible evasion of these controls, the joint alert outlines products of particular concern that can be used to enhance Russian and Belarusian military and defense capabilities and that require a BIS license before being exported or re-exported to Russia or Belarus. These products include, among others, aeronautical equipment, antennas, GPS systems and cameras.
The joint alert also outlines some transactional and behavioral red flags for export control circumvention, including:
Transactions involving a change in shipments or payments that were previously intended to be destined for Russia or Belarus, but are now destined for another country;
Transactions involving payments from entities in third countries that are not otherwise involved in the transactions, where the countries are potential transshipment points for exports to Russia and Belarus;
The use of commercial checking accounts or foreign currency accounts by United States-based merchants involved in the import and export of electronic equipment, when transactions are conducted with electronics and aerospace companies based in third countries with offices in Russia or Belarus; and
Transactions involving entities whose website or company registration indicates that the entities are working on “special purpose projects”.
The joint alert further notes that the purchase of EAR99 items – a category generally referring to low-tech consumer goods that do not require a license for export, re-export or transfer to most destinations – can be a common tactic to evade BIS scrutiny. .
Since many financial institutions are involved in financing or processing payments for export-related activities, they may be uniquely equipped to help identify suspicious activity. For example, the Joint Alert notes that companies providing financing to exporters may have access to customer end-use certificates, export documents or other more detailed documentation associated with commodity-based trade finance. letters of credit.
Financial institutions, especially those directly involved in trade finance, may wish to review their protocols for identifying and reporting suspicious activity in light of this joint alert.
Special thanks to Summer Associate Miranda R. Carnes for her valuable contributions to this GT Alert. Not a licensed attorney.