Legal compliance has always been a strong priority for businesses, especially those working with third-parties internationally.
Export controls prevent domestic companies from doing business with restricted and denied parties, and today’s compliance departments are well aware of their importance.
However, the United States government has recently been diverting more resources and attention into export compliance enforcement. As a result, business owners and management teams are intensifying their efforts to emphasize adherence to government regulations more than ever. This is especially true in light of the new Russia-Ukraine sanctions.
The Department of Commerce hosts the Bureau of Industry and Security (BIS), which sets export control compliance requirements. In recent months, we’ve seen the organization lay down the law with non-compliant businesses and make it clear that denied party screening is a must-have for avoiding sanctions and other major penalties.
Matthew Axelrod Appointed to Office of Export Compliance Enforcement
One of the first steps the U.S. government took to stronger export controls is the appointment of Matthew Axelrod as the Assistant Secretary to the Office of Export Enforcement of the BIS. This nomination is significant for several reasons:
- Mr. Axelrod is a former federal prosecutor with over a decade of work at the Department of Justice. And observers say he has the experience to do his new job accurately and comprehensively.
- He represents the first leader of The Office of Export Enforcement as confirmed by the Senate in half a decade.
- Axelrod himself has noted that he intends to send a clear message to businesses everywhere that compliance enforcement is now a higher priority than ever.
Export compliance is important to prevent the transfer of technologies and products to denied and restricted parties and safeguard national security. Matthew Axelrod and BIS intend not only to penalize companies that do not conform but also to incentivize businesses that take proactive steps follow in lockstep.
Sanctions Against China
Among the goals of the newly-empowered BIS is the intention of preventing China from accessing certain new and emerging technologies. Under the Trump administration, export controls were used to target certain Chinese companies. The Biden administration is making its decisions regarding whether to maintain or discontinue those restrictions. Either way, BIS will continue to produce a list of entities that domestic firms will have to consult with before conducting business relationships overseas.
Actions Against Large Telecom Company
As recently as October of 2021, BIS put down enforcement actions against a large U.S.-based telecommunications firm, which included a $1.87 million fine for exporting illegally to Vietnam.
The company shipped out various transistors and development tools but falsified the intended use to Customs. Rather than for civil purposes, the company sent out the shipments for the sake of defense end uses. In addition, it had also sent out products that were controlled under UN embargos. On top of paying the violation fine, the company agreed to set aside a budget to improve its export compliance program to prevent future export violations.
Stay Compliant with the Right Denied Party Screening Software
If these government actions are keeping you on your toes, they should. Non-compliance is not an issue to be trifled with. As the U.S. government has boosted the profile of the Bureau of Industry and Security, even more stringent regulations and their associated enforcement actions are certain to follow.
Get started with denied party screening in your workflow today to check for sanctioned entities before you close that international deal.
Best of all, enterprise software platforms have made compliance a much easier and inexpensive measure than ever before. To help manage compliance risks more effectively, Descartes provides a range of robust denied party screening and 3rd party risk management solutions as well as comprehensive and trusted trade content for leading business systems such as SAP, Oracle, Salesforce, and NetSuite to name a few.
Descartes compliance solutions are flexible and modular, allowing organizations to pick the specific and exact functionality and content they need and scale up later as and when necessary. By utilizing these solutions, organizations can strengthen their compliance processes, enhance their competitive edge and increase sales velocity.