By Jackson Wood, Director, Industry Strategy, Global Trade Intelligence, Descartes Systems Group
An official alert has been issued urging financial institutions to strengthen their vigilance against attempts to evade U.S. export controls.
This comprehensive alert stems from the joint effort by the Financial Crimes Enforcement Network (FinCEN) and the Bureau of Industry and Security (BIS) at the U.S. Department of Commerce. Although aimed at the financial community, the advisory is a timely reminder for all organizations to likewise be vigilant.
It also comes just months after Five Eyes countries tightened export control collaboration to better safeguard their collective national security interests. Five Eyes is made up of the United States, the United Kingdom, Canada, Australia, and New Zealand.
This initiative, detailed in a FinCEN/BIS press release, builds upon previous alerts and introduces a new Suspicious Activity Report (SAR) key term, “FIN-2023-GLOBALEXPORT,” designed to facilitate reporting on potential evasion of U.S. export controls, extending beyond circumstances related to Russia sanctions. The Russia-specific key term remains “FIN-2022-RUSSIABIS”.
The alert is particularly pertinent in the global context, providing financial institutions with crucial insights and red flags to identify transactions associated with the illicit acquisition of items regulated by the Export Administration Regulations (EAR). These items encompass advanced technologies with potential applications that could enhance military capabilities or support mass surveillance programs linked to human rights abuses.
Understanding U.S. Export Controls
The United States implements export controls to safeguard national security interests and advance foreign policy objectives. These controls play a pivotal role in preventing the proliferation of weapons of mass destruction and curbing the accumulation of conventional weapons and related materials.
Regulatory oversight is distributed among various government departments, including State, Commerce, and Treasury. The Bureau of Industry and Security (BIS), acting under the authority of the Export Control Reform Act of 2018, administers export controls for dual-use items and less sensitive munitions through the EAR. Control over items is contingent upon technical specifications and their intended end-use or end-user, with BIS utilizing the Commerce Control List (CCL) to identify and regulate items based on their technical performance parameters.
What is FinCEN?
FinCEN is short for Financial Crimes Enforcement Network. It is a bureau operating within the U.S. Department of Treasury. Its mission is to monitor and analyze financial transactions for law enforcement purposes. Because of the global scope of its mission, which include export control enforcement, FinCEN works in cooperation with other U.S. government agencies along with counterpart organizations in countries around the world and with related international bodies.
Key Components of the FinCEN/BIS Joint Alert
1. Introduction of SAR Key Term
The newly introduced SAR key term, “FIN-2023-GLOBALEXPORT,” serves as a crucial tool for financial institutions to report potential evasion of U.S. export controls. While initially focused on Russia-related circumstances, this term has been broadened to encompass global scenarios.
2. Global Application of Export Control Red Flag
The joint alert emphasizes the global applicability of red flags to assist in identifying transactions linked to the illicit acquisition of restricted items. These red flags are instrumental in recognizing potential evasion activities occurring in support of other nation-state adversaries and illicit actors across the globe. (More details on these red flags can be found in the FinCEN/BIS press release).
3. Items Subject to EAR
The notice underscores the importance of identifying transactions related to items subject to the EAR, including advanced technologies. Such technologies, when applied innovatively, can have implications for military capabilities and may support mass surveillance programs associated with human rights abuses.
Applying a Risk-Based Approach to Trade Transactions
The joint alert emphasizes the critical need for financial institutions and entities engaged in business with U.S. persons or dealing with U.S.-origin goods or services to adopt a risk-based approach. This approach is particularly relevant in countering efforts by individuals or entities to evade U.S. sanctions and export controls. Financial institutions, especially banks, credit card operators, and foreign exchange dealers, may play a significant role in providing financing, processing payments, or other services associated with international trade.
Leveraging Internal Risk Assessments
Entities with customers in export/import industries, including the maritime sector, are encouraged to rely on internal risk assessments. This enables the deployment of appropriate risk-mitigation measures consistent with their underlying obligations under the Bank Secrecy Act (BSA). Additionally, financial institutions directly involved in providing trade financing for exporters may possess valuable information relevant to identifying potentially suspicious activity.
How Descartes can Help with Export Controls
Descartes Visual Compliance™ is a provider of industry-leading international trade compliance solutions that helps organization to comply with export control rules and regulations in the U.S. and around the world. Its extensive, accurate, and up-to-date compliance data makes it an easy choice for organizations of all sizes, industries, and geographies aiming to minimize their potential exposure to export compliance violations.
To help companies manage their export compliance risk more effectively, there are solutions available for restricted party screening, export classification, license determination and management, risk management, and sanctioned party ownership screening, all of which can help organizations ensure they are not falling foul of new and existing export compliance regulations. Having proper and thorough export compliance processes in place can help organizations remain on the right side of the law, and avoid potential bad press, fines, and other financial and reputational damages that violations of export regulations may incur.
See also what our customers are saying about our range of denied party screening solutions on G2, a third-party business software review website.