On May 19, 2023, FinCEN and U.S. Department of Commerce’s Bureau of Industry and Security (BIS) issued a joint alert urging financial institutions to be vigilant against efforts by individuals and entities to evade BIS export controls implemented in connection with Russia's further invasion of Ukraine. The supplemental joint alert provides financial institutions additional information regarding new BIS export control restrictions related to Russia, as well as reinforces ongoing U.S. Government engagements and initiatives designed to further constrain and prevent Russia from accessing needed technology and goods to supply and replenish its military and defense industrial base.
The joint alert includes evasion typologies and highlights for financial institutions nine high priority Harmonized System (HS) codes to inform their customer due diligence. FinCEN and the BIS strongly encourages Financial institutions to conduct due diligence when encountering one of the nine listed HS codes to identify possible third-party intermediaries and attempts at evasion of U.S. export controls. The agencies also urge financial institutions to conduct due diligence in particular, when opening accounts for new customers engaged in trade, with special attention to those located in non-Alerte Global Export Control Coalition (GECC) countries. Financial institutions are advised by the agencies to:
Evaluate the customer’s date of incorporation (e.g., incorporation after February 24, 2022);
Evaluating the end user and end use of the item (e.g., whether the customer’s line of business is consistent with the ordered items); and
Evaluate whether the customer’s physical location and public-facing website raise any red flags (e.g., business address is a residence, no website is available).
The supplemental alert also identifies new transactional and behavioral red flags to aid in identifying suspicious transactions relating to possible export control evasion, which includes the following:
Transactions related to payments for defense or dual-use products from a company incorporated after February 24, 2022, and based in a non-GECC country.
A new customer whose line of business is in trade of products associated with the nine HS codes, is based in a non-GECC country, and was incorporated after February 24, 2022.
An existing customer who did not receive exports associated with the nine HS codes prior to February 24, 2022, but who is receiving such items now.
An existing customer, based outside the United States, received exports associated with one or more of the nine HS codes prior to February 24, 2022, and requested or received a significant increase in exports with those same codes thereafter.
A customer lacks or refuses to provide details to banks, shippers, or third parties, including about end users, intended end-use, or company ownership.
Transactions involving smaller-volume payments from the same end user’s foreign bank account to multiple, similar suppliers of dual-use products.
Parties to transactions listed as ultimate consignees or listed in the “consign to” field do not typically engage in business consistent with consuming or otherwise using commodities (e.g., other financial institutions, mail centers, or logistics companies).
The customer is significantly overpaying for a commodity based on known market prices.
The customer or its address is similar to one of the parties on a proscribed parties list, such as the BIS Entity List, the SDN List, or the U.S. Department of State’s Statutorily Debarred Parties List.
The joint alert can be found here.