The US treasury department’s Financial Crimes Enforcement Network (FinCEN) and the commerce department’s Bureau of Industry and Security (BIS) have issued a supplemental joint alert urging US financial institutions to remain vigilant for potential attempts by Russia to evade US export controls. The latest alert supplements the first FinCEN-BIS joint alert issued in June 2022 and provides information on new export control restrictions implemented since then.

The alerts aim to further constrain and prevent Russia from accessing needed technology and goods to supply and replenish its military and defence industrial base, and add to Washington’s unprecedented raft of sanctions that aim to counter Russia’s capacity to continue its military operations in Ukraine.

Informing financial institutions

The new alert details evasion typologies, and introduces nine new high priority harmonised system codes (HS codes) to inform US financial institutions’ customer due diligence.

It also identifies additional transactional and behavioural red flags to assist in identifying suspicious transactions relating to possible export control evasion.

HS codes

Financial institutions should “conduct due diligence when encountering one of the nine listed HS codes to identify possible third-party intermediaries and attempts at evasion of US export controls,” according to the alert.

It also advises that financial institutions look for the relevant HS codes in trade documents, such as “commercial invoices, packing slips, airway bills, sea bills, or other supporting trade documentation.”

A license is required for any items associated with these HS codes destined to Russia, Belarus, the Crimea region of Ukraine, or Iran, including certain foreign-produced items.

Risk-based trade finance

Applying a risk-based approach to trade finance is critical for financial institutions, particularly banks, credit card operators, and foreign exchange dealers involved in providing financing, processing payments, or performing other services associated with international trade according to the alert.

It says these services include processing payments for exported goods, issuing lines of credit for exporters, providing or handling the payments supported by letters of credit, processing payments associated with factoring of accounts receivables by an exporter, providing general credit or working capital loans, and issuing or paying insurance on the shipping and delivery of goods to protect the exporter from non-payment by the buyer.

Financial institutions with customers in maritime or export/import industries should rely on the financial institutions’ internal risk assessments to employ appropriate risk-mitigation measures consistent with their underlying Bank Secrecy Act obligations the alert concludes.

The Supplemental Alert: FinCEN and the U.S. Department of Commerce’s Bureau of Industry and Security Urge Continued Vigilance for Potential Russian Export Control Evasion Attempts, dated 19 May 2023 can be found here.

The FinCEN and the U.S. Department of Commerce’s Bureau of Industry and Security Urge Increased Vigilance for Potential Russian and Belarusian Export Control Evasion Attempts, dated 28 June 2022 can be found here.

Categories: Trade Based Financial crimes News