FinCEN and BIS Collaborate to Strengthen Export Control Reporting with New Key Term

In a significant joint effort, the Financial Crimes Enforcement Network (FinCEN) and the U.S. Department of Commerce's Bureau of Industry and Security (BIS) have taken a proactive stance against potential threats to national security by introducing a new key term for financial institutions (FSIs) to utilize in their reporting processes. The key term, known as "FIN-2023-GLOBALEXPORT," has been established to assist FSIs in identifying and reporting any suspected endeavors by individuals or entities to circumvent U.S. export controls. Importantly, this new reporting requirement pertains to evasion efforts unrelated to Russia's invasion of Ukraine.

The joint notice issued by FinCEN and BIS underscores the global red flag indicators of export control evasion, with a specific emphasis on advanced and critical technologies. The purpose is to provide guidance not only to financial institutions but also to exporters who need to conduct due diligence efforts in compliance with export controls.

The initiative reflects the gravity of the national security concern associated with the deliberate evasion of U.S. export controls. FinCEN Director Andrea Gacki emphasized the significance of this collaborative effort, stating, "FinCEN is proud to partner with BIS in issuing this Notice and providing financial institutions with a new key term which they can use to file suspicious activity reports when they suspect such activity."

This latest development follows previous alerts issued by both FinCEN and BIS in June 2022 and May 2023, urging financial institutions to maintain vigilance against potential Russian export control evasion related to Russia's invasion of Ukraine. For situations linked to Russian export control evasion, FSIs are encouraged to continue using the previously introduced key term, "FIN-2022-RUSSIABIS."

However, the expanded reporting requirements for a broader range of export control evasion have brought about significant challenges for financial institutions. Sarah Beth Felix, the Chief Executive of Palmera Consulting, has pointed out the complexity of the "nuanced and broad 'red flags,'" noting that they present operational challenges that are difficult to navigate.

For practical implementation of the joint notice, Sarah Beth Felix offers valuable advice. For example, community banks should ensure that they possess the necessary licenses for conducting business types listed in the Commerce Control List (CCL). They should also scrutinize red flags related to business customers engaged in foreign wire transactions. Fintech and lendtech companies should assess the compliance of their products, and all institutions should evaluate whether their vendors can effectively screen for BIS data.

Despite the importance of this notice, it introduces operational complexities, particularly because many of the red flags require manual assessment. Furthermore, it underscores the necessity for strong collaboration between commercial lenders and anti-money laundering officers to ensure effective implementation, given the unique risks associated with industries listed in the CCL.

Consultant Jim Richards has emphasized the cumulative impact of various notices issued by FinCEN, expressing concern that they may increase complexity and compliance burdens for financial institutions. He pointed out that this notice is one of many issued in recent years, each addressing specific financial crime concerns.

The joint notice underscores the significance of applying a risk-based approach to trade transactions and stresses the importance of remaining vigilant against any attempts to evade export controls on a global scale. It also highlights the use of Suspicious Activity Reports (SARs) by BIS to investigate violations of U.S. export control regulations, particularly in cases involving advanced technologies sought by nation-state adversaries.

This collaborative effort between FinCEN and BIS is part of an ongoing commitment to strengthen export controls and prevent global evasion of U.S. export regulations. By combining their expertise, these two agencies aim to disrupt illicit acquisition activities and bolster the security and integrity of international trade and financial systems.

By fLEXI tEAM