Russia export control evasion indicators flagged by FinCEN/BIS alert

The Financial Crimes Enforcement Network (FinCEN) of the Treasury Department and the Bureau of Industry and Security (BIS) of the Commerce Department have alerted financial institutions to be on the lookout for fresh and inventive ways that people and organizations in Russia and Belarus are attempting to circumvent export restrictions.

The agencies jointly released an alert on Tuesday outlining warning signs that might point to attempts to circumvent sanctions. Since Russia invaded Ukraine in February, the BIS has implemented a number of export controls, primarily focusing on Russia's defense, aerospace, and maritime industries, energy production, and luxury goods used by Russian elites.

Sonar systems, cameras, integrated circuits, oil field equipment, cameras, underwater communications equipment, and water fabrication equipment are among the commodities of concern. Prior to exporting or reexporting any of these goods—as well as others listed in the alert—to Russia or Belarus, the BIS said a license is required.

Export restrictions forbid the export of these goods to be used in finished goods produced in other nations that are then shipped to either nation.

Financial institutions run a higher risk of unintentionally taking part in the export of a prohibited good to Belarus or Russia. The joint alert advised businesses to exercise caution when processing payments, issuing letters of credit, or otherwise facilitating international trade that contravenes the BIS's export restrictions on the two nations.

The information that financial institutions have access to, such as end-use certificates, export documents, and transmittal orders from an intermediary financial institution like the Society for Worldwide Interbank Financial Telecommunications (SWIFT), should be used to assess whether specific transactions may be assisting potential export control violations.

Additionally, businesses may want to spend more time doing their research and gathering extensive documentation related to letters of credit-based trade financing.

The following are some of the warning signs the agencies claimed could suggest export control evasion:

1. A customer's primary line of work is military or government-related; 

2. A customer purchases new vessels for shipping lanes to affected countries that have no discernible economic or commercial purpose;

3. Transactions with companies that have little to no online presence; 

4. Transactions that were previously scheduled to go to Russia or Belarus but are now being routed to another nation or business; 

5. Last-minute modifications to transactions related to Russia or Belarus; 

6. Luxury goods that were previously scheduled to be sent to Russia or Belarus but are now being rerouted to a nation without export restrictions to the two countries; 

7. Shipments to companies whose business purpose is listed as “special purpose projects” or have a certificate with Federal Security Service of the Russian Federation, which allows them to work on projects classified as a state secret; and

8. Transactions involving individuals or companies with links to Russian state-owned corporations.

The Bank Secrecy Act mandates that financial institutions disclose transactions resulting from illegal activity, such as evading export restrictions or sanctions.

Additionally on Tuesday, the Treasury unveiled a slew of fresh economic sanctions against Russia, including a ban on the importation of Russian gold into the US and sanctions against Rostec, a state-owned company that the Treasury claimed is the cornerstone of Russia's defense industry.

Sanctions were imposed on 70 entities, with a focus on management firms associated with the aerospace, defense technology, and industrial exporter industries. Additionally, sanctions were placed on a number of private military organizations with connections to the Russian government or the separatist republics in the Donbas region of Ukraine.

Alexander Kokorev, a former agent for the Russian spy agency FSB, his wife, and another conspirator were also designated for trying to obtain foreign electronics using phony companies in defiance of the restrictions in place.

The United Kingdom, Canada, and Japan joined the United States in opposing the import of gold. Gold that was originally obtained from Russia but is not currently present in the nation was exempt from the import ban on gold.

The Treasury stated in its press release that the sanctions "strike at the heart of Russia’s ability to develop and deploy weapons and technology used for Vladimir Putin’s brutal war of aggression against Ukraine."


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