On November 6, 2023, FinCEN and the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) issued a joint notice to announce a new Suspicious Activity Report (SAR) key term and to highlight red flags related to the global evasion of U.S. export controls.
What Is FinCEN?
The U.S. Financial Crimes Enforcement Network (FinCEN) is a bureau of the U.S. Department of the Treasury. FinCEN’s goal is to safeguard the financial system from illicit use and combat money laundering and promote national security.
What Is A SAR?
A financial institution (FI) is required to file a SAR if it knows, suspects, or has reason to suspect a transaction conducted or attempted by, at, or through the FI involves funds derived from illegal activity, or attempts to disguise funds derived from illegal activity; is designed to evade regulations promulgated under the BSA; lacks a business or apparent lawful purpose; or involves the use of the FI to facilitate criminal activity, including sanctions or export control evasion.
SAR Key Term
The new key term FIN-2023-GLOBALEXPORT should be used to report potential efforts to evade U.S. export controls beyond the Russia-related circumstances that were the focus of FinCEN’s prior two alerts. FIs should continue to use the key term FIN-2022-RUSSIABIS when filing SARs related to potential Russia-related export control evasion.
Red Flags
In the 9-page joint alert, FinCEN and BIS listed the following 13 red flags financial institutions should watch for in identifying transactions potentially tied to evasion of U.S. export controls:
Purchases under a letter of credit that are consigned to the issuing bank, not to the actual end-user. In addition, supporting documents, such as a commercial invoice, do not list the actual end-user.
Transactions involving entities with little to no web presence, such as a website or a domain-based email account.
A customer lacks or refuses to provide details to banks, shippers, or third parties, including details about end-users, intended end-use(s), or company ownership.
Transactions involving customers with phone numbers with country codes that do not match the destination country.
Parties to transactions listed as ultimate consignees or listed in the “consign to” field appear to be mail centers, trading companies, or logistics companies.
The item (commodity, software or technology) does not fit the purchaser’s line of business.
The customer’s name or its address is similar to one of the parties on a proscribed parties list, such as the BIS Lists of Parties of Concern (e.g., Entity List, Unverified List, Denied Persons List), U.S. Treasury’s List of Specially Designated Nationals and Blocked Persons (SDN List), or U.S. State Department’s Statutorily Debarred Parties List. Special attention should be paid to the basis for listing on the Entity List or SDN List, as linkages to weapons of mass destruction programs or military-intelligence end-users or end-uses implicate broader controls regardless of whether an item is subject to the Export Administration Regulations (EAR).
Transactions involve a purported civil end-user, but basic research indicates the address is a military facility or co-located with military facilities in a country of concern.
Transactions involving companies that are physically co-located, or have shared ownership, with an entity on the Entity List or the SDN List.
Transactions that use open accounts/open lines of credit when the payment services are conducted in conjunction with known transshipment jurisdictions and/or the products listed in payment memos align with those identified by BIS as a disruptive technology or included on the Commerce Control List (CCL).
The customer is significantly overpaying for an item based on known market prices.
Transactions involve a last-minute change in payment routing that was previously scheduled from a country of concern but now routed through a different country or company.
Transactions involve payments being made from entities located at potential transshipment points or involve atypical shipping routes to reach a destination.
No single financial red flag is necessarily indicative of illicit or suspicious activity. Accordingly, previously issued red flags and all of a transaction’s surrounding facts and circumstances should be considered when determining whether a specific transaction is suspicious or associated with potential export control evasion.
Click to read the full joint notice FinCEN Notice FIN-2023-NTC2.
For assistance, please contact me via my contact page or at elizabeth@elizabethmcmorrowlaw.com.