US Government Identifies Red Flags for Detecting Sanctions Evaders
March 27, 2023 Leave a comment
The Departments of Commerce, State and Treasury have issued a joint memo warning the community about sanctions evasion and identifying “red flags” that should result in additional scrutiny.
The Compliance Note is specifically published to identify common red flags that can indicate a third-party intermediary may be engaged in efforts to evade U.S. sanctions or U.S. export controls. Red flags are fact patterns that suggest a transaction may violate the U.S. export regulations. When red flags are encountered, it is important to perform additional inquiry in order to identify whether the red flag indicates a reasonable suspicion of a violation, or whether the apparent issue can be cleared because inquiry shows that the fact pattern does not – in fact – reflect a violation..
The following export transaction red flags are identified in the text and republished verbatim:
Common red flags can indicate that a third-party intermediary may be engaged in efforts to evade sanctions or export controls, including the following:
- Use of corporate vehicles (i.e., legal entities, such as shell companies, and legal arrangements) to obscure (i) ownership, (ii) source of funds, or (iii) countries involved, particularly sanctioned jurisdictions;
- A customer’s reluctance to share information about the end use of a product, including reluctance to complete an end-user form;
- Use of shell companies to conduct international wire transfers, often involving financial institutions in jurisdictions distinct from company registration;
- Declining customary installation, training, or maintenance of the purchased item(s);
- IP addresses that do not correspond to a customer’s reported location data;
- Last-minute changes to shipping instructions that appear contrary to customer history or business practices;
- Payment coming from a third-party country or business not listed on the End-User Statement3 or other applicable end-user form;
- Use of personal email accounts instead of company email addresses
- Operation of complex and/or international businesses using residential addresses or addresses common to multiple closely-held corporate entities;
- Changes to standard letters of engagement that obscure the ultimate customer;
- Transactions involving a change in shipments or payments that were previously scheduled for Russia or Belarus;
- Transactions involving entities with little or no web presence; or
- Routing purchases through certain transshipment points commonly used to illegally redirect restricted items to Russia or Belarus. Such locations may include China (including Hong Kong and Macau) and jurisdictions close to Russia, including Armenia, Turkey, and Uzbekistan.
Remember that these are general transactional red flags published by the US government, so their applicability to aviation may vary. Further, this is not an exhaustive list and any fact pattern that suggests a reasonable possibility of export regulation violation should be treated as a red flag (even if it is not on this list).
The Compliance Note also suggests using the consolidated screening list and the Treasury Department SDN list as compliance tools., “as well as conducting risk-based due diligence on customers, intermediaries, and counter-parties.”
https://www.aviationsuppliers.org/asa-afra-conferenceWe have seen increased reliance on end use and end user information to clarify where the parts are intended to be installed, as a means of protecting from unwanted diversion. I continue to work with companies on developing compliance systems to help ensure that the appropriate scrutiny is applied to export transactions. We will be leading export training classes during the ASA/AFRA Annual Conference as well as a discussion of tips and tools for export inquiries during the ASA Quality Committee meeting. I hope to see everyone at ASA’s 30th anniversary Annual Conference on June 4-6 in Orlando, FL!
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