BIS crosses the banking veil, but needs to do better in identifying high risk goods
Updated: Aug 23, 2022
BIS recently crossed the banking veil by issuing a joint advisory, alongside FinCEN, on Russian attempts to circumvent export controls. We translated their high risk goods, identified as ECCN codes, so you don't have to.
Last Tuesday, BIS crossed the banking veil and issued a joint advisory with FinCEN on identifying Russia-related export control violations. This is a step in the right direction! We had previously raised both the need and how BIS could better use financial intelligence when identifying smuggling networks. The key takeaways include: - BIS confirms that financial institutions have a responsibility to analyze trade finance transactions and certain wire payments for an illicit export controls nexus. - The agency provided actionable red flags, but some of the juiciest information is actually embedded in the footnotes, such as jurisdictions of concern and certain keywords that might trigger an investigation. - The advisory also contains a table of goods for bank's to be on the lookout for when processing transactions. I'll address this below, but we are advising clients to focus on non-routine transactions involving shipments of semiconductors, aircraft/engines/avionics, and marine equipment. However, the agency is still a novice when dealing with financial institutions and will need to follow up this advisory with both improved communication, as well as a potential revamp of their own policies. For starters, very few FCC officers are steeped in the export classification regulations used to determine if a product is a dual-use good. BIS doesn't seem to realize this and provided a table with priority Export Control and Classification Numbers ("ECCN") and a brief description, but these descriptions didn't always match up. For example, the agency tells banks to look out for "Testing Equipment" under the ECCN 3B992, but a review of BIS' regs shows that the ECCN specifically refers to testing equipment for semiconductors. It's this context that compliance officers need, and the agency needs to do better. We've attached a table of the ACTUAL description of each ECCN and what it addresses. This will be in our July guidance, but I felt it would be silly to withhold it until then.