The Bureau of Industry and Security (BIS) of the U.S. Department of Commerce has declared additional export control restrictions on the Russian Federation, bolstering international efforts to thwart Russia’s aggression against Ukraine. In an official release on May 19, 2023, BIS announced the addition of 71 entities to its Entity List, which enumerates certain foreign entities subject to specific licensing requirements for the export, reexport, and/or transfer of specified items.
In a concerted initiative, the BIS and the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued a supplementary joint alert on the same day. They urged financial institutions to heighten vigilance concerning Russian attempts to bypass U.S. export controls. This supplementary alert provides additional data about the new BIS export control restrictions concerning Russia, while fortifying existing U.S. government initiatives aimed at obstructing the Russian Federation’s access to technology and goods vital for its military and defense industrial base.
Further developments were recorded on May 31, 2023, when the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced General License 69 (GL 69), permitting “Certain Debt Securities Servicing Transactions Involving International Investment Bank” in relation to the Russian Harmful Foreign Activities Sanctions Regulations (“RuHSR”).
BIS Export Control Restrictions
In its ongoing commitment to restrict and impede the Russian Federation’s access to vital technology and goods required for its military and defense industrial base in the context of the conflict with Ukraine, the BIS has introduced a comprehensive export control rule. This rule encompasses significant measures aimed at curbing the procurement and replenishment of necessary resources.
Additionally, as part of this strategic approach, the BIS has expanded the Entity List by adding 71 entities. By doing so, the BIS aims to heighten control and oversight over specific foreign persons, including businesses, research institutions, government and private organizations, individuals, and other legal entities. These entities now face distinct license requirements for the export, reexport, and/or transfer of specified items, further contributing to the overall objective of constraining and preventing the Russian Federation’s access to critical resources.
Through these decisive actions, the BIS continues to play an active role in safeguarding and ensuring the stability of the region by implementing stringent export control measures to address the ongoing military and defense challenges.
Enhanced Joint Alert by FinCEN and BIS: Strengthening Export Control Compliance Measures
In a collaborative effort to address the new export control restrictions imposed by the BIS on Russia, FinCEN and the BIS have released a supplementary joint alert. This alert serves multiple purposes, providing valuable guidance to U.S. financial institutions while enhancing their ability to detect and prevent export control evasion.
The joint alert offers additional insights into evasion typologies and equips financial institutions with comprehensive guidance in identifying suspicious transactions. It also highlights nine high-priority Harmonized System codes that can assist in enhancing customer due diligence procedures.
Furthermore, FinCEN and the BIS have identified several transactional and behavioral red flag scenarios that may indicate potential export control evasion. By outlining these scenarios, financial institutions gain a valuable resource for recognizing and reporting suspicious activities.
It is essential to note that financial institutions must remain mindful of their Bank Secrecy Act reporting obligations. FinCEN emphasizes the continued use of the existing Suspicious Activity Report (SAR) code “FIN 2022-RUSSIABIS” when submitting SARs related to Russian export control evasion.
This collaborative effort between FinCEN and the BIS aims to bolster the compliance capabilities of financial institutions, foster transparency, and deter illicit activities in the realm of export controls.
Montague Law brings you the latest information on Russia-related sanctions, including the recent update on OFAC General License 69 (GL 69). This license enables certain transactions regarding debt securities issued by the International Investment Bank (IIB) before April 12, 2023.
Under GL 69, interest and principal payments on IIB debt securities can be processed until June 30, 2023. However, it is important to note that these payments must not be directed to individuals located in the Russian Federation. Payments intended for the Russian Federation or blocked persons must be deposited into a blocked account in compliance with the regulations.
In addition, Montague Law highlights that U.S. financial institutions are now authorized to unblock previously blocked interest or principal payments on IIB debt securities. This authorization applies to payments that were blocked on or after April 12, 2023, but before May 31, 2023, for debt securities issued by IIB prior to April 12, 2023. It is crucial to ensure that unblocked funds are used solely for transactions authorized under GL 69. Financial institutions unblocking such assets are required to file an unblocking report with OFAC to demonstrate compliance with the regulations.
