Financial Crime World

U.S. Cracks Down on Sanctions Evasion: New Measures Target Russian Financial Institutions and Export Controls

Date: May 25, 2023 - Eastern Daylight Time

The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) has introduced significant changes to its Russia- and Belarus-related export controls, adding 89 entities to its Entity List in an effort to tighten the noose on sanctions evasion.

New Measures and General License

  • The BIS has issued a general license that authorizes certain transactions related to the divestment or transfer of debt or equity of six newly-designated Russian financial institutions. This license, known as General License 61, is effective until May 25, 2023, at 12:01 a.m. Eastern Daylight Time.
  • The Departments of Commerce, Treasury, and Justice have issued a joint statement warning against the use of third-party intermediaries to evade sanctions and export controls targeting Russia.

Joint Statement on Third-Party Intermediaries

The joint statement highlights the tactics used by entities to disguise their involvement in sanctioned activities. It emphasizes the importance of an effective compliance program that minimizes the risk of evasion, outlining 13 common red flags that can indicate a third-party intermediary is engaging in sanctions or export control evasion:

  • Red Flags:
    • Unusual payment methods or transactions
    • Lack of transparency in business dealings
    • Inconsistencies in financial records
    • Failure to disclose beneficial ownership
    • Unusual business practices

The statement also recommends best practices for mitigating risk, including:

  • Screening customers and counterparties through the Consolidated Screening List
  • Conducting risk-based due diligence
  • Implementing robust anti-money laundering (AML) and know-your-customer (KYC) programs
  • Deputy Attorney General Lisa Monaco announced at the American Bar Association National Institute on White Collar Crime that the Departments of Justice, Commerce, and Treasury will issue joint advisories similar to those published jointly with the Securities and Exchange Commission (SEC) regarding Foreign Corrupt Practice Act guidance.
  • The Department of Justice is investing in resources to combat corporate crime in the national security space, including:
    • Adding 25 new prosecutors in the National Security Division (NSD)
    • Appointing a Chief Counsel for Corporate Enforcement
    • Issuing routine joint statements regarding national security-related enforcement compliance

Conclusion

The measures signal a renewed collaboration across U.S. agencies to hold accountable those companies that fail to comply with sanctions and export controls, underscoring the need for companies – with or without a U.S. presence – to prioritize compliance in the export controls and sanctions arena.