On June 28, 2022, the Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) and the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) issued a Joint Alert urging financial institutions to be vigilant against efforts by individuals or entities to evade BIS export controls implemented in connection with the Russian Federation’s further invasion of Ukraine. After providing an overview of recent BIS actions in response to Russia’s invasion of Ukraine, the Joint Alert identifies commodities that present “special concern because of their potential diversion to and end use by Russia and Belarus to further their military and defense capabilities,” all of which require a BIS license prior to export or reexport to Russia and Belarus.
The Joint Alert also provides guidance to financial institutions, “particularly banks but also credit card operators and foreign exchange dealers” that may provide services associated with international trade, such as providing financing or processing payments. Among other information, the Joint Alert provides a “select list of potential red flag indicators of export control evasion that may be relevant to financial institutions and other covered institutions or persons, including flags derived from recent BSA reporting.”
The Joint Alert was issued on the heels of a senior Biden Administration official’s announcement, at a background press call during President Biden’s visit to Germany, where the United States and G7 leaders announced that they will be taking further aggressive actions to “align and expand targeted” sanctions to restrict Russia’s access to services and economies that support Russia’s armament industrial base and technology sector. A White House Fact Sheet has identified the following measures that the United States Departments of Treasury and State are expected to take as part of this effort:
- Implementing blocking sanctions on major state-owned defense enterprises, defense research organizations, and “dozens of other defense-related entities and individuals”, as part of the effort to limit “Russia’s ability to replace the military equipment it has already lost during its brutal war against Ukraine.”
- Implementing blocking sanctions “against persons tied to aiding Russia’s evasion efforts”, as part of G7 Leaders’ commitment to “target efforts by those engaging in evasion and backfill activities.”
- Implementing blocking sanctions on “private military companies operating in Ukraine, Russian military units that have been credibly implicated in human rights abuses or violations of international humanitarian law in Ukraine, and Russia-installed senior officials in areas besieged or held by Russia’s forces, including ministers and mayors of contested cities.”
- Issuing a “determination to prohibit the import of new gold into the United States, which will prevent Russian participation in the formal gold market.”
In addition to these actions by the Departments of Treasury and State, the U.S. Department of Commerce is anticipated to add several companies to the Entity List, in its first action against companies “engaging in backfill activities in support of Russia.” Commerce and Treasury will “jointly issue an alert to financial institutions to aid in detecting potential violations of export controls.”
These efforts will add sanctions to hundreds of individuals and entities (in addition to the over 1,000 already sanctioned), target companies in several countries (in addition to the over 3000 Entity listings already in place), and impose tariffs on Russian products worth billions of dollars.