The Department of Treasury, Department of Commerce, and Department of Justice, issued a recent compliance note to companies whose businesses may involve third-parties seeking to evade Russian sanctions and export restrictions. The document, issued on March 2, 2023, was a call to action for companies to remain vigilant and bolster their compliance programs, or else face potential penalties for complacency and ignoring red flag behavior.
The guidance included a list of common tactics that third-parties use to evade sanctions and export controls. Some examples include:
- Use of shell companies to obscure ownership or source of funds
- Last minute changes to shipping instructions
- Changes in shipments or payments that were previously scheduled for
Russia or Belarus
- Use of residential addresses or small commercial store fronts for large, international businesses
- Reluctance to share end-user information or failure to complete end-user forms
- A purchaser declining customary installation, training, or maintenance of purchased item
These examples of “suspicious” and concerning activities are not new behaviors in the world of trade business. While, strictly speaking, nothing in the list is illegal, failure to address these warning signs would be an aggravating factor in the eyes of the relevant federal agencies. This announcement, which highlights a task force designed to focus on enablers and not just the enabled violators, is a reminder and warning to companies working in or close to restricted markers and transactions. Companies who suspect evasion within their business stream are encouraged to report bad actors or voluntarily self-disclose potential company violations.
Awareness of the issue and implementation of proper training and compliance programs is preferred over inadvertent violations. Best practices include screening current and new customers, intermediaries, and counterparts; conducting risk assessment, testing and auditing; and assuring management commitment to compliance, including incentivizing through appropriate compensation.
Companies are reminded that ignorance of the law, failure to follow best practices, and turning a blind eye to violations could lead to regulatory action, heavy fines, or criminal investigation.
For more information on effective compliance programs, or if you have any questions or concerns regarding the above information, please contact James A. Amyx firstname.lastname@example.org; Matthew S. Cummins email@example.com; or Lawrence W. Hanson firstname.lastname@example.org.