US Authorities Warn Trade Finance Lenders of Sanctioned Goods Exported to Russia
US authorities have recently warned trade finance lenders that they may be unknowingly facilitating exports of sanctioned goods to Russia, with funds potentially moving through the US financial system. The Kremlin’s intelligence service has reportedly been tasked with finding ways to circumvent sanctions and export controls to replace military equipment damaged in its war with Ukraine.
According to a joint alert from the Financial Crimes Enforcement Network (FinCEN) and the Bureau of Industry and Security, Russia is using covert procurement agents and front companies to orchestrate purchases of banned goods from legitimate suppliers, which receive payment through non-Russian bank accounts. Buyers may transmit funds through a US correspondent bank account to route funds back to the supplier, while the front company will then route the goods to Russia, often through permissive jurisdictions such as known transshipment points.
Procurement agents are also creating shell and transshipment companies that order banned goods from multiple similar suppliers, reducing the value of payments to any single seller with the intent to attract less attention than would large-volume transactions.
The alert targets all financial institutions involved in trade, including those providing export credit facilities, working capital loans, factoring solutions, and payment processing, as well as companies providing or making insurance-related payments. These banks should deploy appropriate risk-mitigation measures consistent with the Bank Secrecy Act, including carrying out thorough customer due diligence and beneficial ownership checks.
The alert identifies nine HS codes, corresponding to various electronics or machinery-related products, that require a license to be exported to Russia, Belarus, Crimea, or Iran. Financial institutions that encounter one of those nine codes are strongly encouraged to conduct due diligence to identify possible third-party intermediaries and attempts at evasion of US export controls.
The crackdown on Russian attempts to evade export controls follows findings by the Financial Times that more than $1bn of exports from the EU effectively disappeared in transit to countries with economic or trade ties to Russia. The alert suggests that red flags include a customer that does not provide details on the intended end use of goods being imported or on company ownership, or a buyer significantly overpaying based on commodity market prices.
In conclusion, financial institutions involved in trade must be vigilant and carry out thorough customer due diligence and beneficial ownership checks to prevent any unwitting facilitation of exports of sanctioned goods to Russia. The US authorities have warned that enforcement action will be taken against companies found to have breached rules on exports to Russia.
Original Source: https://www.gtreview.com/news/americas/us-government-warns-trade-finance-lenders-over-breaches-of-russia-export-controls/
