Purchases under letters of credit (L/Cs) that are consigned to the issuing bank are amongst several red flags listed in new suspicious activity reporting (SAR) guidance to support US financial institutions in reporting potential efforts to evade US export controls.

The guidance issued jointly by the US Bureau of Industry and Security and the Financial Crimes Enforcement Network (FinCEN) also introduces a new SAR key term, 'FIN-2023-GLOBALEXPORT', which US financial institutions should reference when reporting suspicious activity to FinCEN.

The new SAR key term essentially mirrors a similar one, "FIN-2022- RUSSIABIS", that still applies to and should still be used for reporting potential Russia-related export control evasion.

End-user should be named

Red flags relating to export control evasion include purchases under an L/C that are consigned to the issuing bank, not to the actual end user.

In addition, supporting documents, such as a commercial invoice, that do not list the actual end-user should also be treated as potentially suspicious.

Additional red flags

Other red flags include transactions involving entities with little to no web presence, such as a website or a domain-based email account.

A customer that lacks or refuses to provide details to banks, shippers, or third parties, including details about end-users, intended end-use(s), or company ownership may also be considered potentially suspicious.

Conflicting information

Transactions involving customers with phone numbers with country codes that do not match the destination country as well as items that do not fit the purchaser's line of business may also raise a red flag.

So may transactions involving a last-minute change in payment routing or a customer that seems to be significantly overpaying for an item based on known market prices

The joint notice, FinCEN and the US Department of Commerce's Bureau of Industry and Security Announce New Reporting Key Term and Highlight Red Flags Relating to Global Evasion of US Export Controls, can be found here.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.