On March 2, 2023, the Departments of Commerce, Justice and the Treasury issued a joint Compliance Note cautioning financial institutions and multinational companies subject to U.S. jurisdiction to “be vigilant against efforts by individuals or entities to evade sanctions and export control laws.” The Compliance Note emphasizes the “unprecedented scope and scale” of sanctions against Russia following its invasion of Ukraine and indicates that “malign actors” continue efforts to evade Russia-related sanctions and export controls, stating that “One of the most common tactics is the use of third-party intermediaries or transshipment points to circumvent restrictions, disguise the involvement of Specially Designated Nationals and Blocked Persons (SDNs) or parties on the Entity List in transactions, and obscure the true identities of Russian end users.” The joint Compliance Note highlights some of these evasive tactics in order to assist efforts to identify warning signs and to implement appropriate compliance procedures.
The Compliance Note provides guidance on certain methods and tools to identify evasive tactics, including having an updated, risk-based compliance program involving management commitment, risk assessment, internal controls, testing, auditing and training. It also provides a list of common red flag indicators for evasion (see also BIS’s Red Flag Indicators and Know Your Customer Guidance), and recommends that companies refer to BIS and OFAC enforcement action summaries to review tactics that may be used to evade detection.
The Compliance Note concludes with a reminder that the three agencies will continue to undertake both civil and criminal enforcement actions against those entities and individuals who engage in efforts to evade Russian-related sanctions and export control laws. Finally, the Compliance Note provides examples of such actions, and describes some of the tactics that have been used and states that the U.S. government “will not hesitate to pursue criminal prosecutions, administrative enforcement actions, or additional designations where the circumstances so warrant.”