KYC/AML, Due Diligence, Enterprise Risk on entities from Russia

19 years of hands-on experience in International Business development ( Germany, Italy, Russia, ex-USSR countries, the U.S.) Global Sanctions Compliance, EDD Investigations and End-User control.

     SA provides guidance on export controls, sanctions and international trade rules and conducts  Due Diligence, audits for the U.S., European & Russian companies of sanctions in export-import transactions, develops and implements policies, processes and procedures to ensure compliance with sanctions and international trade rules and regulatory compliance with the U.S. and European Union export rules.

Main expertise: KYC & Due Diligence for Russia, CIS/former Soviet Republics

      Since 2001, we worked for or collaborated with such leading European companies in their industries as Liebherr Holding AG, Bauer Maschinen GmbH, Soilmec Spa, Casagrande Spa, Klemm Bohrtechnik GmbH and others. (deep foundation, construction drilling and tunneling equipment, mining equipment and supply of the oil and gas industry)

     Profound international trade experience, especially in transactions with Russia, CIS/former Soviet Republics, Eastern Europe, Western Europe (Germany, Italy), Middle East (UAE)

BIS has developed a list of “red flags”, or warning signs, intended to discover possible violations of the EAR.

Also, BIS has “Know Your Customer” guidance.

SA helps the US exporters to implement these rules

Red Flag Indicators

Things to Look for in Export Transactions

Use this as a checklist to discover possible violations of the Export Administration Regulations. You may also wish to visit our page, "Know Your Customer Guidance."

  • The customer or its address is similar to one of the parties found on the Commerce Department's [BIS'] list of denied persons.

  • The customer or purchasing agent is reluctant to offer information about the end-use of the item.

  • The product's capabilities do not fit the buyer's line of business, such as an order for sophisticated computers for a small bakery.

  • The item ordered is incompatible with the technical level of the country to which it is being shipped, such as semiconductor manufacturing equipment being shipped to a country that has no electronics industry.

  • The customer is willing to pay cash for a very expensive item when the terms of sale would normally call for financing.

  • The customer has little or no business background.

  • The customer is unfamiliar with the product's performance characteristics but still wants the product.

  • Routine installation, training, or maintenance services are declined by the customer.

  • Delivery dates are vague, or deliveries are planned for out of the way destinations.

  • A freight forwarding firm is listed as the product's final destination.

  • The shipping route is abnormal for the product and destination.

  • Packaging is inconsistent with the stated method of shipment or destination.

  • When questioned, the buyer is evasive and especially unclear about whether the purchased product is for domestic use, for export, or for reexport.

https://www.bis.doc.gov/index.php/all-articles/23-compliance-a-training/47-know-your-customer-guidance

Know Your Customer Guidance

Certain provisions in the Export Administration Regulations (EAR) require an exporter to submit an individual validated license application if the exporter "knows" that an export that is otherwise exempt from the validated licensing requirements is for end-uses involving nuclear, chemical, and biological weapons (CBW), or related missile delivery systems, in named destinations listed in the EAR.

BIS has issued the following guidance on how individuals and firms should act under this knowledge standard. This guidance does not change or revise the EAR.

Decide whether there are "Red Flags"

Take into account any abnormal circumstances in a transaction that indicate that the export may be destined for an inappropriate end-use, end-user, or destination. Such circumstances are referred to as "Red Flags." Included among examples of red flags are orders for items which are inconsistent with the needs of the purchaser, a customer's declining installation and testing when included in the sales price or when normally requested, or requests for equipment configurations which are incompatible with the stated destination (e.g.--120 volts in a country with a standard of 220 volts). BIS has developed lists of such "Red Flags" which are not all-inclusive but are intended to illustrate the types of circumstances that should cause reasonable suspicion that a transaction will violate the EAR. You should also review U.S. Government Lists to check to identify parties prohibited or restricted from participating in U.S. export transactions as well as BIS's Unverified List of parties whose bona fides BIS has been unable to determine in end-use checks.

If there are "Red Flags"

If there are no "Red Flags" in the information that comes to your firm, you should be able to proceed with a transaction in reliance on information you have received. That is, absent "Red Flags" (or an express requirement in the EAR), there is no affirmative duty upon exporters to inquire, verify, or otherwise "go behind" the customer's representations. However, when "Red Flags" are raised in the information that comes to your firm, you have a duty to exercise due diligence to inquire regarding the suspicious circumstances and ensure appropriate end-use, end-user, or ultimate country of destination in the transactions you propose to engage in.

The duty to check out "Red Flags" is not confined to transactions involving the "know," "reason to know," or "is informed" sections of the EAR. Parties engaging in export transactions are required by the EAR to obtain documentary evidence concerning the transaction; misrepresentation or concealment of material facts is prohibited, both in the licensing process and in all export control documents. You can rely upon representations from your customer and repeat them in the documents you file unless "Red Flags" oblige you to take verification steps.

Do not self-blind

Do not cut off the flow of information that comes to your firm in the normal course of business. For example, do not instruct the sales force to tell potential customers to refrain from discussing the actual end-use, end-user and ultimate country of destination for the product your firm is seeking to sell. Do not put on blinders that prevent the learning of relevant information. An affirmative policy of steps to avoid "bad" information would not insulate a company from liability, and it would usually be considered an aggravating factor in an enforcement proceeding.

Employees need to know how to handle "Red Flags." Knowledge possessed by an employee of a company can be imputed to a firm so as to make the firm liable for a violation. This makes it important for firms to establish clear policies and effective compliance procedures to ensure that such knowledge about transactions can be evaluated by responsible senior officials. Failure to do so could be regarded as a form of self-blinding.

Reevaluate all the information after the inquiry

The purpose of this inquiry and reevaluation is to determine whether the "Red Flags" can be explained or justified so as to evidence the bona fides of the party and the legitimacy of the transaction. If they can, you may proceed with the transaction. If the "Red Flags" cannot be explained or justified and you proceed, you run the risk of having had "knowledge" that would make your action a violation of the EAR.