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FinCEN releases new Russian sanction evasion trends

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To enhance the fight against sanctions violations, the US Financial Crimes Enforcement Network (FinCEN) has announced a Financial Trend Analysis (FTA) highlighting critical trends for Russian export controls sanctions evasion. The patterns came from Bank Secrecy Act (BSA) suspicious activity reports (SARs) US depository institutions submitted in response to joint alerts issued by FinCEN and the Bureau of Industry and Security (BIS).

“Our partnership with FinCEN has illuminated Russian efforts to evade our export controls through the receipt of targeted … SARs … from financial institutions,” explained Matthew S. Axelrod, Assistant Secretary of Commerce for Export Enforcement.

The ongoing fight against sanctions violations

US authorities implemented sanctions following the Russian invasion of Ukraine in 2022. Between February 2022 and 2023, the US Office of Foreign Assets Control (OFAC) put more than 2,500 targets on its Specially Designated Nationals and Blocked Persons (SDN) List. 

It was in this context that FinCEN and BIS partnered to issue two alerts in 2022 and 2023, asking firms to increase their vigilance against Russian sanctions evasion activity. The alerts contained key sanctions evasion red flags. In response, hundreds of firms submitted SARs revealing activity worth close to $1 billion. The reports helped galvanize investigations and support enforcement, but they also provided valuable insights for teams monitoring Russia-related activity. FinCEN’s summary of the most important trends revealed in those SARs should enhance ongoing anti-evasion collaboration between US authorities and financial institutions.

Emerging sanctions evasion trends

The FTA emphasizes several important trends in Russian sanctions evasion attempts. The trends listed in the report fall into four categories:

  1. The use of intermediaries and direct supply – Reported activity showed that US-based companies in industries capable of Russian military, intelligence, and industrial support had transferred goods to Russian end-users in similar industries. These transfers occurred directly and through intermediaries in Asia, the Middle East, Europe, and the UK. The intermediaries often used transshipment tactics, transferring the goods through third countries to Russia.
  2. The role of the US, China, and Hong Kong in supplying Russian users – In the 333 reports filed, the United States was mentioned as a subject country 976 times. Russia was mentioned 322 times, with China and Hong Kong receiving 130 and 126 references as suspicious activity subjects respectively. According to FinCEN, entities in these countries, as well as Turkey and the United Arab Emirates (UAE) have been involved in trading potentially sensitive goods with or on behalf of Russia.
  3. The role of the electronic industry in export control evasion – Most companies implicated in the reports were multijurisdictional and involved in the electronics sector, both in the US and abroad. These included manufacturers or sellers of microelectronic components, electromechanical instrumentation, and imaging technology.
  4. The involvement of the industrial machinery industry in supporting Russia – These additional companies supplied gas compressors, welding equipment, precision tungsten rods, and other related goods.

How firms can respond

Given the sensitive nature of Russian sanctions and the rise in evasion attempts, it is crucial that firms respond to US authorities’ invitations to greater vigilance and collaboration. This priority goes well beyond compliance to encompass national and international security. Firms should comprehensively study the joint alerts issued by FinCEN and BIS, which detail important red flags to look out for during ongoing customer due diligence (CDD). They should also study the most recent FTA, which explains the above trends in more detail. Armed with this understanding, firms can then reevaluate their unique risks and focus their CDD efforts on the areas of greatest vulnerability.

Detailed SAR filing instructions can be found at the bottom of both alert documents.

Automated Sanctions Screening: A Guide for Compliance Professionals

Learn how automated technology can help firms mitigate sanctions evasion attempts.

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Originally published 15 September 2023, updated 09 February 2024

Disclaimer: This is for general information only. The information presented does not constitute legal advice. ComplyAdvantage accepts no responsibility for any information contained herein and disclaims and excludes any liability in respect of the contents or for action taken based on this information.

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