A Guide to Anti-Money Laundering for Crypto Firms

What is the BIS Entity List and How Does it Apply Globally?

Regulation Knowledge & Training

The Bureau of Industry and Security (BIS) list, also known as the ‘BIS Entity List’, sets out the specific foreign persons (including businesses, research institutions, government organizations, and other legal entities) that are subject to US government licensing and sanctions requirements. In more detail, the US BIS Entity List concerns persons that are subject to Export Administration Regulations (EAR) which primarily regulate dual-use items (those that can be used for commercial or civil use but can also be used for terrorism, military, or weapons of mass destruction applications).
American flag and building: Us Bis entity listOperating under the authority of the US Department of Commerce, BIS regularly updates the Entity List: persons may be subject to EAR if they are involved in activities that are sanctioned by the US Department of State or that are contrary to the United States’ national security or foreign policy interests.

When Do I Need to Check the BIS Entity List?

Firms must check the US BIS Entity List for every transaction involving an export to a foreign person.

Exporters and re-exporters are responsible for conducting proper due diligence on any applicable restrictions or licensing requirements for their exports under threat of severe financial and criminal penalties. Fines for BIS Entity List compliance violations can reach up to $250,00 dollars or twice the amount of the offending transaction (whichever is greater). Punishments may even include a denial of export privileges and can be applied even in cases of inadvertent violations.

According to its annual report, in 2019 BIS levied over $19,000,000 in civil and criminal penalties for export violations and convicted 36 individuals and companies for a combined 1,038 months of imprisonment.

How Do I Check Export Licensing Requirements?

The process of checking export licensing requirements and restrictions is complicated. Exports may be restricted based on:

  • The nature of the export: An export’s technical specifications or its potential end-use may mean that export restrictions are applicable
  • The export’s destination: Specific persons, businesses and countries may be subject to restrictions.
  • A combination of factors: In some circumstances, combinations of product and destination factors may trigger restrictions. 

For example, under EAR, the Department of Commerce may require an export license for specific items found on its Commerce Control List (CCL). However, items that aren’t on the CCL may still be subject to EAR if they are being exported to a restricted person, entity, or country (designated on the BIS Entity List). Similarly, US BIS Entity List requirements for a specific entity may vary by export depending on an item’s end-use.

The export licensing compliance process may be complicated further when additional restrictions are taken into account. Multiple regulations, such as the Arms Export Control Act and the International Traffic In Arms Regulations, may apply to particular exports while these regulations are, in turn, administered by various agencies and departments, including the Department of State, the Office of Foreign Assets Control (OFAC), the Nuclear Regulatory Commission, and the Food and Drug Administration (FDA), which must be consulted for every transaction.

Get Started Now

Ensure Your Organization Remains Compliant with our Sanction Screening Software

Discover our screening tools to ensure your organization remains compliant.

Find out More

When Do the BIS Entity List Restrictions Apply?

Who does the BIS Entity List Cover?

The BIS Entity List designates the entities and countries that are subject to restrictions and licensing requirements for exports from the US.

An item does not necessarily have to leave the country for the purposes of Entity List compliance: items that are transferred to a foreign person located within the US (a ‘deemed person’) are subject to BIS restrictions. Restrictions also apply to branch offices or divisions of a listed entity, although a legally separate subsidiary of a covered entity is not restricted so long as the transaction does not result in the covered parent entity becoming the end user.

What types of transactions are considered ‘exports’?

The BIS Entity List covers any export, re-export, or in-country transfer (i.e. a change in end use or end user within the same foreign country) of EAR controlled items, regardless of payment (gifts are covered entities) or personal relationship (even close friends are covered entities).

Exports do not need to be tangible items and do not need to be commercially shipped. Sending something via email or telephone or hand-carrying something on a flight may fall under the definition of export and trigger licensing requirements. Even permitting a foreign person to visually inspect a document may be considered an export and be subject to BIS restrictions.

What is covered by the List?

An ‘item’ doesn’t have to be physical equipment or hardware to be covered by the BIS Entity List. EAR criteria broadly define ‘item’ to include technology, software, schematics, source code, and other data. Similarly, Entity List restrictions apply regardless of where the item was originally manufactured.

How Does the BIS Entity List Work?

If a product, service, or technology falls with the scope of EAR, exporters should begin the compliance process by checking the Commerce Control List (CCL): listed items will have a corresponding Export Control Classification Number (ECCN) that denotes the reason for its restriction. Items that do not have an ECCN will be designated EAR99.

EAR99 items: The EAR99 classification is generally assigned to low technology or low risk items that do not require an export license. However, the export of EAR99 items may be prohibited or require an export license depending on their end use, end user, or their destination country. Accordingly, exporters must check the BIS Entity List even if an export item is not included on the CCL, in order to establish whether the receiving entity or person triggers a licensing requirement.

Non-BIS restrictions: It is important to remember that non-BIS export restrictions may also apply to exports. Non-BIS restrictions may be imposed by OFAC which enforces sanctions against specific countries (such as Cuba, Iran, North Korea, and Syria), and the State Department which restricts the export of defense articles and services under the International Traffic in Arms Regulations (ITAR).

The Department of Trade’s Consolidated Screening List contains a comprehensive list of most export restrictions, including the BIS Entity List.

Do I Need an Export Screening Tool?

It is the responsibility of exporters to determine whether a specific transaction requires an export license and to conduct suitable due diligence on the export’s intended end use (since restrictions will vary based on end use).

BIS recommends that exporters always screen parties against the Entity List as part of their pre-transaction due diligence process. Record-keeping is a crucial component of due diligence and it is important that firms implement clear policies, processes, and systems, to document their export licensing due-diligence activities.

Given the vast amounts of data required for the BIS due diligence process, manual screening is often unfeasible and can lead to costly human errors. Similarly, the shared responsibility of due diligence activities among different business units often leads to duplicate efforts, information silos, and missed risk factors.

Accordingly, firms should seek to integrate a suitable export screening tool to meet their BIS Entity List compliance obligations. Some businesses find it helpful to use an automated screening tool to conduct their export licensing checks: automated screening adds speed, efficiency, and accuracy advantages to the compliance process, and can help firms adapt to changes to the BIS Entity List as listings are added and withdrawn.

Identify special interest persons now

Discover how our clients have made compliance painless with our software.

Get Started

Originally published March 16, 2021, updated May 4, 2022

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.

Copyright © 2022 IVXS UK Limited (trading as ComplyAdvantage).