BIS Issues Guidance to Financial Institutions on Best Practices for Compliance with the Export Administration Regulations
The Department of Commerce’s Bureau of Industry and Security (BIS) recently published guidance for financial institutions containing several recommendations for complying with the Export Administration Regulations (EAR).
The guidance provides recommendations on steps financial institutions can take to minimize the likelihood of EAR violations. The recommendations focus on three key areas: due diligence best practices, reviewing transactions for red flags, and real-time screening.
Due Diligence Best Practices
The guidance recommends that financial institutions incorporate EAR related due diligence into their compliance and risk management and compliance processes. Due diligence should be conducted both before onboarding a new customer and as part of regular due diligence thereafter.
Specifically, BIS recommends that financial institutions:
- Review customers against lists of persons subject to BIS’s end-user restrictions
- Review customers – and, where appropriate, customers’ customers – against lists of entities that have shipped Common High Priority List (CHPL) items to Russia since 2023
- Ask a customer to certify that it has controls in place to comply with the EAR if the customer is engaged in the export, reexport or transfer of items subject to the EAR and is on a restricted-party list
Review Transactions for Red Flags
The guidance recommends that financial institutions review transactions on an ongoing basis for red flags:
- Purchases under a letter of credit that are consigned to the issuing bank, not to the actual end user.
- Transactions involving entities with little to no web presence, such as a website or a domain based email account.
- A customer lacks or refuses to […]
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