Archive for the ‘Compliance Programs and Procedures’ Category

Nov

30

Maybe There’s a Good Idea Lurking in Tom Fox’s Stealth Advertorial

Posted by at 4:44 pm on November 30, 2016
Category: BIS • Civil Penalties • Compliance Programs and Procedures • Criminal Penalties • DDTC • FCPA • OFAC

Internet Email by twitter.com/mattwi1s0n [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/75rLY [cropped and processed]

Over at the excellent FCPA Compliance & Ethics Blog, Tom Fox has a plug for email monitoring software disguised as a blog post.  He’s even doing a “webinar” with the software developers — completely free, of course —  presumably to push the sales of this product.

Notwithstanding what might not be his completely objective take on this software product, Fox raises a good issue that might warrant consideration for incorporation into your export compliance program.  I assume everyone reading my blog and this post is acutely aware that a robust compliance plan is the best insurance against getting taken to the cleaners by the DoJ and the export agencies after it is discovered that an employee in your Hamburg office has been shipping  your U.S. origin night vision to Iran.  But what does your compliance program do proactively to ferret out such problems?  Fox suggests that companies should consider periodic email sweeps for keywords

The concept is straightforward; at regular intervals you can sweep through your company email database for identified key words that can be flagged for further investigation, if required.

So, should you consider sweeping all emails for keywords such as “Iran” or “Syria”? What other keywords might help pinpoint export compliance problems? “Jail”? “Orange Jumpsuit”? “Export License,” as in “let’s avoid fussing with that stupid export license requirement”? Are there keywords that can identify times when employees say something like “Call me, since we shouldn’t put this in writing”?

While I think such an approach is a nice shiny bauble that can be dangled in front of prosecutors and enforcement agencies and therefore is worth considering, I also wonder whether such sweeps will actually be effective in detecting violations. First, in my experience, most of the problems come from sales employees outside the United States who don’t think U.S. laws should interfere with their commissions. Foreign privacy laws, particularly in the E.U., often pose barriers to rifling through foreign employees’ emails. Second, in my experience, employees, particularly those with mischief in their hearts, are much too savvy to talk openly in emails about their transshipment schemes. They almost always use code of some kind to conceal what they are up to. These employees and their code words are normally not clever enough to fool prosecutors, but those code words — like “the country we discussed” or “Middle Earth” — will easily evade keyword email sweeps.

Any thoughts on this? Share your experiences (anonymously if you wish) in the comments section.

Photo Credit: Internet Email by twitter.com/mattwi1s0n [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/75rLY [cropped and processed]. Copyright 2003 twitter.com/mattwi1s0n

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Copyright © 2016 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)
Aug

20

The Consolidated Screening List Isn’t

Posted by at 9:01 pm on August 20, 2014
Category: BIS • Compliance Programs and Procedures • DDTC • Debarred List • Denied Party List • Entity List • OFAC • Russia Sanctions • Sanctions • SDN List • Unverified List

PortShip by USDA (cropped) via https://www.flickr.com/photos/usdagov/9715983721 [CC BY 2.0 https://creativecommons.org/licenses/by/2.0/]The U.S. Government, over at export.gov, provides a so-called Consolidated Screening List, which you might think would be a one-stop shopping list for your screening needs, something that might be useful if you or your company does not subscribe to or implement one of the commercial screening solutions. Unfortunately, the Consolidated Screening List doesn’t consolidate all the lists you should review and has other significant limitations.

The good news is that the list now does include the Foreign Sanctions Evaders List, which was not included for some time after the list was adopted by Treasury back in February of this year. The description of the list still does not mention the FSE list, but the entries on that list have been quietly added.

However, two other Treasury Department lists are still not included. The relatively new Sectoral Sanctions Identifications List is missing as action. U.S. persons are forbidden from engaging certain transactions with entities on this list, including providing credit in excess of ninety days. Part of the reason for this is probably that the “consolidated” list is infrequently updated. The last update of the list was almost two months ago, on June 26, 2014.

In addition, the Palestinian Legislative Council List, adopted back in 2006, is not included. U.S. financial institutions must reject (not block) transactions with people on the PLC list.

Not only is the “consolidated” list not complete or consolidated, but also it is dangerous to rely on it alone for another significant reason. The search page for the list only retrieves literal matches and does not allow address searching. In addition to searching the consolidated list, you should also rely on OFAC’s sanction list search tool. That tool uses, fairly successfully, “fuzzy logic” to retrieve similarly spelled names. Because many of the names on the list are transliterated versions of Arabic names, meaning that there are many alternate spellings, the “fuzzy logic” will be somewhat more successful in identifying alternate spellings.

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Copyright © 2014 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)
Apr

8

The Best Question on Burma Sanctions Is Still Unanswered

Posted by at 6:28 pm on April 8, 2014
Category: Burma Sanctions • Compliance Programs and Procedures • Economic Sanctions • General • OFAC • SDN List • Zimbabwe Sanctions

By Bild von Stefan Grünig, CH-3752 Wimmis (de:Benutzer:Sgruenig)Sgruenig at de.wikipedia [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0/)], from Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ABurma06.jpg

OFAC announced last week that it issued additional Frequently Asked Questions and respective answers relating to what remain of U.S. sanctions against Burma.  None of the additional questions or answers is surprising or resolves an issue that is not otherwise answered by other OFAC guidance or applicable general licenses.

The questions and answers are, for the most part, a helpful recitation of the current landscape of sanctions involving Burma that summarize in one place the state of sanctions based on an assortment of scattered statutes, executive orders, regulations and licenses.  But one question stands out along with its non-responsive answer, in part, as follows:

What are the plans to update the SDN List for Burma?

Listings and any potential delistings under our Burma authorities will be pursued as appropriate to meet changing conditions in Burma.

The question itself has a colloquial quality to it as if the frequently asked question really put to OFAC has been along the lines of “What’s going on here?”

As other questions and answers describe, a number of banks remain on the SDN List but General License 19 authorizes U.S. persons to conduct most transactions with the banks.  In a similar situation about a year ago dealing with Zimbabwean banks, we posted about OFAC’s decision to keep those banks on the SDN List but, through a general license, to authorize almost all transactions with them.  At that time, I termed both the Burmese and Zimbabwean banks as SDN-lite designations and warned of the potential compliance difficulties such situations presented.

Keeping an entity on the SDN List would have the effect of blacklisting it from possible business with U.S. persons who rely solely on software to screen names on the SDN List to decide with whom to do business.  The results, of course, would create false positives because most transactions with these Burmese and Zimbabwean entities are permissible under U.S. law.  In fact, running these banks through OFAC’s SDN Search tool produces hits with no mention of any general license permitting dealings with them.

Delisting would, of course, be one option to correct the problem, but that would unblock any currently blocked assets, something OFAC might not wish to do.  Failing that, OFAC should at least put some annotation on the SDN List to denote that these very few entities are to be treated very differently than the thousands of others on the SDN List with whom U.S. persons may have no dealings.  At the moment, the question is back to OFAC, “What are the plans to update the SDN List?”

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Oct

16

Tip of the Day: Read Your Packing Lists for Incoming Shipments

Posted by at 12:08 am on October 16, 2013
Category: Compliance Programs and Procedures

Source http://commons.wikimedia.org/wiki/File:Cma.cgm.mozart.wmt.jpg [GNU Free]Kristen Lane from Richardson Electronics and I were on a panel together at the recent ACI EAR Boot Camp in Chicago. Kristen had a great compliance tip that she implemented at Richardson which I asked her to write up so that I could pass it on because I thought it was a great idea. Here is what she sent me in an email:

I have put in place a process both at Richardson and a number of my clients through my consulting business (Lane International Trade Consulting) where they review every packing list that comes through their Receiving Department. This process can be setup a number of ways. To follow is an easily understandable way to implement using internal resources that may have some time to assist the business. The Receiving Department receives packages all day long. At the end of each day they gather the packing lists and give them to the Receptionist in the morning. The Receptionist reviews each packing list looking for any ECCN information or ITAR designation for which he/she has received special training from Trade Compliance. Any packing list with ECCN or ITAR information he/she will look up that item in the system and if the ECCN or ITAR information is different than what is on the system he/she will forward that packing list to Trade Compliance for review.

Trade Compliance then takes a couple of actions. For distributed items they look at the ECCN or ITAR designation to ensure it is correct and add it to the item master and look for any additional issues for any past sales, pending sales or future sales. For inbound materials used in manufacturing they will look to ensure there are no compliance issues for the end product being manufactured. Example, if ITAR component, end item will be ITAR; do they seek a different component that is not ITAR, etc. etc.

Not every company puts this information on their Packing Lists but the companies with good Trade Compliance programs do. I would say we get the export ECCN information on about 10% of our packing lists but if a company is also looking for HTS and Country of Origin information I would say we find that on about 30-40% of packing lists.

I have also noticed that these same companies that put the information on the packing lists also put it on their AP invoices.

We at Richardson do also add this information on our outbound packing lists and invoices so it lessens the chance that one of our customers can say to BIS or anyone else that they were not notified. Especially on our ITAR items that are sold and shipped within the USA.

This seems to me to be a procedure that can be easily implemented and can assist with the perplexing problem of classifying products from third parties that you might wind up exporting separately or as part of component or system that your company manufactures. Obviously, you should know the classification of your own products, but this procedure will flag other items that you might not realize is export controlled.

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Copyright © 2013 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)