BIS Hoping New Strike Force Leads to Faster Prosecutions, More Criminal Enforcement

The Bureau of Industry and Security is hoping its new Disruptive Technology Strike Force leads to more investigations of export control violations, faster prosecutions and more criminal enforcement actions, said John Sonderman, director of the BIS Office of Export Enforcement. The agency also is looking to clamp down on U.S.-origin items ending up in Iranian drones, said Kevin Kurland of OEE, warning that companies should make sure they’re complying with the new Iran Foreign Direct Product Rule issued last month.

Sonderman, speaking during a Regulations and Procedures Technical Advisory Committee meeting this week, said the new Strike Force should lead to more export control cases. The task force, announced last month to increase export enforcement cooperation among BIS, DOJ and other agencies (see 2302160019), also will help the government in “analyzing evidence and sending out leads,” which will hopefully lead to an uptick in investigations, Sonderman said.

The task force should also lead to a “faster timeline, potentially, from when we present a case for prosecution to when it's prosecuted,” Sonderman said. Part of the faster timeline will include involving the BIS chief counsel office and DOJ earlier in investigations, he said.

The cooperation also should lead to more “joint regulatory and criminal actions,” Sonderman said. He specifically said BIS wants to increase its use of is-informed letters -- letters the agency sends to specific companies to inform them about specific licensing requirements for some of their products (see 2209160025, 2211020027 and 2211040051). “So more use of either our temporary denial orders or Entity List or is-informed letters to coincide with public criminal action,” Sonderman said, “such as unsealed indictments or arrests.”

Although the strike force will focus on several countries, including China, Iran, Russia and North Korea, Kurland said BIS has been “working very hard” with DOJ and the Treasury Department to publicize more information on red flags associated with Russian export control evasion tactics. The three agencies published their first joint compliance alert last month (see 2303020054) and are working on another alert that will cover “broader red flags," said Kurland, OEE’s deputy assistant secretary.

One of the red flags companies should be monitoring, he said, involves new businesses created by Russian firms and acting as front companies buying controlled U.S. goods. “We’ve seen a number of new companies that have been established post Feb. 24 that should really be creating red flags for you all when you're looking at new business opportunities,” Kurland said. “I really encourage you all that are either receiving the orders or that are working with companies that are receiving the orders, for folks to be doing due diligence on when these companies have been stood up.”

Other types of due diligence can be more complex, Kurland said, especially around Iran. He said BIS is increasing its focus on stopping U.S. parts and components from being used in Iranian unmanned aerial vehicles, which are being sent by Iran to Russia.

“It’s a very complicated area, but at the same time, we do think that there needs to be some hardening of supply chains,” Kurland said. “The volume of at least Western-labeled and U.S.-labeled items that are ending up in these drones is of considerable concern to us.”

The agency issued a final rule last month that introduced a new Iran Foreign Direct Product Rule, which imposed new license requirements on certain foreign-made items destined to Iran that are made by or with certain U.S. software or technology (see 2302240028). Among other restrictions, the rule also imposed new license requirements on a subset of low-level items destined to Iran regardless of whether a U.S. person is involved in the transaction.

“Now that we have a foreign direct product rule that applies to those items,” Kurland said, “folks really need to be doubling down on working with their authorized distributors and those distributor relationships with in-country transfers to make sure that folks are aware of the new controls that have been imposed.”

Kurland said OEE is reaching out to companies that may be playing a part in allowing Iran to acquire U.S. drone parts. The agency also has contacted “more than 700 companies individually” to "educate" them about Russia export controls and is speaking with firms about the BIS October China chip controls (see 2210070049).

“Our goal is just to make sure that you all are aware of what's happening,” he said, adding that export regulations are changing almost “on a weekly basis.”

OEE is also checking in on companies to make sure they “have some type of compliance program” and are voluntarily disclosing any potential export violations.

Sonderman said most of the “aggravating factors” the agency is seeing when investigating export control violations involve “willfulness,” or a company trying to obtain “a commercial advantage” over their competitors. Sonderman added that the agency is “charging very few voluntary self-disclosures.”