Former BIS Official: ‘I've Never Seen Enforcement Environment Like This’

The Bureau of Industry and Security will likely issue more penalty announcements this year for export control violations, a former senior BIS enforcement official said, suggesting the current state of enforcement is unprecedented.

“I've never seen the enforcement environment like this,” said Melissa Mannino, a trade and national security lawyer with BakerHostetler and former chief of enforcement and litigation at the BIS chief counsel office. “We haven't seen a lot of administrative enforcement cases yet with a lot of penalties -- I expect that they are coming.”

BIS just ended a record year for export enforcement, saying earlier this month that its investigations in 2023 resulted in the “highest number ever” of convictions, temporary denial orders and post-conviction denial orders (see 2401030074). But Mannino, speaking during a virtual conference last week hosted by the Massachusetts Export Center, said more BIS-specific fines may be coming, particularly because she’s “not seeing many” voluntary self-disclosures get closed out by BIS within the 60-day window usually reserved for more minor disclosures.

An increase in public penalties could be a good thing for many compliance departments, which can use the cases to lobby their managers for more resources or "get the attention of the senior officials," Mannino said. But she also said it means risk levels are rising, and she urged companies to pay even closer attention to their sanctions screening and record-keeping.

She said businesses need to “conduct due diligence for every transaction,” but the amount of due diligence will depend on how risky they deem a particular transaction. “What do we think the potential harm is to national security? What do your instincts tell you about whether this looks like a suspicious transaction?” Mannino said. “What is your company's risk profile?”

Companies also need to make sure they’re constantly screening government-run sanctions and denied party lists, she said. “We are seeing on a fairly common basis now companies that were doing business with someone and then within two weeks, they're now sanctioned,” Mannino said. “And so if you don't keep screening, you can end up inadvertently engaging in unauthorized transactions.”

She said compliance professionals need to “know all parties to your transaction,” including the customer, the freight forwarder and any third parties involved. Mannino said a company selling an export-controlled product should verify the addresses of all those parties, and make sure “no one's sending anything to a P.O. box,” which is a tactic sometimes used by sanctioned companies to evade controls.

Mannino also stressed that all that due diligence should be documented. “If you don't have the documentation, I think it's not going to be very persuasive to the government,” she said. “You need to make sure you have robust written export control policies and procedures now that are targeted at identifying potential red flags for diversion.”

Mannino specifically said she’s seeing an increase in Iran-related enforcement and pointed to a BIS rule last week that added a new six-digit harmonized system subheading to the scope of items that need a license for export to Iran (see 2401230044). “I feel like Iran is coming a little bit more back on the radar screen,” she said, adding that businesses should be “trying to figure out or minimize the risk of making sure parts can’t go to Iran.”