Rising Export Compliance Risk 'Demands' More C-Suite Attention, BIS Official Says

C-suite officials need to be more involved in their companies’ export compliance programs, the Bureau of Industry and Security’s top export enforcement official said this week. He also urged businesses to review -- and potentially expand -- their current programs to keep pace with export controls risks, especially as various government agencies work more closely together on investigations, indictments and sanctions.

Matthew Axelrod, the BIS assistant secretary for export enforcement, said that because export compliance is a “fairly technical regulatory area,” some C-suite officials believe they don’t need to know much about it. But Axelrod, speaking during a Baker McKenzie-hosted webinar Jan. 30, said it may no longer be acceptable for large companies with export compliance programs to sequester their compliance employees in a way such that they don’t have regular contact with upper management.

“I think this is now enough of a risk area, the stakes are high enough, both the enforcement risk and reputational risk, that it demands more C-suite attention than in the past,” he said. “It's not enough just to say, ‘Hey, I got someone somewhere who does that stuff.” He said export compliance is something senior executives should “make sure they're up to speed on to make sure they're managing their national security risk appropriately.”

He also said both large and small businesses with export risks should reassess their compliance programs, “given the way the world is now.” The “world is changing, and you need to make sure you have a strong export compliance program,” Axelrod said. “For major multinationals, that may seem obvious, but even what you had in place before, I think you're going to want to review to make sure it is fit for purpose.”

Axelrod was also asked about rising cooperation among U.S. national security agencies on export enforcement issues, which he called “unprecedented.” He pointed to several alerts and guidance documents BIS has issued with multiple agencies in recent months, including one in December with DOJ, Homeland Security Investigations and the Treasury and State departments that alerted industry about new enforcement trends (see 2312110060).

“It's not new that we're coordinating,” he said, but “I think our coordination is deeper and more intense than it's been in the past.”

He also referenced the reward the State Department is offering for information on Iranian businessman Hossein Hatefi Ardakani, who was charged by DOJ in December -- with help from BIS, Defense Department and HSI officials -- with export violations (see 2401240048 and 2312190069). Treasury also sanctioned Ardakani and his companies.

“If I've done my math right, six different United States agencies are all coordinating and working together on this,” Axelrod said. “I think you're starting to see more and more of this as we work closely together and coordinate closely together on these issues.”

Part of the increased cooperation has stemmed from the joint Commerce-DOJ Disruptive Technology Strike Force launched in February 2023, which also includes the FBI and HSI (see 2302160019). Members of the group are meeting in Phoenix next week to “talk about how the year has gone and what we anticipate for 2024,” Axelrod said. “I think you can expect to see more StrikeForce cases.”

A BIS official earlier this month revealed the agency is helping Japan and South Korea put together a similar, coordinated export enforcement effort (see 2401230060). Axelrod said both countries have “been interested in the work of our Strike Force,” and the U.S. wants to form a “Disruptive Technology Protection Network” with them to “help them explore standing up similar efforts in their countries.”