Session IV - Enforcement of U.S. Export Controls

Enforcement of Export Controls Bureau of Industry and Security (BIS) U.S. Department of Commerce 1 Overview The Export Control and Enforcement Community Export Enforcement within BIS Red Flags Reporting and Disclosing Violations Penalties/Sanctions Case Study

Contact Information and Resources 2 Export Control and Enforcement Community Other U.S. Government Departments and Agencies With Export Control Responsibilities: Department of State, Directorate of Defense Trade Controls (DDTC) - Defense services and defense articles Department of the Treasury, Office of Foreign Assets Control (OFAC) - Foreign assets and transactions controls Department of Energy (DOE) - Natural gas and electric power; nuclear technology; technical data for nuclear weapons/special nuclear materials

Nuclear Regulatory Commission (NRC) - Nuclear materials and equipment Drug Enforcement Administration (DEA) - Drugs, chemicals, precursors 3 Other U.S. Government Departments and Agencies With Export Control Responsibilities (continued) Food and Drug Administration (FDA) - Drugs and biologics, investigational drugs, medical devices Department of the Interior (DOI) - Fish and wildlife controls; endangered species

Federal Maritime Commission - Ocean freight forwarders Department of Commerce, U.S. Patent and Trademark office (PTO) - Patent filing data sent abroad U.S. Maritime Administration - U.S. Flagged or U.S. manufactured vessels over 1,000 gross tons Source: Supplement No. 3 to Part 730 of the EAR 4 Export Enforcement Coordination Center (E2C2) Partner Agencies:

Department of Commerce Department of Defense Department of Energy Department of Homeland Security Department of Justice Department of State

United States Postal Inspection Service Department of the Treasury Office of the Director of National Intelligence. 5 Bureau of Industry and Security (BIS) BIS Mission: Advance U.S. national security, foreign policy, and economic objectives by ensuring an effective export control and treaty compliance system and promoting continued U.S. strategic technology

leadership. 6 Export Enforcement (EE) within BIS 7 BIS Export Enforcement EE Mission: Protect U.S. national security, homeland security, foreign policy, and economic interests through a law enforcement program focused on: sensitive exports to hostile entities or those that

engage in onward proliferation; prohibited foreign boycotts; and related public safety laws. EE accomplishes its mission through preventative and investigative enforcement activities and then, pursuing appropriate criminal and administrative sanctions against export violators. 8 BIS Export Enforcement EE consists of: Office of Export Enforcement (OEE) Office of Enforcement Analysis (OEA) Office of Antiboycott Compliance (OAC)

Together with BISs licensing officers and policy staff, EE personnel apply their law enforcement and export control expertise to prevent and deter exports of the most sensitive items to illicit end users and end uses, to embargoed destinations, and to ensure that parties involved in U.S. commercial transactions do not engage in prohibited boycott activities. 9 Office of Export Enforcement (OEE) BIS's Export Enforcement (EE) is an elite law enforcement organization recognized for its expertise, professionalism, integrity, and accomplishments.

OEE Special Agents are sworn federal law enforcement officers with authority to bear firearms, make arrests, execute search warrants, serve subpoenas, detain and seize items about to be illegally exported, and order the redelivery to the United States of items exported in violation of U.S. law. 10 OEE Field Offices Chicago Chicago New

New York York Boston Boston San San Jose Jose Portland Portland Washingt Washington

on Los Los Angeles Angeles Dallas Dallas Houston Houston Miami Miami Atlanta

Atlanta 11 Chicago Field Office Area of Responsibility 12 How do we accomplish our mission? OEE works closely with other federal law enforcement agencies to identify and act on export violations and with industry to raise awareness of

compliance best practices and red flag indicators of potential illicit activities. OEE investigations are initiated on information and intelligence obtained from a variety of sources, including routine review of export documentation, overseas end-use monitoring, and industry information. 13 Partnership with Industry OEE works cooperatively with the exporting community to prevent violations. Export Enforcement relies heavily on the partnership it has with the business community.

By prosecuting those who violate our regulations we are helping the vast majority of exporters who follow the rules and are diligent in their efforts to conduct their affairs in an honest and appropriate manner. 14 Red Flags Things to Look for in Export Transactions to discover possible violations: The customer or its address is similar to one of the parties found on BIS' list of denied persons. The customer or purchasing agent is reluctant to offer information about the end-use of the item. The product's capabilities do not fit the buyer's line of business.

The item ordered is incompatible with the technical level of the country to which it is being shipped. The customer is willing to pay cash for a very expensive item when the terms of sale would normally call for financing. The customer has little or no business background. The customer is unfamiliar with the product's performance characteristics but still wants the product. 15 Red Flags (continued) Routine installation, training, or maintenance services are declined by the customer. Delivery dates are vague, or deliveries are planned for out of the way destinations.

A freight forwarding firm is listed as the product's final destination. The shipping route is abnormal for the product and destination. Packaging is inconsistent with the stated method of shipment or destination. When questioned, the buyer is evasive and especially unclear about whether the purchased product is for domestic use, for export, or for reexport. see 15 CFR 732 Supplement 3: Know Your Customer Guidance and Red Flags. 16 What to do when you identify a red flag? When "Red Flags" are raised, you have a duty to

exercise due diligence to inquire regarding the suspicious circumstances and ensure appropriate end-use, end-user, or ultimate country of destination. Reevaluate all the information after the inquiry. Refrain from the transaction, and/or report or disclose the information to BIS/OEE. See also section 732 Supplement 3 Know your customer guidance and red flags. 17 What to do when you identify a red flag? If you have reason to believe a violation is taking place or has occurred, you may report it

to: OEEs Chicago Field Office: 630-705-7010. OEEs 24-hour Hotline number: 800-424-2980. OEEs Confidential Enforcement Lead/Tip Form through the BIS website: 18 Report Possible Violations 19 Report Possible Violations 20 Disclosing Violations 15 CFR 764.5 Process Initial Notification Narrative Account (w/in 180 days) Deadline extensions 21

Types of Responses to Apparent Violations No Action Warning Letter Administrative Enforcement Case Civil Monetary Penalty

Criminal Referral to DOJ Other Administrative Sanctions 22 Other Administrative Sanctions License Revision, Suspension or Revocation. Denial of Export Privileges. Exclusion from practice. Training and Audit Requirements. 23

Case Study: Timothy Gormley Amplifier Research Corporation Timothy Gormley was an employee of Amplifier Research Corporation. Many of the companys products were classified as ECCN 3A001 and were controlled for national security reasons. In admitting to the conduct, he explained that he was too busy to obtain the licenses. Gormley altered invoices and shipping documents to conceal the correct classification of the amplifiers so they would be shipped without the required licenses, listed false license numbers on export paperwork, and lied to fellow employees. Gormleys actions resulted in at least 50 unlicensed exports to

China, India, Hong Kong, Taiwan, Thailand, Russia, and Mexico. 24 Case Study: Timothy Gormley Amplifier Research Corporation The Penalty: On January 17, 2013, Gormley was sentenced to 42 months in prison, five years of supervised release, a $1,000 criminal fine and a $500 assessment. On December 27, 2013, Amplifier Research agreed to a fully suspended civil penalty of $500,000 provided the company did not commit any export violations for two years. Additionally Amplifier Research was required to conduct

external audits of their compliance program and submit the results to BIS. 25 Export Enforcement Cases Dont Let This Happen to You!! available at https:// c_download/1005-don-t-let-this-happen-to-you-0 73115 BIS eFOIA page on Export Violations: http://

ons 26 How to ensure THAT does not happen to you? Know Your Customer (see 732 Supplement 3) See Consolidated Screening List 11 USG lists from Commerce, State and Treasury BIS Entity List BIS Denied Persons List BIS Unverified List

http:// Watch for Red Flags Report and/or Disclose Violations Have an effective Export Management Compliance Program (EMCP) 27 BIS Contact Information Chicago Field Office - 630-705-7010 Reporting Possible Violations OEE Enforcement Hotline: 1-800-424-2980 Questions about Disclosers to OEE

Investigative Programs Division: 202-482-5036 Antiboycott Advice Line OAC: 202-482-2381 Ask an Export Counselor OExS Outreach and Educational Services Division: 202-4824811 28 Questions? Useful References 15 CFR 732 Supplement 3: Know Your Customer Guidance and Red Flags 15 CFR 736 General Prohibitions

15 CFR 758 Export Clearance Requirements 15 CFR 764.4 Reporting of violations 15 CFR 764.5 Voluntary self-disclosure 15 CFR 766 Supplement 1: Guidance on Charging and Penalty Determinations in Settlement of Administrative Enforcement Cases 29

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