Russia’s invasion of Ukraine has sparked a war with unusual implications: The U.S. has stepped up sanctions and export controls. But companies are increasingly learning that the most seemingly innocuous products can find themselves in “dual use,” as a product for daily life and a product for war. A gyroscope or a more advanced GPS chip might help improve a smartphone’s capabilities, but they can also help to guide a missile.
Speakers and attendees at Compliance Week’s Third-Party Risk Management Summit in Austin, Texas, on Wednesday discussed how they can prepare and think ahead so that their products don’t accidentally find their way into a war zone.
The answer increasingly has been to think ahead. A U.S. government official who monitors compliance with export controls told attendees that the onus is increasingly on companies to identify when a product might be misused, rather than on government agencies to prescribe answers. Some ways to mitigate these issues, the speaker said, are to more carefully scrutinize the customers and vendors.
Common red flags of potential export control violations include an end user that is not sophisticated enough to use the product it is claiming to buy for itself.
Freight forwarding companies are not the end user, no matter what they may claim on paperwork.
Another red flag is companies that suddenly switch from delivering products from a sanctioned entity to a non-sanctioned entity but order the same amount of product in the same buying pattern. Scrutinize that new party for connections to the previous entity.
End users who decline service agreements, like installation or the fulfillment of those agreements, could be a red flag of potential export control violations.
If a company keeps track of phone numbers, email addresses, and locations of people in at-risk locations, that can help flag potential wrongdoing. And if that customer or vendor has a history of trouble without clear mitigation, do not trust them.
The discussions at Compliance Week’s TPRM summit, held generally under Chatham House Rule to encourage open sharing of information and ideas, underscore how much more complex modern business has become. Export controls and sanctions have jumped in recent years, partly in response to Russia’s war against Ukraine, as well as evolving threats from extremist regimes such as Iran and North Korea.
Some companies have responded by increasing their use of technology to expand both employee training and vetting of third parties. One speaker said that even a simple program that asks branching questions about compliance can lead to revealing information about security standards, data privacy risks, and potential export control violations.
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