On January 30, 2024, Baker McKenzie, in partnership with the International Compliance Professionals Association, hosted a virtual fireside chat with Matthew Axelrod, the Assistant Secretary for Export Enforcement for Bureau of Industry and Security (“BIS”) in the US Commerce Department. The webinar attracted 3,200 registrations from across industry, with participants raising a wide variety of questions.
In the discussion with Baker McKenzie partners Janet Kim (Washington, DC) and Sunny Mann (London), Assistant Secretary Axelrod discussed export enforcement trends and what companies can expect from the BIS Office of Export Enforcement. The key points are summarized below.
- Export Controls Demand C-Suite Attention: Assistant Secretary Axelrod cautioned companies that, since export controls have become a riskier area of compliance, it is no longer sufficient for executive-level managers to be satisfied in their company’s export control compliance merely because they have an export control compliance team somewhere within the organization. It is incumbent upon c-suite management to monitor the shifting export controls environment to ensure that their companies maintain compliance programs that are adequate to their risk profiles.
- Increasing Multilateral Coordination: BIS has worked to develop multilateral enforcement coordination mechanisms, such as the “Export Enforcement Five”—essentially the export enforcement version of the Five Eyes group (the United States, United Kingdom, New Zealand, Australia, and Canada). (Our blog post on Five Eyes coordination is here.) BIS has also been coordinating with Japan and South Korea to form a disruptive technology protection network.
- Advanced Technology an Enforcement Priority Export enforcement efforts by BIS will continue to concentrate on more sensitive, higher technology items, including quantum computing, advanced supercomputers and semiconductors, and biotechnology.
- Expect more Interagency Strike Force Cases: The BIS-DOJ Disruptive Technology Strike Force, operating out of 12 US metropolitan regions, is expected to ramp up enforcement operations and bring more cases to the public’s attention. This Strike Force recently celebrated its first anniversary with a summit to discuss cases, compare investigative best practices, and hear from the private sector. It also announced two new cases on February 7, targeting activities allegedly aimed at supporting Iran and China. This effort is a high profile example of BIS working more closely and regularly with the US Justice Department, the US Federal Bureau of Investigations, the US Homeland Security Department, among others, on export control enforcement cases.
- Increase in Voluntary Disclosures Following Policy Change: BIS has seen an 80% year-on-year increase in voluntary self disclosures of potentially significant violations and one third more tips over the same time period that Assistant Secretary Axelrod attributed in part to an April 2023 policy change for BIS to view the decision not to voluntarily disclose a significant possible violation as an aggravating factor. (Our blog post about the policy change is here.)
- Additional Role for Banks: A consistent theme in Assistant Secretary Axelrod’s comments was an increase in the intensity and breadth of multi-agency efforts at targeting export enforcement. A key example is the BIS partnership with Financial Crimes Enforcement Network to develop key terms for banks to code their Suspicious Activity Reports (“SARs”) to flag potential export control violations, with one code related to Russia and another code for the rest of the world. (Our blog post about the policy change is here.) This has made relevant information more readily available and actionable by export enforcement agents. In that regard, Assistant Secretary Axelrod reported that BIS has reviewed over 500 SARs, with 20% of those reports leading to BIS action.
The authors acknowledge the assistance of Ryan Orange in the preparation of this blog post.
