FCC ESSENTIALS

Explore our latest FCC (Financial Crime Compliance) Essential article as Christopher Stringham, Global Account Manager at Neterium, delves into his fervor for Financial Crime Compliance (FCC).
In this edition, we’re looking into the proactive steps taken by the Financial Intelligence Unit of the Netherlands (FIU) in response to Russia's invasion of Ukraine. By promptly alerting regulated entities to potential risks, the FIU, in this specific context, successfully thwarted the exportation of dual-use goods. Join us as we dig deeper into this unprecedented measure.

Following the invasion of the Ukraine by uniformed troops from the Russian Federation and the imposition of new sanctions on Russia in February and March of 2022, the Financial Intelligence Unit of the Netherlands took steps to inform obliged entities of potential risks. Information sharing between the private and public sectors proved beneficial for both sides as significant reports of unusual and suspicious transactions were submitted. In the FIU’s Annual Review for 2022, they outlined the measures taken and highlighted some specific successes. Based on information gathered by the FIU, authorities in another country were able to prevent the exportation of dual use goods, millions of Euros connected to a sanctioned person were seized, and a person connected with evading sanctions relating to microchips was arrested.

That final point is particularly interesting since the person was recently convicted and the court judgement provides very interesting insights into his schemes. The issue was the shipment of various circuits in violation of Annex VII of Regulation 833/2014 and the court kindly provides details about the specific chips that were sold and exported. For example, they mention an invoice for a “Monolithic Inertial Sensor Digital Output of the brand/type ADIS16445BMLZ”. A quick internet search shows online traders who offer this product and helps find the relevant TARIC codes (8542399000). After converting the number to the CN code format, the first 6 digits, (8542 39), then it is easy to search for the number in the list of goods which may not be sold to any entity in Russia. By converting the number to the ECCN code format, it is also possible to confirm that this type of chip, it is also on the US’s Commerce Control List.

This exercise really highlights the difficulty of identifying restricted goods including dual-use goods. Invoices may provide part numbers or product names, but manual work is necessary to connect those product descriptions with the necessary codes used in official lists.

The court decision also provides an interesting insight into the approach of the defense in this case. The defense claimed that it wasn’t sufficient to consider just invoices and other documentation; they insisted that the goods themselves should have been investigated. The court rejected this on the basis that there was no indication that the goods delivered were different than those specified on the invoice. From a practical perspective, it is hard to say how Dutch prosecutors could have obtained the goods to inspect them as they had already been exported. Had the court agreed to this logic, it would have made prosecutions an impossibility.

One of the biggest topics in financial crime compliance circles is the usefulness of Suspicious Transaction Reports. Millions of reports are filed every year, but feedback is very rare. In this case, however, we have an example where the FIU was able to take the information received from an obligated entity, initiate an investigation, and obtain a conviction.

Netherlands FIU report 2022 Annual review of FIU-the Netherlands (fiu-nederland.nl)

Press Release about arrest Aanhouding in onderzoek naar overtreding sanctiewetgeving | FIOD

Court Decision: ECLI:NL:RBROT:2023:10072, Rechtbank Rotterdam, 83-235373-22 (rechtspraak.nl)

Council Regulation (EU) No 833/2014 of 31 July 2014 EUR-Lex - 02014R0833-20231001 - EN - EUR-Lex (europa.eu)