Dual-use goods [DUG] challenges connected to Proliferation financing
06/08/2023
A new International Chamber of Commerce paper addressing dual-use goods challenges, guiding on implementing controls and risk-based approaches for identifying and managing associated risks in trade finance. It is a publication where you will find most of the difficulties we all face in our daily duties in dealing with DUG.
Introduction and background
Dual-use goods (DUG), defined explicitly as items with commercial and military or proliferation applications, are subject to various export restrictions and controls set by national and/or international agencies. These can sometimes be in the form of sanctions but usually take the shape of licencing requirements placed upon corporates.
The concept of DUG intersects several areas of financial crime compliance within the financial services industry, including proliferation financing, export controls and trade sanctions. Financial institutions (FI)
should remain cognisant of these convergences, as regulatory expectations may differ and bring products outside of trade finance and trade services into scope.
For example, under UK and EU sanctions legislation, the definition of the provision of “financial services” and “financial assistance” concerning the movement of DUG is broad, requiring a more comprehensive assessment of the risks and controls.
FI are aware of the requirement to have appropriate risk-based controls to identify transactions which involve such goods, while regulators continue to highlight the need for FI to have in place appropriate controls and identification methods, for example, as noted by the UK Prudential Regulation Authority and Financial Conduct Authority
- ‘Dear CEO Letter’ on Trade Finance Activity, published in September 2021.
The UK authorities’ letter draws out the need to sufficiently focus on the identification and assessment of financial crime risk factors, such as the risk of DUG or the potential for fraud, and consequently to perform a sufficient level of due diligence, such as additional pricing checks or the use of tools like vessel tracking and independent document verification.
Further In certain jurisdictions, regulators may specifically require FI to undertake screening of specified lists of goods, as seen in the UAE.
SOURCE
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As well as owning and publishing Comsure's copyrighted works, Comsure wishes to use the copyright-protected works of others. To do so, Comsure is applying for exemptions in the UK copyright law. There are certain very specific situations where Comsure is permitted to do so without seeking permission from the owner. These exemptions are in the copyright sections of the Copyright, Designs and Patents Act 1988 (as amended)[www.gov.UK/government/publications/copyright-acts-and-related-laws]. Many situations allow for Comsure to apply for exemptions. These include 1] Non-commercial research and private study, 2] Criticism, review and reporting of current events, 3] the copying of works in any medium as long as the use is to illustrate a point. 4] no posting is for commercial purposes [payment]. (for a full list of exemptions, please read here www.gov.uk/guidance/exceptions-to-copyright]. Concerning the exceptions, Comsure will acknowledge the work of the source author by providing a link to the source material. Comsure claims no ownership of non-Comsure content. The non-Comsure articles posted on the Comsure website are deemed important, relevant, and newsworthy to a Comsure audience (e.g. regulated financial services and professional firms [DNFSBs]). Comsure does not wish to take any credit for the publication, and the publication can be read in full in its original form if you click the articles link that always accompanies the news item. Also, Comsure does not seek any payment for highlighting these important articles. If you want any article removed, Comsure will automatically do so on a reasonable request if you email info@comsuregroup.com.