Tag Archives: Business

Project Alpha to Host Workshop on Trade Finance and Proliferation Finance

On June 20, 2017, Project Alpha will host the workshop “Trade Finance and Proliferation Finance – Mitigating the Risks,” in London.The workshop’s aim is to better understand how trade finance might be exploited to finance WMD proliferation and will build upon a typologies study of proliferation finance currently being carried out by Project Alpha. The report is available here.

The objectives of the workshop are to:

  1. Review current mechanisms for trade finance and identify how these may be exploited for financing proliferation;
  2. Identify possible measures governments and financial sector could take to mitigate risks;
  3. Consider mechanisms for information sharing to support risk mitigation.

Workshops participants will include experts and practitioners from the financial sector, consulting firms with experience advising clients in trade finance or proliferation finance contexts, banking association representatives, government agencies, and research and academic organisations.

For inquiries regarding attending the workshop as a speaker or participant, please contact Andrea Viski through email to Andrea.Viski@kcl.ac.uk.

Export Controls 101

Strategic Trade Controls: What Do Firms Need to Know?

  • Export controls are in place to prevent technology and goods from being acquired by those seeking to used them for  illicit military-related end uses and are an important tool of national security
  • Firms need to be aware of the control status of their products and of the potential uses of their goods in military or WMD programmes
  • A licence is required when exporting controlled goods and potentially when exporting non-listed goods to sensitive destinations
  • There are significant legal and financial risks associated with deliberate and inadvertent involvement in illicit transfers
  • A systematic approach to compliance is required to mitigate risks effectively
  • If firms have questions about the scope and requirements of export controls, they should contact Project Alpha at alpha@kcl.ac.uk
  • A link to your licensing authority can be found on this page

The Purpose of Export Controls

Export controls and sanctions are in place in order to allow national authorities (various departments of the British government in the UK case), an opportunity to assess the international security and proliferation risks associated with the export of certain sensitive military-related technologies. They allow a country’s government to act to safeguard the national security of that country and to avoid fuelling conflict or internal repression overseas.

More specifically, some of the purposes of export controls are:

  • To prevent goods from contributing to WMD programmes
  • To prevent the transfer of goods which could contribute to sanctioned military programmes or cause regional instability
  • To prevent those goods, for example as weapons, from contributing to human rights abuses
  • To prevent those who support or direct the activities above from accessing the British, European, US, or international marketplace

The Scope of Export Controls

Export controls cover ‘technology’ which is taken to mean both tangible goods, as well as the intangible technology associated with controlled goods.

The EU maintains a military list and a dual-use list. Military goods are largely what you might expect: arms, tanks, missiles, and other equipment specifically designed or prepared for a military end use. The dual-use list includes a relatively broad range of technologies that can be incorporated either into military goods or into weapons of mass destruction programmes.

However, export controls can also encompass non-listed technologies. This typically occurs in cases where exporters ‘know or suspect’ that technology is destined for sanctioned entities or programmes of concern. A ‘catch-all’ control exists to allow uncontrolled goods to be prevented from reaching such destinations.

Country-specific Restrictions

In addition to export controls which impose a licence requirement on any country regardless of destination, a range of country-specific restrictions or ‘sanctions’. These measures can restrict trade in a number of ways:

·         Introducing a presumption of denial for export licences

·         Prohibiting trade with certain entities in specified countries (designated entities)

·         Restricting investment in certain industry sectors, such as Iran’s oil and gas sector

UK Government Departments Involved

In the UK, as in most countries, there are multiple government departments involved in the export control process. This is because export controls cover a number of policy areas.

The principal organisation in the UK system is the Export Control Organisation (ECO) which is a part of the Department for Business Innovation and Skills (BIS). This is the organisation with which exporters communicate with when applying for export licenses.

A second lead organisation is HM Treasury, which advises on trade with designated entities.

Other government departments are also involved such as: the Foreign and Commonwealth Office (FCO), which sets the strategic objectives and conduct diplomacy relating to the UK’s international commitments; the Ministry of Defence (MOD), which deals with military and technical issues; the Department for Energy and Climate Change (DECC), which deals with nuclear issues; the Department for International Development (DFiD), in cases where exports may have implications for UK development assistance; and HMRC and the UK Border Service, which undertake enforcement actions when necessary.

The Requirements of Export Controls

UK export control legislation usually requires that the exporter holds an export licence at the time of export. A valid licence is required, in most cases, if the goods are controlled or they are destined for a sanctioned destination or an end-user of concern.

Open licences are available in all EU countries, providing exporters with a more simple way to export less proliferation-sensitive goods to less sensitive destinations. With these types of licences, the emphasis is on registration, the record-keeping of the exporter, and compliance audits carried out by government representatives.

Licence applications are both made by exporters and assessed by government through the online Spire system.

The Consequences of Non-Compliance

There are significant risks associated with non-compliance with export controls. These include legal risks – fines of hundreds of thousands of pounds and imprisonment of several years – as well as reputational risks and associated financial costs. A number of case studies of UK prosecutions can be found on the ECO website.

However, exporters should be aware that compliance with export controls does not fully mitigate risks. Firms can be compliant with the law and still have their goods diverted to programmes of concern. Extra due-diligence is important in this regard. Exporters should contact their national authority or Alpha when in doubt.

Managing Compliance and Non-proliferation Requirements

Given the detailed and sometimes changing requirements of export controls, it is important that firms take a systematic approach to compliance and non-proliferation to mitigate risks fully. This should include ensuring that a senior official is responsible for trade compliance and include providing training to all relevant staff. More information about best practice compliance can be found here.

Each country maintains its own export licensing system. A link to yours can be found on the following page.

Many countries allow exporters to apply for licences electronically. For example, all UK licence applications must be submitted through the SPIRE system.

Entities of Concern

Key Points

  • It is only by conducting extensive due diligence that the risks posed by parties to a trade can be understood;
  • However, several authorities maintain lists of entities known to be of concern which must be taken into account. These are produced at United Nations (UN), National (including European Union (EU)), and non-governmental levels;
  • UN sanctions are binding on firms based in all countries, while national (or EU) lists are typically only binding to firms based within the relevant territory;
  • US measures often have an extraterritorial element, meaning that conducting business with US-sanctioned entities can have adverse business impacts for a firm even if based outside the US;
  • Companies should implement screening and due diligence systems to ensure that all entity-specific concerns are identified, understood, and addressed before entering business relationships.

What is an entity of concern?

Entities are typically identified as being of concern for one of three main reasons:

1)    They are involved in activities of concern – i.e. they have been designated as a terrorist organisation, they directly support or operate a Weapons of Mass Destruction programme in a country of concern, or they oversee an activity of concern (this can include individuals with responsibility for Iran’s nuclear programme, for example).

2)    They work on behalf of entities of concern, in capacities including procurement agents, brokers and financial service providers.

3)    They potentially supply programmes of concern, often by failing to implement appropriate trade compliance systems.

Note that not all entities of concern can be found on the various lists; firms should conduct due diligence to fully mitigate risk.

Where are entities of concern located?

This depends on the category of entity of concern. Those directly involved in programmes of concern are usually found only in sensitive countries (see country briefs), whereas middle men and suppliers to programmes of concern can be located anywhere around the world. The image below is a map highlighting the entities identified as being of concern by the US government in summer 2012.

What are firms’ responsibilities?

While legal responsibilities vary from country to country, the short answer is that firms must comply with the laws of the territories in which they operate. This means that if your national authority maintains a list of entities of concern you must ensure that you have a system in place to screen customers. In cases where national authorities do not provide national lists, firms should be screening potential business partners against the lists contained in UN resolutions.

How can firms avoid conducting business with entities of concern?

In practice, as US designations name firms worldwide, to ensure that you stay compliant with US extraterritorial measures, firms should maintain a designated entity screening system for trade to all destinations. A screening system or process which screens new and existing customers and other business partners against multiple relevant national and international lists is necessary to mitigate legal and reputational risk.

Nonetheless, while legally it may be permitted to do business with entities identified as being of proliferation concern outside jurisdictions in which the firms operate, there is an obvious need for caution: such trade is can lead to massive reputational risk and damage a firm’s public image.

Therefore, an effective screening system is one which screens against the relevant lists required for legal compliance, as well as takes into account possible reputational risks. An efficient system is one which effectively uses fuzzy logic to pick up matches whilst keeping a ‘false-positive’ figure low.

Partners Against Proliferation: Good Practice Guidance

The “Partners Initiative” is a voluntary and inclusive mechanism to share good practices between companies in the area of export and trade compliance. Participation will reduce the likelihood that your company’s goods or services will aid proliferation or that your company will breach trade control obligations.  At heart of the initiative are guidelines and a related peer-review mechanism. Firms undertake to work towards implementing the internationally-recognised[1] “good practice guidelines” (See below) and to demonstrate to other “Partners” how they go about this.

Other service providers and trade associations are encouraged collaborate with the partners initiative, by for example by creating working groups for their own members.

Involvement with the initiative will have the following benefits you company:

1.   Improving your company’s implementation of trade controls.  This is not just about complying with the law, but also about ensuring the compliance system you implement is robust, proportionate and effective. Getting implementation right may even reduce your company’s trade compliance burden.

2.   Enabling customers or suppliers to build confidence in your compliance system. Your business partners are dependent after all on your company’s implementation of trade controls either to safeguard their controlled technologies or to provide them with correct trade control information, such as control status the control status of the goods you sell to them. They care if your company ‘gets compliance’.

3.   Demonstrating to stakeholders that your company is socially responsible. Non-compliance with export controls is socially unacceptable and threatens international security. Your stakeholders will want to know if you are compliant, or perhaps worse, if you are not.  Participation in the Partners Initiative provides a route to demonstrate your commitment.

The Partners Initiative is a peer-based network and is governed by consensus. The initiative will be overseen by a “Partners Board”, membership of which will be determined based upon nomination and vote (with one vote being allocated to each participating institution). Presently there is no entry criteria to become a partner other than a willingness to work towards implementation of the good practice guidelines (see below).  Companies will be asked to demonstrate in what ways they implement each of the elements of the good practices to their peers on at least on an annual basis.[2]

Good Practice Guidelines on Export Compliance
These guidelines were submitted by the British government to the Nuclear Suppliers Group and have been recognised internationally. Enterprises are advised to:

1.0 Implement internal systems to ensure due-diligence checks are carried out on potential customers and business partners and on the goods, software and technology that they wish to acquire, utilising public information such as early warning lists, red-flag checklists and questionnaires provided by the United Nations, states and other parties with an interest in supporting the multilateral non-proliferation effort, and to consult with the relevant government authorities as necessary;

2.0 Monitor, collate and vet enquiries within the scope of due-diligence, relating to the acquisition of proliferation sensitive goods, software and technology;

3.0 Consult government export control authorities before having any dealings with entities identified as being of proliferation concern either from public sources, from corporate monitoring systems or from contact with relevant competent authorities in states themselves;

4.0 Implement best efforts to share information about illicit attempts to procure items for Weapons of Mass Destruction programmes with security and other relevant agencies in the state where they are established and with business partners and others in instances where the state judges that broader publicity would be appropriate;

5.0 Promote the adoption of due-diligence and information sharing within the supply chain and with other business partners within the boundaries of legitimate protection of business and company information;

6.0 Incorporate non-proliferation measures and export control compliance into existing corporate social responsibility statements;

7.0 Encourage relevant industry-wide trade and professional bodies to recognise the importance of supporting and encouraging the non-proliferation effort and the measures set out herein; and

8.0 Foster an open and transparent relationship with appropriate government and regulatory authorities.

9.0 Train all relevant staff against a trade compliance competence framework

[1] Adherence to the guideline has been recognised by members of the Nuclear Suppliers Group as a “good practice”.

[2] The Partners Initiative is a peer-based initiative intended to implement the good practice guidelines. Failure to work toward implementation of the guidelines or egregious examples of not working to the guidelines such as being found non-compliant with export control legislation can, based on a 2/3 majority vote of the Partners board, result in companies being excluded for a period of time to be determined by the board

Download attachments: partners_initiative_-_invitation

Export Control Regimes – EU State Members

Dual use items are products and technologies used for civilian purposes but which may have military applications. Export of dual-use items to destinations outside the EU are prohibited unless a licence has been granted by a national authority.

Dual-use export controls in all EU states is guided by Regulation 428/2009. This regulation sets out the list of technologies and controlled items under export control. It can therefore be expected that, in general, any item considered controlled in one EU jurisdiction would also be controlled in the other jurisdictions.

Transfers of dual-use goods within the EU need a licence only where the item appears on Annex IV of the regulation. Annex IV contains very sensitive goods such as nuclear items.

For exports to destinations outside the EU there are numerous types of licence that may be granted within the EU. These include:

  • EU General Export Authorisations (EU GEAs) – cover exports of certain items to certain destinations as specified in Annex II of the dual-use Regulation.
  • National General Export Authorisations (NGAs) – may be issued by individual EU countries, provided that they:
  • do not conflict with existing CGEA
  • do not cover any of the items listed in Annex IIg to Regulation 428/2009
  • France, Germany, Greece, Italy, Sweden, the Netherlands, and the UK
  • Global authorisations – are granted by individual EU countries to one exporter and cover one or more items to one or more countries/end users
  • Individual licenses – are granted by individual EU countries to one exporter and cover exports to one end user


Links for license authorities of each EU state members:


National Authority


Federal Ministry of Economy, Family and Youth


1) The Ministry of the Brussels-Capital Region [Direction des Relations extérieures (external relations directorate)]

2)Flanders Region

3)Wallonn Region


Ministry of Economy, Energy and Tourism [Interdepartmental Commission for Export Control and Non-Proliferation of Weapons of Mass Destruction]

[General Information: http://www.exportcontrol.bg/indexen.php]

Czech Republic

Ministry of Industry and Trade[Licencing Office]


Danish Enterprise and Construction Authority



Ministry of Foreign Affairs[Strategic Goods Commission]



Department for External Economic Relations in Ministry of Foreign Affairs [export control unit]




Ministry of Industry: Dual-use goods

Ministry of Industry: Defence goods export control

Cryptographic Goods



Federal Office of Economics and Export Control BAFA



Ministry for Development, Competitiveness Infrastructure, Transport and Networks



Hungarian Trade Licensing Office



Minister for Jobs, Enterprise and Innovation [Licensing Unit in Department of Jobs, Enterprise and Innovation]



Ministry of Economic Development[Department for Enterprise and Internationalization, Directorate-General for International Trade Policy-Export Control Unit]


Ministry of Foreign Affairs of the Republic of Latvia [Security Policy Department Strategic Goods Export Control Division]



Ministry of Economy[Trade Department – Division of Strategic Goods Export Control (Licensing Office)]



Ministry of Foreign Affairs, Export Controls




Ministry of Foreign Affairs[Disarmament and Non Proliferation Desk]



Ministry of Finance[Central Import and Export Service (CDIU) on behalf of Ministry of Foreign Affairs]



Department of Economic Security of the Ministry of Economy






Ministry of Foreign Affairs [Department for Export Controls]




Ministry of Economy, Department of Sensitive Goods Trading Management, Division of Sensitive Goods



Ministry of Economic Development and Technology



TRADE – Foreign Trade – Sector Information – Defense and Dual-Use Material



Swedish Agency for Non-proliferation and Export Controls


United Kingdom


Department for Business, Innovation, and Skills [Export Control Organisation]

SPIRE[online export licensing system]


Find more Information here: http://ec.europa.eu/trade/import-and-export-rules/export-from-eu/dual-use-controls/

Dual Use Controls and License Authorities of Non-EU States

This page provides links to the licensing authorities of countries outside the EU that are a member of one or more of the export control regimes. While it would be too much to assume that the control  lists of these countries align to the EU’ s just because the country is a member of one of the regimes, in general it could be expected that the export control lists of these countries should approximately reflect the structure of the EU’s lists.

Links for license authorities of each Non-EU state members:


Wassenaar Arrangement

Australia Group

Missile Tech. Control Regime

Nuclear Suppliers Group

National Authority






Ministerio de Relaciones Exteriores, Comercio Internacional y Culto [Direccion de Seguridad Internacional, Asuntos Nucleares y Espaciales]






Defence Export Control Office [DECO]






Ministry of Science and Technology[Department of Nuclear Affairs and Sensitive Assets(DNASA)






Department of Justice



Ministry of Commerce





Ministry of Economy, Labour and Entrepreneurship





Ministry for Foreign Affairs






Ministry of Foreign Affairs[Japan’s Policies on the Control of Arms Exports]






Ministry of Foreign Affairs

New Zealand





Ministry of Foreign Affairs&Trade-International Security and Disarmament Division





Ministry of Foreign Affairs

Republic of Korea





Defence Acquisition Program Administraion

Russian Federation




Federal Service for Technical and Export Control

South Africa




South African Council for the Non-proliferation of Weapons of Mass Destruction






State Secretariat for Economic Affairs






Ministry of Foreign Affairs of Turkey, Arms Control and Disarmament Department






State Service of Export Control of Ukraine

United States





Bureau of International Security and Nonproliferation-Office of Export Control Cooperation

Note: there are four multilateral export control regimes(MECR) is aim to promote international cooperation developing a robust and binding export control systems of member states.

  • The Wassenaar Arrangement

  • The Australia Group(AG)

  • The Missile Technology Control Regime(MTCR)

  • The Nuclear Suppliers Group(NSG)

Red Flag Indicators: Detecting Unusual Behaviour in Transactions

The illicit trade in sensitive products and materials is a major problem for international security today. Proliferators work within legitimate trade structures by exploiting weak points in supply chains. They will often employ approaches simultaneously, attempting to disguise their own intentions and actions through a variety of methods. This document will explore some of the ‘red flags’ that appear during transactions that can help exporters to identify illicit behaviour. In doing so, it will consider a number of examples derived from open sources and the work of Project Alpha to better illustrate some of these ‘red flags’ that exporters need to be aware of when dealing with dual-use and nuclear-related materials and products.

If you receive an enquiry you consider suspicious you can often allay concerns through your own research. However, you could also either apply for an export licence or utilise the UK Export Control Organisation’s “End User Advisory Service”.