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Dual-use goods [DUG] challenges connected to Proliferation financing  


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.



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