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Red Flags Rising

Red Flags Rising: S01 E46: “Knowledge” Masterclass

Mike Huneke and Brent Carlson revisit and synthesize in one episode everything trade compliance teams need to know about the “knowledge” standard under the US Export Administration Regulations (EAR).

After starting the episode with Brent’s own journey in website design and announcing free resource materials (now) available at www.redflagsrising.com (01:05), Mike and Brent specifically discuss the full definition of “knowledge” under the EAR, including its three-tiered definition of actual knowledge, reason to know, and an awareness of a high probability (08:36); the “collective knowledge doctrine” under US law (14:14); parallels to US Foreign Corrupt Practices Act (FCPA) enforcement (15:06); misperceptions regarding the Bureau of Industry & Security’s KYC Guidance (16:25); other common misunderstandings (18:11); where KYC screening programs go wrong (24:23); the limited application of the “legally distinct” rule under the Entity List catch-all (25:33); why we accepted self-certifications when national security was served by global integration (26:36); the suspended BIS Affiliates Rule and its core problems (30:43); entity-shifting (34:10); risks associated with distributors and resellers (35:10); and the potential restrictions on remote access (40:49). They then conclude with this episode’s installment of Brent Carlson’s “Managing Up” segment (46:22).

Brent’s improved website and free resources

“Knowledge”

General Prohibition 10 

Brent Carlson, When Loopholes Create Liability Pitfalls (Aug. 25, 2023)

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Red Flags Rising

Red Flags Rising: S01 E19 – Stack Sweeps, Successor Liability, and “Knowledge” – Emerging Signals from Recent Enforcement Actions

Mike & Brent coin a new phrase in the context of white-collar corporate enforcement, “stack sweep,” to describe the potential enforcement risks–up and down the technology stack–that recent U.S. export controls settlements, policy statements, and guidance portend in focusing on broad end-use or end-user “catch-all” provisions that turn on “knowledge” defined to include “an awareness of a high probability.” Specifically, they discuss how two recent cases are short on facts but long on lessons (or, as Brent says, appear at first glance to be “dogs”) (01:07), discuss the Alpha & Omega Semiconductor (AOS) settlement announced July 2, 2025 (03:19), how reliance on the advice of counsel is as useful as the extent of facts disclosed to counsel (06:09), discuss the Unicat Catalyst Technologies settlement announced by the Bureau of Industry & Security (BIS) on June 24, 2025 and parallel settlements announced by the Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the Department of Justice’s (DOJ’s) National Security Division (NSD) on June 16, 2025 (08:34), the lessons for pre-acquisition due diligence (11:03) including the importance to buyers of testing whether a target’s trade compliance program incorporates risks driving by the full definition of knowledge to include “high probability” awareness (for example, by specifically addressing risks under the catch-all provisions) (15:33), convergence across DOJ, Treasury, and Commerce regarding expectations for corporate compliance programs (17:50), and then Mike & Brent coin the phrase “stack sweep” to describe what would be the equivalent in corporate export controls enforcement to prior “industry sweeps” in corporate FCPA enforcement, in that catch-all, knowledge-driven end-use and end-user enforcement “sweeps” within the tech industry would be “sweeps” up and down the relevant technology stack (20:01). They then conclude with Brent’s back-by-popular-demand segment, “Managing Up” (25:52).

Resources:

The July 2, 2025, BIS settlement with Alpha & Omega Semiconductor

The June 24, 2025, BIS settlement with Unicat Catalyst Technologies

The June 16, 2025, OFAC settlement with Unicat Catalyst Technologies

The June 16, 2025, DOJ NSD press release with the relevant declination letter (buyer), non-prosecution agreement (target), and criminal guilty plea (former CEO)

For everything you ever wanted to know about the “high probability” standard

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