Ruling [CJEU] ¦ Dual-Use Aircraft Exports and the Financial Crime Risks Behind Strategic Goods Controls

A broader test for dual-use items

The Advocate General’s Opinion in Case C-538/25 could materially affect how European authorities assess exports of goods capable of serving both civilian and military purposes. The proposed approach treats the concept of “dual-use items” broadly, while anchoring the assessment in the physical and technical characteristics of the goods at the time of export.

The case concerns an Austrian manufacturer that exported a two-seat civilian aircraft, together with related items and technology, to the Myanmar Airforce in 2019. Austrian authorities authorized that export. When the manufacturer later sought to export the same items in 2023, authorization was refused. The authorities considered that the aircraft and associated materials could support reconnaissance operations and military pilot training, creating a possible connection with human rights violations.

The dispute is important beyond aviation. Dual-use goods sit at the intersection of trade, national security, human rights protection and financial crime compliance. Their lawful appearance can conceal significant risks when goods are supplied to military users, state-linked entities or jurisdictions affected by conflict, sanctions or systemic abuses.

The predicate-offense connection

Money laundering analysis must begin with the predicate offense. In this context, the relevant underlying conduct may include unlawful arms trafficking, sanctions evasion, corruption, procurement fraud, breaches of export controls or serious human rights violations. Proceeds generated through those offenses can later enter the financial system through apparently legitimate commercial transactions.

A dual-use export can create several points at which illicit value is generated or concealed. A transaction may involve the unlawful acquisition of restricted technology, the payment of bribes to secure an export authorization, the use of false end-user certificates or the diversion of goods to an undisclosed military recipient. Revenue from the transaction may then be transferred through intermediaries, inflated invoices, offshore companies or third-country accounts.

The financial crime risk does not depend on whether the aircraft or other item is itself the direct instrument of an offense. The underlying offense may arise from the unauthorized export, the circumvention of trade restrictions or the use of the goods in conduct that violates criminal or international law. Once proceeds are generated, subsequent transfers, conversions or concealment may constitute money laundering, subject to the applicable national legal framework.

Bastian Schwind-Wagner _Follow

"The Advocate General’s Opinion in Case C-538/25 supports a broad interpretation of dual-use items, based primarily on their physical and technical capabilities. For financial crime compliance, this reinforces the need to look beyond civilian labels and assess whether an export could support military activity, human rights abuses or export-control violations.

The predicate offense remains central to any money laundering analysis. Unauthorized exports, corruption, sanctions evasion, procurement fraud and diversion can generate illicit proceeds that are later concealed through intermediaries, complex payment structures or unrelated commercial transactions."

Why the physical and technical characteristics matter

The proposed legal test would require authorities to examine what an item is technically capable of doing, rather than relying primarily on the identity or military strength of the end-user. For an aircraft, relevant features could include its configuration, endurance, instrumentation, communications systems, payload capacity, surveillance potential and suitability for military training.

This approach provides a more stable basis for regulatory decisions. A product does not become dual-use only because a particular recipient intends to misuse it. Conversely, its civilian branding does not remove the risk if its design permits military or security applications.

For financial institutions, the same distinction has practical significance. A bank assessing a trade-finance request should not treat a civilian product description as conclusive. The bank may need to understand the item’s technical function, the destination, the customer’s business model, the end-user and the wider transaction structure. A mismatch between the stated civilian purpose and the item’s capabilities may indicate export-control evasion, bribery or diversion.

Separating classification from authorization

The proposed reasoning distinguishes two questions that are often conflated.

The first is whether an item qualifies as dual-use. That question should be answered by reference to its physical and technical capabilities at the time of export. The national authorities would not necessarily need to determine the military capacity of the recipient, the political situation in the destination country, the possibility of later repurposing or the risk of diversion in order to classify the item.

The second is whether the export should require authorization or be prohibited. At that stage, authorities may consider the destination, the end-user, the risk of diversion, the security environment and the possibility that the goods could contribute to human rights violations.

This distinction is relevant to anti-money laundering controls. A financial institution may encounter a transaction that is not obviously prohibited but still presents a high risk of proceeds linked to a predicate offense. Export authorization is not proof that a transaction is free from corruption, sanctions or laundering concerns. Likewise, the absence of an authorization requirement does not establish that the transaction is low risk.

Myanmar and heightened exposure to abuse risks

The destination in this case is especially significant from a risk perspective. Transactions involving military institutions in a country affected by armed conflict and allegations of serious human rights abuses require enhanced scrutiny. Risks may arise from state procurement channels, military-owned businesses, front companies, undisclosed beneficial owners and payment routes involving intermediaries in other jurisdictions.

A transaction involving a civilian aircraft may therefore raise questions that extend beyond product classification. Financial institutions may need to establish who controls the recipient, who benefits from the transaction, whether any intermediary has a role beyond logistics and whether payments are proportionate to the goods and services supplied.

Potential warning signs include unusual commissions, vague consulting services, last-minute changes to the recipient, payments from unrelated companies, discrepancies between shipping and financial documents, and structures designed to prevent the bank from identifying the ultimate beneficiary. These indicators do not prove criminal conduct, but they justify a more detailed review and, where appropriate, escalation under applicable reporting obligations.

Human rights risks as a financial crime indicator

The proposed interpretation recognizes the protection of human rights as a legitimate basis for restricting certain exports. That point matters for compliance teams because human rights concerns can be closely connected to financial crime.

Bribery may be used to secure military contracts or regulatory approvals. False documentation may conceal the involvement of prohibited end-users. Procurement fraud may divert public funds. Export-control violations may generate profits for networks connected to armed groups or corrupt officials. The same transaction can therefore present trade, sanctions, corruption, human rights and money laundering risks at the same time.

A risk assessment should not isolate these issues into separate compliance silos. Information indicating a credible risk of human rights abuse may also affect the assessment of source of funds, source of wealth, beneficial ownership and the legitimacy of the commercial purpose.

Implications for transaction monitoring and investigations

The proposed approach may encourage financial institutions to improve the technical quality of trade-related screening. Automated systems often depend on product descriptions, customs codes and customer-provided information. Those data points may be insufficient where a civilian item has military applications.

Banks and other obliged entities should consider whether their controls can identify transactions involving aircraft, avionics, navigation equipment, surveillance technology, advanced manufacturing components and related technical assistance. Screening should cover not only the goods but also brokers, freight forwarders, maintenance providers, training organizations and payment intermediaries.

Where concerns arise, investigators should reconstruct the transaction as a complete chain. That includes the commercial rationale, contracting parties, beneficial owners, end-user documentation, licensing history, shipping route, payment instructions and communications concerning the intended use. The central question is whether the transaction may have generated, moved or concealed proceeds connected to a predicate offense.

The importance of reasoned decisions

The Advocate General also emphasizes effective judicial protection. National authorities should explain why they regard particular goods as dual-use and why the proposed export raises security or human rights concerns.

Clear reasoning is valuable for businesses and financial institutions as well. An unexplained restriction or vague risk classification can lead to inconsistent decisions, excessive de-risking or ineffective controls. Detailed decisions create a stronger basis for internal investigations, account restrictions, suspicious transaction reports and cooperation with authorities.

For regulated firms, records should show not only the final decision but also the facts considered, the technical characteristics of the goods, the parties involved, the licensing position and the reasons for accepting or rejecting the residual risk.

What compliance teams should take from the Opinion

The Opinion is not binding on the Court of Justice, which will issue its judgment at a later date. It nevertheless signals a potentially important direction for export-control and financial crime compliance.

The central lesson is that dual-use risk should be assessed by looking beyond labels. Technical capability, end-user risk, destination-country conditions and transaction structure each answer different questions. None should automatically replace the others.

A robust financial crime assessment should identify the possible predicate offense, trace the movement of value, test the legitimacy of the parties and purpose, and examine whether export-control or human rights concerns indicate concealment, diversion or corruption. Businesses that treat licensing as the end of the analysis may miss the financial flows that follow from the underlying offense.

For banks, exporters and professional advisers, the safest approach is to connect trade controls with anti-money laundering, counter-terrorist financing, sanctions and anti-bribery controls. Dual-use goods are not inherently illicit, but their technical capabilities and the circumstances of their export can provide a critical warning signal about how criminal proceeds are created, transferred and hidden.

Dive deeper

• InfoCuria ¦ Case C-538/25 [Flugzeugherstellerin] ¦ Link