Penalties/Export Highlights [As Of October 20, 2022] – Export controls and trade and investment sanctions

Penalties/Export Highlights [As Of October 20, 2022] – Export controls and trade and investment sanctions

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New US-UK Sanctions Partnership: On October 13, 2022, the Office of Foreign Assets Control (“OFAC”) and the United Kingdom’s Office of Financial Sanctions Implementation (“OFSI”) announced that they had concluded multi-day meetings in London involving a technical exchange of information between the two sanctions. authorities. The agencies agreed to further strengthen OFAC-OFSI cooperation, including exploring ways to align with sanctions, providing guidance and improving information sharing. The agencies expect future collaboration to expand beyond sanctions against Russia to include other overlapping sanctions regimes and priorities, such as cyber threats and misuse of virtual assets, and to address the risks to the US and UK financial systems posed by corruption, kleptocracy and other economic crimes. .

New designations in the UK, US and EU: On October 19, 2022, OFAC appointed Yury Yuryevich Orekhov, a Russian national and procurement agent, and two of his companies, Nord-Deutsche Industrieanlagenbau GmbH and Opus Energy Trading LLC. OFAC claimed that Orekhov and his companies purchased military and sensitive dual-use technologies from US manufacturers and supplied them to Russian end users.

On October 20, 2022, the UK and EU nominated three Iranian military chiefs for the development or delivery of unmanned aerial vehicles (i.e. drones) to Russia for use against Ukraine. The UK has also designated an Iranian entity, Shahed Aviation Industries, to manufacture drones supplied to Russia.

On October 13, 2022, the EU appointed Sergei Ivanovich Menyailo, leader of North Ossetia-Alania and former Plenipotentiary Representative of the President of the Russian Federation, for providing support to those involved in the poisoning of Alex Navalny.

US and UK General Licensing Updates: On October 17, 2022, OFAC issued General License (“GL”) 28A which replaces GL 28. GL 28A authorizes all transactions involving the public joint-stock company Transkapitalbank to or from Afghanistan up to as of January 18, 2023. The GL previously expired on October 20, 2022 but the scope of the GL remains unchanged.

On October 17, 2022, the United Kingdom issued General License INT/2022/1552576 under its Russian and Belarusian Sanctions Regulations allowing Designated Persons (“DPs”) and companies owned and controlled by DPs to conduct payments to the London Court of International Arbitration (“LCIA”) to cover their arbitration costs. The license also authorizes the LCIA to receive and use payments for arbitration fees and the relevant financial institutions to process such payments.

US government alert on the impact of sanctions and export controls on the Russian military: On October 14, 2022, the U.S. Departments of Treasury, Commerce, and State issued a joint alert, saying Russian sanctions had a significant impact on Russia following its invasion of Ukraine. The alert notes that US sanctions and export controls have degraded Russia’s ability to wage war and project military might beyond its borders. Specifically, the actions (i) prevented Russia from replacing over 6,000 weapons and pieces of military equipment destroyed during the war in Ukraine; (ii) caused Uralvagonzavod, the main Russian tank producer, to lay off its employees due to a lack of foreign components; (iii) reduced imports of semiconductors to Russia by 70%; and (iv) created major supply shortages for the Russian military.

The alert also flags the risk of Russian circumvention of US sanctions and export controls, and that those who support sanctioned Russian individuals risk being sanctioned. For example, diversionary tactics included:

  • A Russian company trying to leverage front companies and intermediaries in Uzbekistan, Armenia and the People’s Republic of China to continue importing critical technologies.

  • Designation of an Uzbekistan-based entity that actively supported the Russian company’s breakout efforts, as well as other foreign front companies and intermediaries that operated as part of a Russian industry supply network of defense.

  • Designation of an FSB-linked network covertly purchasing US, Japanese and European components for the Russian defense industrial base through various foreign countries and bank accounts.

OFAC guidelines: On October 14, 2022, OFAC released Frequently Asked Questions (“FAQ”) 1092, FAQs confirming that non-U.S. individuals and companies that provide goods, services, or other forms of support to the Russian military-industrial complex may be subject to US sanctions. FAQ 1092 also highlighted various ways in which the United States has used sanctions against the Russian military-industrial complex.

Enforcement measures:

  • JTemporary denial order against Ural Airlines:On October 13, 2022, the U.S. Department of Commerce issued a temporary denial order against Russian carrier URAL Airlines JSC (“URAL”) for continued export violations. The URAL continuously operated controlled aircraft subject to Export Administration Regulations (“EAR”) without authorization. The temporary denial order terminates the URAL’s right to participate in transactions subject to the AEI.

  • Intertech Trading Corporation fined for failing to file export information: On October 17, 2022, a federal court ordered Intertech Trading Corporation (“Intertech”), a New Hampshire laboratory equipment distributor, to pay $140,000 and two years of corporate probation after Intertech pleaded guilty. to 14 counts of failure to report export information on shipments of laboratory equipment to Russia and Ukraine between 2015 and 2019.

  • Indictment of European Nationals and Entities for Violation of US Export Law: On October 19, 2022, the United States Department of Justice (“DOJ”) announced the unsealing of an indictment against European nationals and entities for allegedly attempting to smuggle a controlled jig to the exported to Russia in 2018, in violation of U.S. export control laws and regulations. Although the crusher does not need a license to export to EU countries, a license was required for export and re-export to Russia due to its potential application in nuclear proliferation programs and defense. The DOJ also announced criminal charges against numerous individuals and entities for violating US export control laws regarding the alleged attempt to illegally export a jig grinder to Russia. Separately, the DOJ announced criminal charges against Russian and Venezuelan nationals for allegedly purchasing military and dual-use technology from US manufacturers to ship to Russian end users, including sanctioned companies. The DOJ also alleged that some defendants smuggled millions of barrels of Venezuelan oil from Venezuela to Russian and Chinese buyers involving U.S. dollar transactions through U.S. financial institutions and correspondent accounts, in violation conspiracy to defraud the United States, conspiracy to violate the International Emergency Economics Credentials Act (“IEEPA”); money laundering conspiracy and bank fraud conspiracy.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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James V. Hayes