The federal government says it has identified nearly $1 billion in trade activity suspected of being associated with efforts to evade Russia-related export controls.
For more information on the wide range of trade restrictions the U.S. has imposed on Russia and how to ensure your company is in compliance, please contact attorney Kristine Pirnia at (202) 730-4964 or via email.
The Bureau of Industry and Security and the Financial Crimes Enforcement Network issued an alert in June 2022 urging financial institutions (banks, credit card operators, foreign exchange dealers, etc.) to exercise increased vigilance as individuals and entities attempt to evade U.S. controls on exports to Russia following its invasion of Ukraine. This alert listed nearly two dozen red flags that can indicate whether a shipment may be connected to such evasion and should be reported. It also listed specific commodities that present special concern because of their potential diversion to an end-use in Russia that could further its military and defense capabilities.
The two agencies recently issued a financial trend analysis stating that reports filed in response to that alert have provided BIS with insight into Russian procurement activities that has helped directly enable export enforcement actions. Specifically, visibility into the financial networks of Russian proliferators, shell companies, and fronts has prompted new investigations and bolstered existing ones, resulting in detentions and seizures of unauthorized exports as well as the application of BIS enforcement authorities that can result in criminal and/or administrative sanctions. BIS has also used the information from these reports to identify parties in Russia and third countries acting contrary to U.S. national security and foreign policy interests, leading to their designation on the Entity List and the imposition of license requirements for transactions subject to the Export Administration Regulations.
Reports filed between June 2022 and July 2023 detailed almost $1 billion in suspicious activity, and the new analysis highlights trends found in these reports, including key U.S.-origin goods exported to end-users in Russia, emerging jurisdictions for export control evasion, and intermediaries enabling the movement of sensitive goods to Russia. Specific findings include the following.
- Companies in intermediary countries – mainly in China and Hong Kong but also in Belgium, Germany, Singapore, Turkey, the United Arab Emirates, and the United Kingdom – appear to be purchasing U.S.-origin goods on behalf of Russian end-users.
- Suspicious transactions link trade activity, likely involving sensitive items, between end-users in Russia and other jurisdictions, particularly China, Hong Kong, Turkey, and the UAE.
- The majority of companies identified as being potentially associated with, or directly facilitating, Russian export control evasion are connected to the electronics industry and linked to several jurisdictions. Many of the U.S.-based companies noted in the reports manufacture or sell electronics equipment such as microelectronic components, imaging technology, electronic filters, and electromechanical instrumentation.
- Companies in the industrial machinery industry are also potentially supplying Russia with equipment, such as fluid transfer system components, gas compressors, wood materials, plumbing equipment, precision tungsten rods, and welding equipment. These companies operate in China, Hong Kong, Singapore, the U.S., and other countries.
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