New U.S. and UK Sanctions Partnership: On October 13, 2022, the Office of Foreign Assets Control (“OFAC”) and the UK’s Office of Financial Sanctions Implementation (“OFSI”) announced that they had concluded multi-day meetings in London involving technical exchange of information between the two sanctions authorities. The agencies have decided to enhance OFAC-OFSI cooperation further, including exploring ways to align on sanctions, providing guidance, and improving information sharing. The agencies expect future collaboration to expand beyond sanctions on Russia to include other overlapping sanctions regimes and priorities, such as cyber threats and misuse of virtual assets, and to address risks to the U.S. and UK financial systems posed by corruption, kleptocracy and other economic crimes.
New UK, U.S., and EU Designations: On October 19, 2022, OFAC designated 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 Orekhov and his companies procured military and sensitive dual-use technologies from U.S. manufactures and supplied them to Russian end users.
On October 20, 2022, the UK and EU designated three leaders of the Iranian military for the development or delivery of Unmanned Aerial Vehicles (i.e., drones) to Russia for use against Ukraine. The UK also designated one Iranian entity, Shahed Aviation Industries, for manufacturing drones supplied to Russia.
On October 13, 2022, the EU designated Sergei Ivanovich Menyailo, the Head of the North Ossetia-Alania and former Plenipotentiary Representative of the President of the Russian Federation, for providing support to persons involved in the poisoning of Alex Navalny.
U.S. and UK General License Updates: On October 17, 2022, OFAC published General License (“GL”) 28A which supersedes GL 28. GL 28A authorizes all transactions involving Public Joint Stock Company Transkapitalbank destined for or originating from Afghanistan until January 18, 2023. The GL previously expired on October, 20, 2022 but the scope of the GL remains the unchanged.
On October 17, 2022, the UK issued General License INT/2022/1552576 under its Russian and Belarusian sanctions regulations authorizing Designated Persons (“DPs”) and companies owned and controlled by DPs to make payments to the London Court of International Arbitration (“LCIA”) to cover their arbitration costs. The license also authorizes LCIA to receive and use the payments for arbitration costs and for relevant financial institutions to process such payments.
U.S. Government Alert on the Impact of Sanctions and Export Controls on Russia’s Military: On October 14, 2022, the U.S. Departments of the Treasury, Commerce, and State issued a joint alert, claiming that the Russian sanctions have had a large impact on Russia following its invasion of Ukraine. The alert notes that U.S. sanctions and export controls have degraded Russia’s ability to wage war and project military force beyond its borders. Specifically, the actions (i) prevented Russia from replacing over 6,000 weapons and pieces of military equipment destroyed in the war in Ukraine; (ii) caused Uralvagonzavod, Russia’s major tank producer, to furloughed its employees due to a lack of foreign components; (iii) reduced semiconductor imports to Russia by 70 percent; and (iv) created major supply shortages for the Russian military.
The alert also flags the risk of Russian evasion of U.S. sanctions and export controls, and that those who support sanctioned Russian persons risk being sanctioned. For example, diversion tactics included:
- A Russian company attempting to leverage front companies and intermediaries in Uzbekistan, Armenia, and the People’s Republic of China to continue its importation of critical technologies.
- Designation of an Uzbekistan-based entity that actively supported the Russian company’s evasion efforts, and other front companies, and foreign intermediaries that operated as part of a Russian defense industry procurement network.
- Designation of an FSB-linked network covertly procuring U.S., Japanese, and European components for Russia’s defense industrial base through various foreign countries and bank accounts.
OFAC Guidance: On October 14, 2022, OFAC published Frequently Asked Question (“FAQ”) 1092, FAQ confirming that non-U.S. persons and companies that provide goods, services, or other support to Russia’s military-industrial complex may be subject to U.S. sanctions. FAQ 1092 also highlighted different ways the U.S. has used sanctions against the Russian military-industrial complex.
- Temporary 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 ongoing export violations. URAL continuously operated controlled aircrafts subject to the Export Administration Regulations (“EAR”) without authorization. The Temporary Denial Order terminates the right of URAL to participate in transactions subject to the EAR.
- Intertech Trading Corporation Sentenced For Failure to File Export Information: On October 17, 2022, a federal court sentenced 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 felony counts of failure to file export information on shipments of lab equipment to Russia and Ukraine between 2015 and 2019.
- Indictment of European Nationals and Entities for Violating U.S. Export Law: On October 19, 2022, the U.S. Department of Justice (“DOJ”) announced the unsealing of an indictment against European nationals and entities for allegedly attempting to smuggle an export-controlled jig to Russia in 2018, in violation of U.S. export control laws and regulations. Although the grinder did not require a license to export to EU countries, a license was required for export and reexport to Russia because of its potential application in nuclear proliferation and defense programs. DOJ also announced criminal charges against numerous individuals and entities for violating U.S. export control laws relating to the alleged attempted unlawful export of a jig grinder to Russia. Separately, the DOJ announced criminal charges against Russian and Venezuelan nationals for allegedly purchasing military and dual-use technologies from U.S. manufacturers for shipment to Russian end users, including sanctioned companies. DOJ also alleged that certain defendants smuggled millions of barrels of Venezuelan oil from Venezuela to Russian and Chinese purchasers involving U.S. dollar transactions through U.S. financial institutions in and correspondent accounts, in violation of conspiracy to defraud the United States, conspiracy to violate the International Emergency Economic Powers Act (“IEEPA”); money laundering conspiracy and bank fraud conspiracy.