U.S. Government Charges Parties with Violating U.S. Sanctions and Export Control Laws
By: Alexander J. Cotoia currently serves as the Regulatory Compliance Manager at The Volkov Law Group, where he regularly advises the firm and its clients on the latest developments implicating trade compliance concerns. He may be reached at [email protected]; and Daniela Melendez, Associate at the Volkov Law Group she may be reached at [email protected]
As we have repeatedly noted in the context of other blog posts and webinars in which various representatives of The Volkov Law Group have participated, the violation of existing U.S. sanctions and export control regulations remains a core focus of federal prosecutors, in the wake of Deputy Attorney General Lisa Monaco’s observation that sanctions enforcement is the “new FCPA”. This is particularly true as tensions have continued to escalate between Washington and Moscow, owing to the latter’s decision to continue its Ukraine incursion with seeming impunity. The recent decision of federal prosecutors to zealously pursue a series of criminal charges against a number of parties in the context of two proceedings initiated in the U.S. District Court for the Eastern District of New York, is proof positive that Deputy Attorney General Monaco’s statement amounts to more than mere rhetoric.
United States v. Goltsev et al.
According to a criminal complaint, a New York resident and two Canadian nationals were recently arrested in connection with an elaborate global scheme in which the defendants used two corporate entities registered in Brooklyn to unlawfully purchase dual-use electronics on behalf of end-users based in Russia—which included companies maintaining strong affiliations with the Russian Federation military. The egregiousness of the alleged misconduct is underscored by the fact that some of the electronic components shipped by the defendants were of the same model and part numbers that have been found in seized Russian weapons in Ukraine.
Thus, in United States v. Goltsev et al. three individual defendants were charged with violating sanctions and export controls laws. The scheme purportedly involved nearly $7 million worth of semiconductors, integrated circuits and other dual-use electronic components that were unlawfully exported to the Russian Federation via a Brooklyn based company. The items in question were shipped to intermediary corporations located in Turkey, Hong Kong, India, China, and the United Arab Emirates, which in turn, re-exported the items to the Russian Federation. Most of the electronic components and integrated circuits shipped by the defendants were, according to the Department of Commerce, “of the highest concern due to their critical role in the production of advanced Russian precision-guided weapons systems, Russia’s lack of domestic production, and limited global manufacturers.”
United States v. Grigorev et al.
In United States v. Grigorev et al. defendants, two from Russia and one resident of Brooklyn were charged with conspiracy and other offenses related to export control violations for the purpose of benefiting companies affiliated with the Russian Federation military. Among these companies is SMT-iLogic, a sanctioned Russian entity that has been identified as part of the global supply chain utilized to manufacture Russian military drones deployed in Russia’s war against Ukraine.
According to the indictment, defendants used an entity named “Quality Life Cue” or “QLC” to breach export control laws by allowing the entity to acquire and then illegally divert, dual use electronic components to a number of entities in Russia having substantial ties to its Ukraine excursion. Court documents establish that between 2021 and 2022, QLC received wire transactions from SMT-iLogic totaling approximately $273,000. The government contends that these funds were used to make payments to a Brooklyn-based electronics distributor or to pay down debts incurred by one of the defendants in the course of procuring controlled commodities. Perhaps most damningly, documentary evidence further establishes that the defendants expressly mentioned their effort to circumvent U.S. sanctions regulations in a number of email exchanges originating from accounts controlled by the defendants.
In the end, these cases underscore how serious the U.S. government’s efforts to prosecute those who breach U.S. sanctions and export control laws truly are. They further illustrate the extent to which federal agencies are collaborating in an effort to positively identify those entities and individuals that are responsible for the most serious violations of U.S. sanctions and export control laws. Perhaps most critically, these cases demonstrate that despite the effort to conceal the real nature of a transaction or the end-user of an item, the U.S. government is working diligently to bring clarity where obscurity is found.