On October 19, 2022, the US Department of Justice announced charges against nearly a dozen individuals and several entities for violating US export controls and sanctions laws in two separate cases, one in the Eastern District of New York and the other in the District of Connecticut. DOJ stated that both cases were coordinated through its Task Force KleptoCapture, an interagency law enforcement task force dedicated to enforcing Russia-related sanctions and export controls laws. (For discussion about Task Force KleptoCapture, please refer to our previous post.)
The news highlights the US government's continued attention to enforcing Russia-related export controls and sanctions measures. We expect that DOJ and other US enforcement agencies will continue to pursue investigations and bring enforcement actions focused on alleged violations of Russia-related export controls and sanctions laws, including through the Task Force KleptoCapture and cooperation with its allies and partner countries. In announcing the enforcement actions, Attorney General Merrick Garland emphasized that DOJ investigators and prosecutors "will be relentless in their efforts to identify, locate and bring to justice those whose illegal acts undermine the rule of law and enable the Russian regime to continue its unprovoked invasion of Ukraine."
Details of the Eastern District of New York Case (United States v. Orekhov et al.)
DOJ charged five Russian nationals and two oil brokers from Venezuela for allegedly participating in a global sanctions evasion and money laundering scheme. According to the DOJ announcements, the defendants used shell companies and cryptocurrency to source and purchase sensitive military dual-use technologies from US manufacturers—including semiconductor and microprocessor items used in aircrafts, missile systems, smart munitions, radar, satellites, and other military applications—and shipped the items to Russian end users, including sanctioned companies. DOJ asserted that some of the types of electronic components obtained through this scheme were found in Russian weapons platforms that were seized in Ukraine.
The defendants also allegedly used a front company to deliver hundreds of millions of barrels of oil from Venezuela to Russian and Chinese purchasers, including companies controlled by sanctioned oligarchs. Defendants allegedly used falsified documents and supertankers with deactivated GPS navigation systems to obscure the Venezuelan origin of the oil.
Five defendants are involved in the alleged oil-smuggling scheme and are charged with conspiracy to violate the International Emergency Economic Powers Act (IEEPA) (which serves as the basis for the Russia-related sanctions regulations), bank fraud conspiracy and money laundering conspiracy. Four defendants are involved in the alleged export-controls-violation scheme and are charged with conspiracy to commit wire fraud, wire fraud, conspiracy to commit money laundering, conspiracy to violate the Export Control Reform Act (ECRA), and smuggling goods from the United States. All of the defendants also are charged with conspiracy to defraud the United States.
Two of the individual defendants were arrested in Germany and Italy at the request of the United States and will undergo extradition proceedings.
Details of the District of Connecticut Case (United States v. Romanyuk et al.)
DOJ charged four named individuals and two European entities for allegedly violating US export controls laws by attempting to smuggle a high-precision grinding machine, commonly known as a "jig grinder," which is export controlled for its use in nuclear proliferation and defense programs. DOJ stated that the US authorities worked with Latvian authorities to intercept the jig grinder in Riga, Latvia before it was shipped to Russia.
Both the individual defendants and the entity defendants are charged with conspiracy to defraud the United States, violation of the ECRA, smuggling goods from the United States, and international money laundering. One of the individual defendants also is charged with making false statements to the US Department of Commerce.
The four individual defendants were arrested by Latvian and Estonian authorities at the request of the United States, and DOJ is seeking their extradition.
We will continue to monitor these cases and provide updates, here on Enforcement Edge.
* Junghyun Baek contributed to this blog post. Mr. Baek is a graduate of Harvard Law School and is employed at Arnold & Porter's Foreign Legal Consultant Office as a Law Clerk.
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