October 20, 2022

OFAC designates network for procuring US components for Russian end-users; DOJ unseals related indictment

On October 19, 2022, the US Department of Treasury Office of Foreign Assets Control, in coordination with the Department of Justice and the Federal Bureau of Investigation, designated a Russian national and two of his companies responsible for the procurement of military and sensitive dual-use technologies from US manufacturers to Russian end-users.  OFAC reports that Russian national Yury Yuryevich Orekhov operated a network that was able to procure semiconductors and microprocessors from the US that had been discovered in a number of Russian weapons in Ukraine. Orekhov is accused of sending these US components to Russian end-users, including companies that contained on the Entity List kept by the Commerce Department’s Bureau of Industry and Security (“BIS”), in violation of US export controls. 

Orekhov and his two companies were designated pursuant to Executive 14024 for operating in the technology sector of the Russian economy or for being a company owned or controlled by Orekhov.  Consequently, the designations were imposed just after the release of a joint alert by the US Departments of Treasury, Commerce and State on October 14, 2022 which describes the impact of international sanctions and export controls on Russia’s war against Ukraine.  

As a result of the OFAC designations, all property and interests in property of these designees within the United States or within the possession or control of a US person are blocked, and US persons are generally prohibited from engaging in transactions involving designated persons.  In addition, entities owned 50 percent or more by one or more blocked persons are also blocked.

On the same day, the US Department of Justice announced that federal prosecutors in New York unsealed a 12-count indictment charging Orekhov and four other Russian nationals with a variety of crimes, including conspiracy to defraud the United States, conspiracy to violate the International Emergency Economic Powers Act (“IEEPA”), conspiracy to commit bank fraud, and money laundering conspiracy, in connection with the Orekhov’s procurement and smuggling scheme. The DOJ reports that the dismantling of this sophisticated Russian network was made possible by Task Force KleptoCapture, an interagency task force formed in March 2022, which is dedicated to the enforcement of sanctions, export restrictions, and other economic countermeasures imposed by the US and its allies and partners, in response to Russia’s military invasion of Ukraine.

Department of Treasury Press Release | DOJ Press Release | Unsealed Indictment