The United States recently issued a Tri-Seal Compliance Notice to inform the international community of attempts by third-party intermediaries to evade Russia-related sanctions and export controls in an effort to support Russia’s military-industrial complex and its war against Ukraine. The US Department of Justice, the US Department of the Treasury’s Office of Foreign Assets Control, and the US Department of Commerce’s Bureau of Industry and Security (“BIS”) issued the compliance note to specifically address Russia’s continued use of third-party intermediaries and transshipment points to evade US sanctions and export regulations and obscure end users who are subject to Russia-related sanctions. The compliance note is intended to help the private sector identify warning signs that they may be dealing with third-party intermediaries who are involved in sanctions evasion efforts. The note also emphasizes the importance of effective, risk-based compliance programs for US business or other entities that deal in US origin goods or services or in foreign-origin goods that are subject to US export laws.
The note provides the following list of common red flags potentially pointing to efforts to evade sanctions or export controls:
- The use of corporate vehicles (i.e., shell companies, legal entities) that obscure a company’s ownership, source of funds or countries involved, especially in sanctioned jurisdictions;
- Reluctance by a customer to share information about a product’s end use;
- The use of shell companies to conduct international wire transfers;
- Declination installation, training or maintenance of the purchased item;
- Customers with IP addresses that do not correspond with their reported location;
- Last-minute changes to shipping instructions that appear contrary to transaction history or business practice;
- Payments from third-party countries or businesses not listed on the end-user form;
- The use of personal email accounts instead of business email accounts;
- The use of residential addresses or addresses common to multiple closely-held corporate entities;
- A customer that changes standard letters of engagement to obscure the ultimate customer;
- Transactions that previously involved shipments or payment s to Russia or Belarus;
- Transactions involving entities with little or no web presence; or
- Routing purchases through transshipment points commonly used to redirect restricted items to Russia or Belarus, for example China, Hong Kong, and Macau, and locations close to Russia such as Armenia, Turkey and Uzbekistan.
The compliance note also discusses several DOJ enforcement actions involving possible violations of Russia-related US sanctions and export control laws. The note highlights common tactics used by defendants in these cases such as dividing shipments of controlled items into multiple, smaller shipments to avoid law enforcement detection; using aliases to refer to intermediaries and end users; and claiming to do business on behalf of a US-based shell company rather than a restricted end user.