US Warns About Increasing Use of Intermediaries to Evade Russia Sanctions

WASHINGTON — The Russian invasion of Ukraine has triggered an unprecedented wave of U.S. sanctions on Russia.In the year since the onslaught, the U.S. The Treasury Department has sanctioned about 2,400 entities and individuals, while the Commerce Depar…

WASHINGTON — The Russian invasion of Ukraine has triggered an unprecedented wave of U.S. sanctions on Russia.

In the year since the onslaught, the U.S. The Treasury Department has sanctioned about 2,400 entities and individuals, while the Commerce Department has imposed prohibitive controls on exports to Russia and its ally Belarus.

While the Biden administration says the restrictions have “significantly degraded” Russia’s military-industrial complex and supply chains, it appears equally concerned that Moscow has proved increasingly adept at skirting the sanctions.

Using intermediaries, Russian companies continue to ship oil across the globe despite wide-ranging Western sanctions on its energy industry, while at the same time importing U.S. and European technology through intermediaries in countries that have not imposed sanctions on Russia.

In a bid to close the loophole, the Biden administration has been homing in on what it calls “evasion-related targets,” designating more than 200 entities in connection with evading the sanctions. Spanning Europe, Africa and Asia, the targets include transshipment points in the Middle East, the Eurasian Economic Union, and East Asia, the Treasury Department said last month.

Putting companies on notice about the risk of violating U.S. sanctions on Russia, the U.S. departments of Justice, Treasury and Commerce last week released a “compliance note” to highlight what they described as one of the most common sanctions evasion tactics: the use of third-party intermediaries and transshipment points.

In the joint notice, the three agencies responsible for sanctions enforcement cited more than a dozen common “red flags” that suggest the use of a third-party intermediary – or a foreign company based outside Russia – to evade the sanctions.

Among the tell-tale signs: Using shell companies to execute international wire transfers, being reluctant to share information about the end user, and routing shipments through “certain transshipment points commonly used to illegally redirect restricted items to Russia or Belarus.”

“Businesses of all stripes should act responsibly by implementing rigorous compliance controls,” the notice warned.

Antonia Tzinova, a partner at the Holland & Knight law firm in Washington, D.C., said the administration’s sanctions compliance notice reflects growing concerns that Russian entities have found ways to circumvent the restrictions.

“The concern is that Russia keeps getting the technologies that have been embargoed in support of its war and keeps getting the resources to finance its war,” Tzinova said.

Sanctions – when targeted, closely coordinated and multilateral – work, she said. But they lose potency over time as their targets learn to evade them.

“This is part of the adjustment process,” she said of Russia’s ability to weather the sanctions’ effects. “They’ll find ways because for them it’s a matter of survival.”

Jim McWeeney, chief executive officer of Integrity Risk International, said the compliance note amounts to a warning signal to governments that are helping Russia evade the sanctions.

“These aren’t just the typical bad actors that we normally see around the globe,” McWeeney said.

The notice mentioned China, Armenia, Turkey and Uzbekistan among the countries commonly used as “transshipment points” to Russia and Belarus.

In January, the non-profit Silverado Policy Accelerator reported that some former Soviet states had “increased their transshipment of goods produced by multinational firms that no longer export the goods directly to Russia.”

Another alleged transshipment point to Russia and Belarus is the United Arab Emirates.

Elizabeth Rosenberg, U.S. assistant secretary of Treasury for terrorist financing, said the administration is “concerned” that UAE-based companies exported more than $18 million worth of goods to U.S.-designated Russian entities between July and November 2022.

In addition, she said, UAE firms shipped more than $5 million in U.S.-origin, export-controlled goods to Russia, including semiconductor devices.

“We are specifically concerned about increases in trade with Russia in the kind of goods that can be used on the battlefield and those who are aiding designated Russian entities,” Rosenberg said last week at the Association of Women in International Trade. “We are investigating this type of assistance at the individual, firm and sector level.”

The embassies of China, Armenia, Turkey, United Arab Emirates and Uzbekistan in Washington did not respond to VOA’s requests for comment.

McWeeney of Integrity Risk said the Biden administration is clearly “concerned” about Russia’s efforts to circumvent international sanctions.

“The more they can evade sanctions, the longer that Russia can continue to pursue this war,” McWeeney said. “The more that the sanctions can be enforced, the more difficult it is on Russia to fund the war, to continue the war.”

Source: Voice of America