US warns of growing use of proxies to evade Russia sanctions

WASHINGTON — The Russian invasion of Ukraine has resulted in unprecedented U.S. sanctions against Russia.
In the year since the invasion began, the US Treasury Department imposed sanctions on some 2,400 individuals and businesses, while the Commerce Department imposed strict export controls.
While the Biden administration says these restrictions have “significantly weakened” Russia’s military-industrial complex, it is also concerned that sanctioned Russian entities and individuals have become increasingly adept at circumventing sanctions.
Last week, the Ministries of Justice, Finance and Commerce issued a “Compliance Notice” highlighting one of the most common tactics used by unscrupulous actors to circumvent sanctions against Russia and Belarus – l use of third-party intermediaries and transit points.
In a notice to financial institutions and others, the three agencies responsible for implementing the sanctions regime cited more than a dozen common signs they believe indicate the use of third-party intermediaries to circumvent sanctions.
These include the use of shell companies for international wire transfers, customer reluctance to share end-user information, and the diversion of shipments through “certain transshipment points commonly used to illegally divert goods banned to Russia and Belarus”.
Anthony Tsynova, a partner at Washington-based law firm Holland & Knight, said the notice reflected the administration’s growing concerns about sanctions evasion.
“The concern is that Russia continues to receive embargoed technologies to support its war and continues to receive resources to fund the war,” Cinova said.
After the invasion of Ukraine in February 2022, many multinationals left Russia, while others chose not to do business in the country. But someone stayed.
“They don’t want to lose long-term business opportunities. And so, probably, these are the people to whom this message is addressed, ”said Tsinova.
Jim McWeeny, chief executive of advisory firm Integrity Risk International, said the US government was also sending a signal to governments that were helping Russia avoid sanctions.
“Certainly there are a number of countries around the world that have united around sanctions against Russia over its activities in Ukraine,” McQueeny said. “But, as far as we know, there are countries that have stayed on the sidelines and are still doing business. And it’s not just the usual bad actors that we usually see around the world.”
Among the countries commonly used as “transshipment points” to Russia and Belarus, the notice mentions China, Armenia, Turkey and Uzbekistan.
The United Arab Emirates is another country that would serve as a transit point for Russia and Belarus.
Treasury Assistant Secretary for Terrorist Financing Elisabeth Rosenberg said the administration was concerned that between July and November 2022, UAE companies exported more than $18 million worth of goods to Russian entities on US sanctions lists.