United States: Biden Administration Takes Administrative Action Against Third-Party Facilitators Of Sanctions Evasion

Washington, D.C. (April 26, 2023) – The U.S. Treasury Department's Office of Foreign Assets Control (OFAC) and the State Department continue to take concrete actions to crack down on third-party intermediaries used to evade both U.S. Russia-related sanctions and export controls. (See Lewis Brisbois' alert from March 7, 2023.)

On April 12, 2023, OFAC announced comprehensive administrative action against 25 individuals and 29 entities with touchpoints in 20 jurisdictions. The State Department imposed sanctions on more than 120 entities and individuals across 20 jurisdiction, including third-party facilitators of sanctions evasion.

Legal Authority for Sanctions

The International Economic Powers Act, 50 U.S.C. §§ 1701 et seq., authorizes the President to "declare[] a national emergency with respect to" an "unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States." 50 U.S.C. § 1701(a). Under such a declaration, the government may "block...or prohibit any, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in" the "property" or "interests of the property" of an entity or individual listed on the OFAC-managed Specially Designated Nationals and Blocked Persons list (SDN List). 50 U.S.C. § 1702(a)(1)(B).

On April 15, 2021, President Biden signed Executive Order 14024, 86 Fed. Reg. 20,049, to block property with respect to specified harmful foreign activities of the Russian government. OFAC's placement of individuals and entities on the SDN list prohibits U.S. persons from engaging in any transfer of products or payments to, or financing of, any property interest of any sanctioned individual or any entity that is, directly or indirectly, 50% or more owned by any sanctioned individual. These prohibitions are extremely broad, including the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person and the receipt of any contribution or provision of funds, goods, or services from any such person.

Multiple Jurisdictions Implicated by Latest Designations

The April 12 actions target the facilitators of Russian oligarch Alisher Burhanovich Usmanov, who holds significant interests in the metal mining, telecommunications, and information technology sectors. Usmanov has a wide network of businesses in financial safe havens, as well as family members through which to conduct financial transactions. Usmanov has also been sanctioned by Australia, Canada, the European Union, Japan, New Zealand, Switzerland, and the United Kingdom.

U.S. authorities, pursuant to E.O. 14024, have designated several entities that facilitate Usmanov's sanctions evasion. Cyprus national Demetrios Serghides handles financial transactions on behalf of Usmanov. Serghides is a settlor of The Sister Trust, which owns multiple companies, including Cyprus-registered Almenor Holdings. In turn, Almenor has several directors, which OFAC has designated for being or having been leaders, officials, senior executive officers, or members of the board of directors of Almenor. OFAC and the State Department have added numerous other entities and individuals to the SDN list related to Usmanov.

Andrei Vladimirovich Skoch is a member of the State Duma of the Federal Assembly of the Russian Federation and is a previous shareholder of companies controlled by Usmanov. Last year, the Department of Justice obtained a forfeiture warrant for Skoch's Airbus A319–100 aircraft worth over $90 million. See Seizure Warrant, In re: Airbus A319–100 Aircraft Bearing Tail Number P4-MGU and Manufacturer Serial Number 5445, No. 22-MAG-6446 (E.D.N.Y. Aug. 8, 2022). On April 12, 2023, OFAC and the State Department added Andrei Skoch's father, Vladimir Skoch, and his daughter, Varvara Skoch, for receiving transferred shares of Usmanov's companies from Andrei Skoch.

OFAC and the State Department also sanctioned companies based in the People's Republic of China, Turkey, and the United Arab Emirates for supplying multiple entities in Russia's military-industrial complex. In addition, OFAC targeted the International Investment Bank in Budapest, Hungary for increasing Russian intelligence presence in Central Europe and facilitating sanctions violations via financial transactions. Last, the State Department designated the network of lawyer Christodoulos Vassiliades for being a prolific enabler of Russian oligarchs by being or having been a leader, official, senior executive officer, or member of the board of directors of Sberbank Investment Limited, an entity that is blocked pursuant to E.O. 14024. The State Department also sanctioned Vassiliades' Cyprus-based law firm, CGV LLC, which maintains offices in Belize, Seychelles, the British Virgin Islands, Hungary, and Greece.

Conclusion

OFAC's and the State Department's recent actions exemplify the potential global reach of U.S.-imposed sanctions in the wake of Russia's invasion of Ukraine. More than one year into the expanded sanctions regime, the Biden Administration will likely continue to increase activity against third-party facilitators of sanctions evasion.

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