Morgan Lewis US and Russia Sanctions Update
US Sectoral Sanctions - BIS (cont'd)
Related notes on transshipment etc.:
Be wary of relying on a "we only shipped to a third-country distributor / warehouse" defense (generally for
Russia, and for Crimea in particular - see slide 41 below)
The prevailing "knowledge or reason to know" standard (developed for Iran, but applies generally)
Various pronouncements / cases to date (see the Epsilon Electronics case decision in particular)
And another OFAC similar enforcement action in 2018: a US company was fined for knowingly shipping
controlled hi-tech goods to like-named sub. of known Russian defense industry SDN Almaz-Antey through
Canadian and Russian distributors (and the purchaser end-user evidently was known to the seller)
i.e., this was not a case of selling through distributor to unlimited/unknown buyers in Russia
provides vivid reconfirmation of the importance of a company's having meaningful, not just facial, screening
program and due diligence in all proposed Russian-related dealings
And similar 2019 OFAC announced Settlement Agreement with US/Dutch co. (PACCAR/DAF) involving
trucks diverted through Russian front buyer to Iran
Also another OFAC 2019 enforcement action involving a prominent US company - direct payments to it
from Cuban SDN end-user of product, per sales through Canadian customer (and various others since then)
And latest such OFAC case announcement 20 Oct. 2020 Settlement Agreement with a prominent US private
equity firm for its Turkish subsidiary's repeated evasive product sales through Turkish third-party
distributors to end-customers in Iran in violation of US trade sanctions
Possible penalties
Essentially same as for OFAC, and now CAATSA too, sanctions violations (see slides 24 and 59)
Plus denial of US export privileges (incl. that no one can export US items to the penalized co.)
Note again: BIS and OFAC licensing/ enforcement authority often overlaps - and thus thorough
analysis of both sets of rules, and perhaps authorizations from both agencies, may sometimes be
needed for one and the same proposed transaction
Morgan Lewis
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