July has seen renewed efforts by OFAC, the EU and OFSI to further limit Russia’s ability to import key technological goods and services in support of its strategic military and economic sectors via dozens of new designations. An increasingly common feature of the Russia sanctions landscape is the growing number of sanctioned individuals seeking to challenge their designations, particularly in the US and UK, and this month has seen some notable de-listings.
Beyond Russia, major developments include additional Iranian designations by both OFSI and the EU, and multiple examples of designations under the transnational programmes operated by OFAC, OFSI and the EU.
Russia & Wagner Group
- In July OFAC introduced a new wave of over 120 Russia designations, further restricting access to military products, targeting the Russian metals, mining, and energy sectors, and aiming to reduce Russia’s access to the international finance system. The measures now also target entities from other countries which are allegedly exporting to Russia, notably including four privately owned entities in Kyrgyzstan which manufacture electronic and telecommunications goods; Amegino FZE, a UAE-headquartered engineering and services company that provides electronic components to Russian manufacturers; and MCI Trading DOO Beograd Palilula, a Serbian firm which has helped to acquire high-tech items for the Russian semiconductor sector.
- The UK Foreign Office further announced 14 new Russia designations this month, specifically in response to Russia’s “attempts to destroy Ukrainian national identity”. Those targeted include 11 individuals said to be involved in the forced deportation and re-education of Ukrainian children, including Sergey Kravtsov, Minister of Education, and Ksenia Mishonova, Moscow Commissioner for Children’s Rights.
- On 19th July OFSI additionally designated 13 individuals and entities linked to the Wagner Group across three sanctions regimes in Africa: Mali, Central African Republic (“CAR”), and Sudan. Those sanctioned included Ivan Aleksandrovitch Maslov, head of the Wagner Group in Mali, Vitalii Viktorovitch Perfilev and Konstantin Aleksandrovitch Pikalov, respectively leader and operational head of the Wagner Group in CAR; and Sudanese mining entity M-Invest, its mining subsidiary, Meroe Gold, and its directors, Andrei Sergeevich Mandel and Mikhail Potepkin.
- On 29th July 29, the EU established a new sanctions framework in response to Iran’s military support of Russia’s war of aggression against Ukraine. The new regime prohibits the export from the EU to Iran of components used in the construction of Unmanned Aerial Vehicles and provides for travel restrictions and asset freeze measures that could be imposed against persons involved in Iran’s UAV’s programme.
De-Listings
- Elena Titova and Andrey Golikov, two former independent board members of the state-owned Bank Otkritie, who left their positions in protest against the invasion of Ukraine, have successfully filed claims against the US Departments of State and Treasury, arguing that the agencies should remove them from OFAC’s SDN list. Titova and Golikov were designated in April 2022 alongside other Bank Otkritie board members and applied to be delisted in May 2022. The pair were delisted on 24th June.
- On 6th July, following a Ministerial Review process, the UK removed Lev Aronovich Khasis from its sanctions list. Khasis was the former first Deputy Chairman of the Management Board at Sberbank. A dual US-Russian national, Khasis fled Russia following its invasion of Ukraine and thereafter ceased to be employed at any of Sberbank’s businesses.
- On 20th July the UK removed Oleg Yurievich Tinkov, the founder of Russian digital bank, Tinkoff Bank, from its Russia sanctions list. Tinkov has been critical of Russia’s invasion of Ukraine and said publicly prior to his delisting that he was forced to sell his shares in Tinkoff Bank by the Kremlin in April 2022.
- On 27th July the High Court of England and Wales heard from sanctioned oligarch Mikhail Friedman that the National Crime Agency’s (“NCA”) recent raid of his London property took place after the NCA had “misled” judges into approving a search warrant on the basis of kompromat – a Russian term for disinformation circulated by business rivals. The NCA’s lawyers have accepted that the warrant should be quashed due to separate “technical” errors made by the agency in its paperwork for the warrant and have dropped an investigation into allegations Frieman conspired to defraud the Home Office in a residence permit application. The agency wishes to continue a separate sanctions evasion investigation; a full hearing will take place in November.
Enforcement
- This month the US Federal Reserve Board announced two enforcement actions against Deutsche Bank, issuing a $186 million fine based on unsound practices and failure to comply with previous consent orders. The actions, which are the latest in a series dating back to 2015, include a declaration that Deutsche Bank failed to make sufficient progress to remedy systems previously deemed “unsatisfactory”. The bank is now required to improve its transaction monitoring systems and establish a customer due diligence programme that meets the standards set out by a previous 2017 order, detailing these efforts to the Federal Reserve within 60 days.
- Behrouz Mokhtari, a US national, was sentenced on 19th July to 41 months in prison followed by 3 years of supervised release for violating US sanctions against Iran by conspiring to engage in prohibited business activities on behalf of persons and entities in Iran. In addition, Mokhtari was ordered to forfeit $2,862,598 in proceeds derived from his criminal activity as well as a residence he purchased in California for over $1.5 million using such proceeds. Mokhtari pleaded guilty in January 2023 to two separate conspiracies.
- On 6th July MEPs in the EU Parliament’s Civil Liberties Committee adopted a draft negotiating mandate on violating and circumventing EU sanctions. According to the proposed law, violating and circumventing sanctions would be punishable criminal offences carrying prison sentences of a maximum of five years and fines of up to €10 million or 15% of overall turnover, and should lead to the exclusion from public tenders. The proposals further dictate that so-called “aggravating circumstances” would be noted and would lead to higher penalties.
- On 16th July the UK High Court dismissed a challenge to the detention under Russian sanctions of the Phi superyacht. In March 2022, Grant Shapps, then the Secretary of State for Transport, detained the vessel and was challenged by Dalston Projects & Sergei Naumenko, the legal & beneficial owner of the Phi. The challenge was filed on the basis that the vessel was detained for an improper purpose and was a disproportionate restriction of their property rights protected by the ECHR. Last week, the High Court ruled that detention was consistent with encouraging Russia to cease its actions in Ukraine and permitted on the basis Naumenko was a person “connected with Russia”, adding the fact that he was not a designated person was not relevant. The Act was held by the court to authorise sanctions having “a broad and deep impact” with consequences for those not personally involved in the activities being targeted.
New Sanctions
- On 7th July, the UK Foreign Secretary, James Cleverly, announced plans for the expansion of the Iran sanctions regime criteria to include any person or entity undermining peace, stability and security in the Middle East and internationally, responsible for the use and spread of weapons or weapons technologies from Iran, and for the Iranian regime’s undermining of democracy, respect for the rule of law and good governance. The announcement of the measures coincided with the UN’s condemnation of Iran’s alleged unfair trial procedures and death penalties and the UK’s condemnation of Iran’s weapons proliferation at the UK-chaired UNSC session.
- On 11th July OFAC designated Aleksandar Vulin, a Serbian politician who is currently the director of the country’s Security Intelligence Agency (‘the BIA’) and who formerly served as the country’s Minister of Internal Affairs. According to the US Treasury, Vulin has been “implicated in transnational organized crime, illegal narcotics operations, and misuse of public office” and “has maintained a mutually beneficial relationship with US-designated Serbian arms dealer Slobodan Tesic”.
- On 12th July the UK designated six entities which have allegedly provided funds and/or materials to the Sudanese Armed Forces (SAF) and the Rapid Support Forces (RSF), the military groups engaged in conflict in Sudan.
- On 13th July, OFAC designated ten individuals and one entity associated with the ‘Los Chapitos’ faction of the Sinaloa Cartel who are responsible for a significant portion of the illicit fentanyl and other deadly drugs trafficked into the United States. Also on 13th July, the US Secretary of State Anthony Blinken announced the designation of former Panamanian President, Juan Carlos Varela Rodriguez, due to his alleged involvement in significant corruption. According to the US Department of State, while serving as Panama’s vice president and then president, Varela accepted bribes in exchange for improperly awarding government contracts.
- On 18th July OFAC designated Jordan Kamcev, a North Macedonia businessman who the US Treasury says engaged in corrupt activities, including the Vodno Land Parcels scheme, where he allegedly purchased land using public money.
- On 21st July the EU designated six individuals and one entity under its Myanmar/Burma regime who it deemed to be responsible for the ongoing repression of peaceful protest in the country. Those targeted included Myint Kyaing, Minister for Immigration and Population, Pwint San, Minister for Labour, and Thet Khaing Win, Minister for Health and Sport; Aung Kyaw Min and Porel Aung Thein, members of the State Administration Council; Kyaw Swar Lin, Myanmar Quartermaster General; and No 2 Mining Enterprise (ME 2), a state-owned enterprise which generates revenue for the Myanmar armed forces.
- On 20th July the EU designated 18 individuals and five entities pursuant to its Global Human Rights regime. Five Taliban ministers and a member of the South Sudanese armed forces were listed for their roles in sexual and gender-based violence. Three individuals and five subsidiaries from the Main Directorate of Internal Affairs of Moscow were also sanctioned for their involvement in the development and use of facial recognition technology as a “tool of oppression”. Finally, nine Russian officials were listed for their involvement in the Navalny case.
