Every Monday we post the highlights out of last week’s FCC Export/Import Daily Update (“The Daily Bugle”). Send out every business day to approximately 6,500 readers of changes to defense and high-tech trade laws and regulations, The Daily Bugle is a free daily newsletter from Full Circle Compliance, edited by James E. Bartlett III, Alexander P. Bosch, Vincent J.A. Goossen, and Alex Witt.
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Last week’s highlights of The Daily Bugle included in this edition are:
- Treasury/OFAC Delists En+, Rusal, and EuroSibEnergo; The Daily Bugle; Monday, 28 Jan 2019, Item #5;
- Commerce/BIS Denies Export Privileges to 8 Individuals; The Daily Bugle; Tuesday, 29 Jan 2019, Item #2;
- Commerce/BIS Fines Ithaca-based Company $80,000 for Engaging in Prohibited Conduct; The Daily Bugle; Tuesday, 29 Jan 2019, Item #3;
- Justice: “Chinese Telecommunications Conglomerate Huawei and Huawei CFO Wanzhou Meng Charged with Financial Fraud”; The Daily Bugle; Tuesday, 29 Jan 2019, Item #6;
- UK ECJU Announces New OGEL Covering Export of Dual-Use Items to EU Member States; The Daily Bugle; Friday, 1 Feb 2019, Item #6;
- UK OFSI Publishes “No Brexit Deal” Sanctions Guidance Documents; The Daily Bugle; Friday, 1 Feb 2019, Item #7.
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Treasury/OFAC Delists En+, Rusal, and EuroSibEnergo
(Source: Treasury/OFAC, 27 Jan 2018.)
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) today lifted sanctions imposed on En+ Group plc (“En+”), UC Rusal plc (“Rusal”), and JSC EuroSibEnergo (“ESE”), following an earlier notification submitted to Congress on December 19, 2018.
Under the terms of their removal from OFAC’s List of Specially Designated Nationals and Blocked Persons (“SDN List”), En+, Rusal, and ESE have reduced Oleg Deripaska’s direct and indirect shareholding stake in these companies and severed his control. This action ensures that the majority of directors on the En+ and Rusal boards will be independent directors – including U.S. and European persons – who have no business, professional, or family ties to Deripaska or any other SDN, and that independent U.S. persons vote a significant bloc of the shares of En+.
The companies have also agreed to unprecedented transparency for Treasury into their operations by undertaking extensive, ongoing auditing, certification, and reporting requirements. All sanctions on Deripaska continue in force.
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Commerce/BIS Denies Export Privileges to 8 Individuals
(Source: Commerce/BIS, 29 Jan 2019.)
* Respondent (1): Alexander Fishenko of Three Rivers, TX
* Charges: Fishenko was convicted of violating the Internal Emergency Economic Powers Act (50 U.S.C. 1701, et seq. (2012)) and section 38 of the Arms Export Control Act (22 U.S.C. Part 2778 (2012)) (“AECA”). Specifically, Fishenko was convicted of knowingly and intentionally exporting from the U.S. to Russia microelectronics without the required U.S. Department of Commerce licenses. Fishenko was also convicted of knowingly, intentionally, and willfully exporting from the U.S. to Russia power amplifiers designated as defense articles on the U.S. Munitions List, namely five TriQuint parts TGA2517, without the required U.S. Department of State licenses, in violation of the AECA. Fishenko was sentenced 120 months in prison, three years of supervised release, and a $1,900 assessment, and forfeited over $500,000 in criminal proceeds in the United States. Fishenko was also placed on the U.S. Department of State Debarred List.
* Debarred: 10 years from the date of Fishenko’s conviction.
* Date of Order: 31 Dec 2018.
* Respondent (2): Asim Fareed of Boca Raton, FL
* Charges:
– 15 C.F.R. Part 764.2(d) – Conspiracy. Specifically, Fareed conspired to export a Humboldt Bending Beam Rheometer and a Humboldt Pressure Aging Vessel subject to the EAR from the United States to Iran, via the United Arab Emirates, without the required U.S. Government authorization.
* Penalty:
– Fareed shall provide two annual reports of all export and reexport transactions involving items subject to the EAR in which he participates in any way.
* Debarred: 3 years from the date of the order.
* Date of Order: 19 Dec 2018.
* Respondent (3): Eduard Roel Vazquez of Beaumont, TX
* Charges:
– Vazquez was convicted of violating section 38 of the Arms Export Control Act (22 U.S.C. Part 2778 (2012)). Specifically, knowingly and willfully aided and abetted the export, and attempt to export, two 7.62x39mm rifles and a 5.56mm rifle, items designated as defense articles on the U.S. Munitions List, from the U.S. to Mexico, without the required U.S. Department of State licenses. Vazquez was sentenced 38 months in prison, three years of supervised release, and a $100 assessment.
* Debarred: 10 years from the date of the order.
* Date of Order: 31 Dec 2018.
* Respondent (4): Joel Prado, Jr. of Beaumont, TX
* Charges: Prado was convicted of violating section 38 of the Arms Export Control Act (22 U.S.C. Part 2778 (2012)). Specifically, conspired to knowingly and willfully export and cause to export from the U.S. to Mexico .223 caliber rifles, items designated as defense articles on the U.S. Munitions List, without the required U.S. Department of State licenses. Prado was sentenced to 96 months in prison, three years of supervised release, and an assessment of $200.
* Debarred: 10 years from the date of respondent’s conviction.
* Date of Order: 31 Dec 2018.
* Respondent (5): Jose Jesus Campos-Flores of Bastrop, TX
* Charges: Campos-Flores was convicted of violating section 38 of the Arms Export Control Act (22 U.S.C. Part 2778 (2012)). Specifically, the respondent knowingly exported and attempted to export from the U.S. to Mexico firearms designated on the U.S. Munitions List, without the required U.S. Department of State licenses. Campos-Flores was sentenced to 36 months in prison, three years of supervised release, and a $100 assessment.
* Debarred: 7 years from the date of Campos-Flores’ conviction.
* Date of Order: 31 Dec 2018.
* Respondent (6): Shavkat Abdullaev of Philipsburg, PA
* Charges:
– Abdullaev was convicted of violating the Internal Emergency Economic Powers Act (50 U.S.C. 1701, et seq. (2012)). Specifically, Abdullaev was convicted of knowingly and intentionally exporting from the U.S. to Russia microelectronics without the required U.S. Department of Commerce licenses. Abdullaev was sentenced to 36 months in prison, two years of supervised release, and a $400 assessment.
* Debarred: 5 years from the date of the order.
* Date of Order: 31 Dec 2018.
* Respondent (7): Veronica Trujillo of Phoenix, AZ
* Charges:
– Trujillo violated section 38 of the Arms Export Control Act (22 U.S.C. Part 2778 (2012)). Specifically, Trujillo attempted to willfully and knowingly export and cause to be exported from the U.S. to Mexico 2000 rounds of Wolf 7.62x39mm ammunition and 1,000 rounds of Wolf 9MM luger ammunition, items designated on the U.S. Munitions List, without the required U.S. State Department licenses. Trujillo was sentenced 46 months in prison, with credit for time served, three years of supervised release, and a $100 assessment. Trujillo was also placed on the U.S. Department of State Debarred List.
* Debarred: 7 years from the date of Trujillo’s conviction.
* Date of Order: 31 Dec 2018.
* Respondent (8): Folasade Omowanile of Brooklyn, NY
* Charges:
– Charge 1: 15 C.F.R. 764.2(b) – Causing, Aiding, or Abetting a Violation. Specifically, respondent caused, aided and/or abetted one or more violations of the EAR in connection with the export of handcuffs and leg cuffs, subject to the EAR, to Nigeria. Respondent filed no Electronic Export Information (“EEI”) for the export of the items, nor was a license sought or obtained for export.
* Penalty: Civil penalty in the amount of $10,000.
* Debarred: 3 years from the date of this Order.
* Date of Order: 17 Jan 2019.
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Commerce/BIS Fines Ithaca-based Company $80,000 for Engaging in Prohibited Conduct
(Source: Commerce/BIS, 29 Jan 2019.)
* Respondent: Multiwire Laboratories, Ltd. of Ithaca, NY
* Charges: BIS has notified the respondent of its intention to initiate an administrative proceeding pursuant to EAR Part 766.3. Specifically, BIS believes that Multiwire committed the following two violations:
– Charge 1-2: 15 C.F.R. Part 764.2(a): Engaging in Prohibited Conduct. Specifically, Multiwire exported Real-Time Back Reflection Laue Camera Detectors and Accessories, designated EAR99, to the University of Electronic Science and Technology China in Chengdu, China, without the required BIS licenses. The Chinese entity was at all relevant times listed on the EAR’s Entity List. Multiwire did not have an export control compliance program.
* Penalty: Civil penalty of $80,000.
* Date of Order: 16 Jan 2019.
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Justice: “Chinese Telecommunications Conglomerate Huawei and Huawei CFO Wanzhou Meng Charged with Financial Fraud”
(Source: Justice, 28 Jan 2019.) [Excerpts.]
Chinese Telecommunications Conglomerate Huawei and Huawei CFO Wanzhou Meng Charged with Financial Fraud / Huawei Device USA Inc. and Huawei’s Iranian Subsidiary Skycom Also Named Defendants / Other Charges Include Money Laundering, Conspiracy to Defraud the United States, Obstruction of Justice and Sanctions Violations
A 13-count indictment was unsealed earlier today in federal court in Brooklyn, New York, charging four defendants, [FN/1] all of whom are affiliated with HuaweiTechnologies Co. Ltd. (Huawei), the world’s largest telecommunications equipment manufacturer, with headquarters in the People’s Republic of China (PRC) and operations around the world. The indicted defendants include Huawei and two Huawei subsidiaries — Huawei Device USA Inc. (Huawei USA) and Skycom Tech Co. Ltd. (Skycom) — as well as Huawei’s Chief Financial Officer (CFO) Wanzhou Meng (Meng).
The defendants Huawei and Skycom are charged with bank fraud and conspiracy to commit bank fraud, wire fraud and conspiracy to commit wire fraud, conspiracy to defraud the United States, conspiracy to violate and substantive violations of the International Emergency Economic Powers Act (IEEPA), and conspiracy to commit money laundering. Huawei and Huawei USA are charged with conspiracy to obstruct justice related to the Grand Jury investigation in the Eastern District of New York. Meng is charged with bank fraud, wire fraud, and conspiracy to commit bank and wire fraud. …
“Today we are announcing that we are bringing criminal charges against telecommunications giant Huawei and its associates for nearly two dozen alleged crimes,” stated Acting Attorney General Whitaker. “As I told Chinese officials in August, China must hold its citizens and Chinese companies accountable for complying with the law. I’d like to thank the many dedicated criminal investigators from several different federal agencies who contributed to this investigation and the Department of Justice attorneys who are moving the prosecution efforts forward. They are helping us uphold the rule of law with integrity.”
“As charged in the indictment, Huawei and its subsidiaries, with the direct and personal involvement of their executives, engaged in serious fraudulent conduct, including conspiracy, bank fraud, wire fraud, sanctions violations, money laundering and the orchestrated obstruction of justice,” stated United States Attorney Donoghue. “For over a decade, Huawei employed a strategy of lies and deceit to conduct and grow its business. This Office will continue to hold accountable companies and their executives, whether here or abroad, that commit fraud against U.S. financial institutions and their international counterparts and violate U.S. laws designed to maintain our national security.” Mr. Donoghue thanked the FBI, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, U.S. Department of Commerce Office of Export Enforcement and the Defense Criminal Investigative Service agents who are investigating this case for their tireless work and dedication.
“These charges lay bare Huawei’s blatant disregard for the laws of our country and standard global business practices,” stated FBI Director Wray. “Companies like Huawei pose a dual threat to both our economic and national security, and the magnitude of these charges make clear just how seriously the FBI takes this threat. Today should serve as a warning that we will not tolerate businesses that violate our laws, obstruct justice, or jeopardize national and economic well-being.”
“As charged in the indictment, Huawei and its Chief Financial Officer broke U.S. law and have engaged in a fraudulent financial scheme that is detrimental to the security of the United States,” stated U.S. Department of Homeland Security Secretary Nielsen. “They willfully conducted millions of dollars in transactions that were in direct violation of the Iranian Transactions and Sanctions Regulations, and such behavior will not be tolerated. The Department of Homeland Security is focused on preventing nefarious actors from accessing or manipulating our financial system, and we will ensure that legitimate economic activity is not exploited by our adversaries. I would like to thank ICE Homeland Security Investigations for their exceptional work on this case.”
“For years, Chinese firms have broken our export laws and undermined sanctions, often using the U.S. financial systems to facilitate their illegal activities,” stated U.S. Department of Commerce Secretary Ross. “This will end. The Trump Administration continues to be tougher on those who violate our export control laws than any administration in history. I commend the Department’s Office of Export Enforcement, and our partners in the FBI, Justice Department, Department of Defense, and Department of Homeland Security for their excellent work on this case.”
Overview of the Indictment
The charges in this case relate to a long-running scheme by Huawei, its CFO, and other employees to deceive numerous global financial institutions and the United States government regarding Huawei’s business activities in Iran. Beginning in 2007, Huawei employees misrepresented Huawei’s relationship to an unofficial subsidiary in Iran called Skycom, and as a result falsely claimed that Huawei had only limited operations in Iran and that Huawei did not violate U.S. or other laws or regulations related to Iran. Most significantly, after news publications in late 2012 and 2013 disclosed that Huawei operated Skycom as an unofficial subsidiary in Iran and that Meng had served on the board of directors of Skycom, Huawei employees, and in particular Meng, continued to lie to Huawei’s banking partners about Huawei’s relationship with Skycom, falsely claiming that Huawei had sold its interest in Skycom to an unrelated third party in 2007 and also that Skycom was merely Huawei’s local business partner in Iran. In reality, Skycom was Huawei’s longstanding Iranian subsidiary, and Huawei orchestrated the 2007 sale to appear as an arm’s length transaction between two unrelated parties although Huawei actually controlled the company that purchased Skycom.
As part of this scheme to defraud, Meng personally made a presentation in August 2013 to an executive of one of Huawei’s major banking partners in which she repeatedly lied about the relationship between Huawei and Skycom.
Huawei relied on its global banking partners for banking services that included processing U.S.-dollar-denominated transactions through the United States. U.S. laws and regulations generally prohibited these banks from providing U.S.-dollar transactions related to Iran through the United States. The banks could have faced civil or criminal penalties for processing transactions that violated U.S. laws or regulations. Relying on the repeated misrepresentations by Huawei, banking partners continued their banking relationships with Huawei. One banking partner cleared more than $100 million worth of Skycom-related transactions through the United States between 2010 and 2014.
As a further part of this scheme to defraud, Huawei and its principals repeatedly lied to U.S. government authorities about the relationship between Huawei and Skycom in submissions to the U.S. government, and in responses to government inquiries. For example, Huawei provided false information to the U.S. Congress regarding whether Huawei’s business in Iran violated any U.S. law. Similarly, as indicated in the indictment, in 2007 — months before Huawei orchestrated the purported sale of Skycom to another Huawei-controlled entity — Huawei’s founder falsely stated to FBI agents that Huawei did not have any direct dealings with Iranian companies and that Huawei operated in compliance with all U.S. export laws.
After one of Huawei’s major global banking partners (identified as Financial Institution 1 in the indictment) decided to exit the relationship in 2017 because of Huawei’s risk profile, Huawei allegedly made additional misrepresentations to several of its remaining banking partners in an effort to maintain and expand those relationships. Huawei and its principals are alleged to have repeatedly and falsely claimed that Huawei had decided to separate from Financial Institution 1, and not that Financial Institution 1 had decided to cause the separation. On the basis of these misrepresentations, those other banking partners continued their banking relationships with Huawei.
In 2017, when Huawei became aware of the government’s investigation, Huawei and its subsidiary Huawei USA tried to obstruct the investigation by making efforts to move witnesses with knowledge about Huawei’s Iran-based business to the PRC, and beyond the jurisdiction of the U.S. government, and by destroying and concealing evidence of Huawei’s Iran-based business that was located in the United States.
In December 2018, Canadian authorities apprehended Meng in Vancouver pursuant to a provisional arrest warrant issued under Canadian law. The U.S. government is seeking Meng’s extradition to the United States.
The charges in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
The indictment unsealed today is assigned to U.S. District Judge Ann M. Donnelly of the Eastern District of New York.
The government’s investigation is ongoing. Individuals and companies with information about additional misconduct by these defendants or their related entities and principals should contact their local FBI field office. …
The Defendants:
Huawei Technologies Co. Ltd.
Huawei Device USA Inc.
Skycom Tech Co. Ltd.
Meng Wanzhou, also known as “Cathy Meng” and “Sabrina Meng”
Age: 46
Residence: People’s Republic Of China
E.D.N.Y. Docket No. 18-CR-457 (AMD)
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[FN/1] The indictment charges other individuals who have not yet been apprehended and whose names will not be publicly released at this time.
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UK ECJU Announces New OGEL Covering Export of Dual-Use Items to EU Member States
(Source: UK ECJU, Notice to Exporters 2019/03, 1 Feb 2019.)
The UK Export Control Joint Unit (ECJU), within the Department for International Trade, has today published a new open general export license (OGEL): export of dual-use items to EU member states.
The UK government’s technical notice on export controls explains that should the UK leave the EU without a deal on 29 March 2019, licenses will be required to export dual-use items to EU member states. Licenses are not currently required to export these items within the EU.
The purpose of this OGEL is to allow, subject to certain conditions, the export of dual-use items (with both a civilian and military application) from the UK to EU member states and the Channel Islands after the UK leaves the European Union.
Before using this license, you must register through SPIRE, the export control joint unit’s (ECJU’s) electronic licensing system, stating where you will keep records of exports or transfers and where the ECJU may inspect them.
In-force date
This license will come into force at 11pm on 29 March 2019 if the UK leaves the EU without a deal.
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UK OFSI Publishes “No Brexit Deal” Sanctions Guidance Documents
(Source: UK OFSI, 31 Jan 2019.)
The UK Office of Financial Sanctions Implementation (OFSI) has published the following “no Brexit deal” guidance documents on its website:
– UK sanctions regimes if there’s no Brexit deal
This page provides links to legislation and guidance on implementing UK and UN sanctions if the UK leaves the EU without a deal.
– UK sanctions on Iran relating to human rights
This page provides guidance on the UK’s sanctions regime on Iran related to human rights, if the UK leaves the EU without a deal.
This page provides guidance on the UK’s sanctions regime on Venezuela, if the UK leaves the EU without a deal.
This page provides guidance on the UK’s sanctions regime on Burma, if the UK leaves the EU without a deal.
– Iran human rights sanctions: guidance
Guidance on the Iran (Sanctions) (Human Rights) (EU Exit) Regulations 2019, if the UK leaves the EU without a deal.
– Venezuela sanctions: guidance
Guidance on the Venezuela (Sanctions) (EU Exit) Regulations 2019, if the UK leaves the EU without a deal.
Guidance on the Burma (Sanctions) (EU Exit) Regulations 2019, if the UK leaves the EU without a deal.