International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Wednesday, January 23, 2019

Skadden & Arps Pays $4.6 million and Agrees to Register as an Agent of a Foreign Principal to Avoid Prosecution

Civil settlement resolves Department of Justice national security inquiry into violations of the Foreign Agents Registration Act Download 2019_01_15_skadden_settlement_agreement_reduced_0

Skadden, Arps, Slate, Meagher & Flom LLP has entered into a settlement agreement with the Department of Justice, resolving its liability for violations of the Foreign Agents Registration Act (FARA), announced Assistant Attorney General for National Security John Demers.

According to the Agreement, Skadden acted as an agent of the Government of Ukraine within the meaning of FARA, 22 U.S.C. § 611 et seq., by contributing to a public relations campaign directed at select members of the U.S. news media in 2012.  Moreover, in 2012 and 2013, Skadden received multiple inquiries from the Department’s FARA Registration Unit about its role in that campaign. A partner then at Skadden made false and misleading statements to the FARA Unit, which led it to conclude in 2013 that the firm was not obligated to register under FARA. The facts, when uncovered, showed that Skadden was indeed required to register in 2012, and, under the Agreement, it will do so retroactively.

“Law firms should handle inquiries from the federal government the same way they would counsel their clients to: with appropriate due diligence to ensure the honesty of their response,” said Assistant Attorney General Demers.  “Skadden’s failure to do so, and reliance on only the representations of the lead partner on the matter, hid from the public that its report was part of a Ukrainian foreign influence campaign.  FARA protects the integrity of the American political system by enabling Americans to consider the identity of the speaker as they evaluate the substance of the speech.”  Assistant Attorney General Demers added, “The Department appreciates Skadden’s more recent extensive cooperation in the investigation of this matter, which facilitated its resolution.” 

In addition to agreeing to register under FARA, Skadden has agreed to pay the U.S. Treasury more than $4.6 million, which it received in fees and expenses for its work with Ukraine, and will ensure that it has formal, robust procedures for responding to inquiries concerning its conduct from any federal government entity and ensuring FARA compliance as to its engagements on behalf of foreign clients.

The Agreement acknowledges that Skadden has already taken substantial steps to comply with its terms, and so long as the firm continues to comply with it, the Department will not undertake any action against the firm relating to any of the conduct described in the Agreement and its Appendix.

Background of the Investigation

According to the Agreement, in the spring of 2012, Ukraine, Ministry of Justice (MOJ), with the assistance of Paul Manafort, hired Skadden to write a report (Report) on the evidence and procedures used during the 2011 prosecution and trial of former Prime Minister Yulia Tymoshenko and to address various questions regarding its fairness.  Skadden also agreed to advise Ukraine in connection with a second, potential future prosecution of Tymoshenko.  Although the engagement letter between Skadden and the MOJ stated that Skadden would be paid its customary fees and expenses, the contract Skadden signed with the MOJ, and which the MOJ made public, stated that the law firm would be paid only 95,000 Ukrainian hryvynas, which is approximately $12,000.  Skadden understood that a Ukrainian business person would be paying its fees, which the law firm received from a Cypriot bank account of an entity named Black Sea View Ltd., which Manafort controlled.  Skadden was eventually paid $4,657,568.91 for its work on behalf of the MOJ.  The arrangements with the Ukrainian business person, the amounts paid, and advice on a second criminal prosecution of Tymoshenko were not disclosed in connection with the issuance of the Report.

Soon after it began work for the MOJ, Skadden became aware that Ukraine intended to use the Report as part of a public relations campaign to influence U.S. policy and public opinion toward Ukraine.  After that point, Skadden’s lead partner for the Ukraine engagement took steps to advance the public relations campaign.  In the fall of 2012, shortly after a meeting in New York with Manafort and a representative from Ukraine’s public relations firm to finalize the Report and discuss the media strategy for its rollout, the lead partner contacted a journalist at a national newspaper and asked whether the journalist would take a call from a lobbyist for Ukraine about the Report in advance of its release.  Then, shortly before Ukraine released the report on December 13, 2012, the lead partner again contacted the journalist and arranged for delivery of the Report to the journalist, both via email and in person.  On December 12, 2012, the lead partner spoke with the national newspaper about the Report and provided a quotation for attribution. 

The lead partner’s pre-release outreach to the journalist was consistent with Ukraine’s media strategy for the Report, which including leaking the Report prior to its official release so as to “effectively set the agenda for subsequent coverage.”

FARA requires those in the U.S. who engage in political activities on behalf of foreign principals, which include foreign governments, to make a variety of written public disclosures to the Department of Justice.  Based on its awareness of and involvement in Ukraine’s public relations campaign, Skadden had an obligation to register with the Department of Justice under FARA, but it failed to do so.  If Skadden had registered, it would have had to disclose, among other things, the full amount it was being paid, the source of those payments, and the full scope of the work it was doing on behalf of the MOJ.

Five days after news articles appeared about the Report, the FARA Unit sent Skadden a letter, seeking information about its activities on behalf of Ukraine in order to assist the FARA Unit in determining whether Skadden had a registration obligation.  This was the first of several requests for information the FARA Unit made to Skadden. 

In both written and oral responses to the FARA Unit between February 6, 2013, and October 11, 2013, Skadden, in reliance on the lead partner, made false and misleading statements including, among other things, that Skadden provided a copy of the Report only in response to requests from the media and spoke to the media to correct misinformation about the report that the media was already reporting.  The firm also submitted documents to the FARA unit that were false.

The FARA Unit made a determination that Skadden did not have a registration obligation in connection with its work for Ukraine, and it based that conclusion on the false and misleading information Skadden had provided.  Before making its representations to the FARA Unit, Skadden had conducted no investigation to confirm the information the lead partner was providing to the FARA Unit and to other partners at the firm.

The investigation and negotiation of the Agreement was handled by Jason B.A. McCullough, a Trial Attorney in the Counterintelligence and Export Control Section, which includes the FARA Registration Unit, with assistance from the Federal Bureau of Investigation’s Counterintelligence Division.

January 23, 2019 in OFAC | Permalink | Comments (0)

Wednesday, July 11, 2018

Implementation and enforcement of the OECD Anti-Bribery Convention

Over the past 19 years, monitoring by the OECD Working Group on Bribery has established the Convention as the most rigorously enforced international anti-corruption instrument. New reports on implementation and enforcement have been issued for Germany and Norway.
» Germany
» Norway
» All country reports on implementation

July 11, 2018 in AML, OECD, OFAC | Permalink | Comments (0)

Monday, July 3, 2017

Cuba Embargo Re-Imposed? FAQs on President Trump’s Cuba Announcement

1. How will OFAC implement the changes to the Cuba sanctions program announced by the President on June 16, 2017? Are the changes effective immediately?
OFAC will implement the Treasury-specific changes via amendments to its Cuban Assets Control Regulations. The Department of Commerce will implement any necessary changes via amendments to its Export Administration Regulations. OFAC expects to issue its regulatory amendments in the coming months. The announced changes do not take effect until the new regulations are issued.

2. What is individual people-to-people travel, and how does the President’s announcement impact this travel authorization?
Individual people-to-people travel is educational travel that: (i) does not involve academic study pursuant to a degree program; and (ii) does not take place under the auspices of an organization that is subject to U.S. jurisdiction that sponsors such exchanges to promote people-to-people contact. The President instructed Treasury to issue regulations that will end individual people-to-people travel. The announced changes do not take effect until the new regulations are issued.

3. Will group people-to-people travel still be authorized?
Yes. Group people-to-people travel is educational travel not involving academic study pursuant to a degree program that takes place under the auspices of an organization that is subject to U.S. jurisdiction that sponsors such exchanges to promote people-to-people contact. Travelers utilizing this travel authorization must maintain a full-time schedule of educational exchange activities that are intended to enhance contact with the Cuban  people, support civil society in Cuba, or promote the Cuban people’s independence from
Cuban authorities, and that will result in meaningful interaction between the traveler and individuals in Cuba. An employee, consultant, or agent of the group must accompany
each group to ensure that each traveler maintains a full-time schedule of educational exchange activities.

4. How do the changes announced by the President on June 16, 2017 affect individual people-to-people travelers who have already begun making their travel arrangements (such as purchasing flights, hotels, or rental cars)?
The announced changes do not take effect until OFAC issues new regulations. Provided that the traveler has already completed at least one travel-related transaction (such as
purchasing a flight or reserving accommodation) prior to the President’s announcement on June 16, 2017, all additional travel-related transactions for that trip, whether the trip
occurs before or after OFAC’s new regulations are issued, would also be authorized, provided the travel-related transactions are consistent with OFAC’s regulations as of June 16, 2017.

5. How do the changes announced by the President on June 16, 2017 affect other authorized travelers to Cuba whose travel arrangements may include direct transactions with entities related to the Cuban military, intelligence, or security services that may be implicated by the new Cuba policy?
The announced changes do not take effect until OFAC issues new regulations. Consistent with the Administration’s interest in not negatively impacting Americans for arranging lawful travel to Cuba, any travel-related arrangements that include direct transactions with entities related to the Cuban military, intelligence, or security services that may be implicated by the new Cuba policy will be permitted provided that those travel arrangements were initiated prior to the issuance of the forthcoming regulations. 6. How do the changes announced by the President on June 16,

6. How do the changes announced by the President on June 16, 2017 affect companies subject to U.S. jurisdiction that are already engaged in the Cuban market and that may undertake direct transactions with entities related to the Cuban military, intelligence, or security services that may be implicated by the new Cuba policy? The announced changes do not take effect until OFAC issues new regulations. Consistent with the Administration’s interest in not negatively impacting American businesses for engaging in lawful commercial opportunities, any Cuba-related commercial engagement that includes direct transactions with entities related to the Cuban military, intelligence, or security services that may be implicated by the new Cuba policy will be permitted provided that those commercial engagements were in place prior to the issuance of the forthcoming regulations.

7. Does the new policy affect how persons subject to U.S jurisdiction may purchase airline tickets for authorized travel to Cuba?
No. The new policy will not change how persons subject to U.S. jurisdiction traveling to Cuba pursuant to the 12 categories of authorized travel may purchase their airline tickets.

8. Can I continue to send authorized remittances to Cuba? Yes. The announced policy changes will not change the authorizations for sending Yes. The announced policy changes will not change the authorizations for sending

Yes. The announced policy changes will not change the authorizations for sending remittances to Cuba. Additionally, the announced changes include an exception that will allow for transactions incidental to the sending, processing, and receipt of authorized remittances to the extent they would otherwise be restricted by the new policy limiting transactions with certain identified Cuban military, intelligence, or security services. As a result, the restrictions on certain transactions in the new Cuba policy will not limit the ability to send or receive authorized remittances. 9. How does the new policy impact other authorized travel to Cuba by persons subject

9. How does the new policy impact other authorized travel to Cuba by persons subject to U.S. jurisdiction?

The new policy will not result in changes to the other (non-individual people-to-people) authorizations for travel. Following the issuance of OFAC’s regulatory changes, travel-related transactions with prohibited entities identified by the State Department generally will not be permitted. Guidance will accompany the issuance of the new regulations.

10. How will the new policy impact existing OFAC specific licenses?

The forthcoming regulations will be prospective and thus will not affect existing contracts and licenses. 

11. How will U.S. companies know if their Cuban counterpart is affiliated with a prohibited entity or sub-entity in Cuba?
The State Department will be publishing a list of entities with which direct transactions generally will not be permitted. Guidance will accompany the issuance of the new
regulations. The announced changes do not take effect until the new regulations are issued.

12. Is authorized travel by cruise ship or passenger vessel to Cuba impacted by the new Cuba policy?
Persons subject to U.S. jurisdiction will still be able to engage in authorized travel to Cuba by cruise ship or passenger vessel. Following the issuance of OFAC’s regulatory changes, travel-related transactions with prohibited entities identified by the State Department generally will not be permitted. Guidance will accompany the issuance of the new regulations.

Trump Administration Cuba Policy FactSheet

July 3, 2017 in OFAC | Permalink | Comments (0)

Wednesday, March 16, 2016

Russian National Pleads Guilty in Connection with Conspiracy to Work for Russian Intelligence

Evgeny Buryakov, aka Zhenya, 41, pleaded guilty today to conspiring to act in the United States as an agent of the Russian Federation without providing prior notice to the Attorney General.

“Evgeny Buryakov pleaded guilty to covertly working as a Russian agent in the United States without notifying the Attorney General,” said Assistant Attorney General Carlin.  “Foreign FBISealnations who attempt to illegally gather economic and other intelligence information through espionage pose a direct threat to U.S. national security.  The National Security Division will continue to work with our law enforcement partners to identify and hold accountable those who illegally operate as covert agents within the United States.”

“An unregistered intelligence agent, under cover of being a legitimate banker, gathers intelligence on the streets of New York City, trading coded messages with Russian spies who send the clandestinely collected information back to Moscow,” said U.S. Attorney Bharara.  “This sounds like a plotline for a Cold War-era movie, but in reality, Evgeny Buryakov pled guilty today to a federal crime for his role in just such a scheme.  More than two decades after the end of the Cold War, Russian spies still seek to operate in our midst under the cover of secrecy.  But in New York, thanks to the work of the FBI and the prosecutors in my office, attempts to conduct unlawful espionage will not be overlooked.  They will be investigated and prosecuted.”

According to indictment, other court filings and statements made during court proceedings:

Beginning in at least 2012, Buryakov worked in the United States as an agent of Russia’s foreign intelligence agency, known as the SVR.  Buryakov operated under non-official cover, meaning he entered and remained in the United States as a private citizen, posing as an employee in the New York office of a Russian bank, Vnesheconombank (VEB).  SVR agents operating under such non-official cover (NOCs) are typically subject to less scrutiny by the host government and, in many cases, are never identified as intelligence agents by the host government.  As a result, an NOC is an extremely valuable intelligence asset for the SVR.

Federal law prohibits individuals from acting as agents of foreign governments within the United States without prior notification to the Attorney General.  Department of Justice records indicate that Buryakov never notified the Attorney General that he was, in fact, an agent of the Russia Federation.

Buryakov worked in New York with at least two other SVR agents, Igor Sporyshev and Victor Podobnyy.  From on or about Nov. 22, 2010, to on or about Nov. 21, 2014, Sporyshev officially served as a trade representative of the Russian Federation in New York.  From on or about Dec. 13, 2012, to on or about Sept. 12, 2013, Podobnyy officially served as an attaché to the Permanent Mission of the Russian Federation to the United Nations.  The investigation, however, showed that Sporyshev and Podobnyy also worked as officers of the SVR.  Sporyshev and Podobnyy were charged along with Buryakov in January 2015, however, Sporyshev and Podobnyy no longer lived in the United States at that time and were not arrested.

The directives from the SVR to Buryakov, Sporyshev and Podobnyy, as well as to other covert SVR agents acting within the United States, included requests to gather intelligence on, among other subjects, potential U.S. sanctions against Russian banks and the United States’ efforts to develop alternative energy resources. 

During the course of their work as covert SVR agents in the United States, Buryakov, Sporyshev and Podobnyy regularly met and communicated using clandestine methods and coded messages in order to exchange intelligence-related information while shielding their associations with one another as SVR agents.  Sporyshev was responsible for relaying intelligence assignments from the SVR to Buryakov.

On or about March 28, 2014, Sporyshev was recorded telling Buryakov that he needed help researching the “effects of economic sanctions on our country,” among other things.  A few days later, on April 2, 2014, Sporyshev called Buryakov and stated, in an intercepted conversation, that he had not seen Buryakov in a while, and asked to meet Buryakov outside VEB’s office in New York in 20 minutes.  A court-authorized search of Buryakov’s computer at VEB revealed that, at around the time of this telephone call, Buryakov conducted the following internet searches: “sanctions Russia consiquences” [sic] and “sanctions Russia impact.”

Two days later, on April 4, 2014, Buryakov called Sporyshev and in an intercepted conversation, stated that he “wrote you an order list,” and suggested that they meet.  Approximately 20 minutes later, Sporyshev met Buryakov in the driveway of Buryakov’s home.  Their encounter, which was captured by a video surveillance camera located near Buryakov’s residence, lasted approximately two minutes.  On the video footage, the defendants appeared to exchange a small object.

In the summer of 2014, Buryakov met multiple times with a confidential source working for the FBI and an FBI undercover employee, both of whom purported to be working on a casino development project in Russia.  During these meetings, Buryakov accepted documents that were purportedly obtained from a U.S. government agency and which supposedly contained information potentially useful to Russia, including information about U.S. sanctions against Russia.

Buryakov will be sentenced on May 25, 2016, where he faces a statutory maximum sentence of five years in prison.

Assistant Attorney General Carlin joined U.S. Attorney Bharara in praising the investigative work of the FBI’s Counterintelligence Division.

The prosecution is being handled by Assistant U.S. Attorneys Emil J. Bove III, Brendan F. Quigley and Stephen J. Ritchin of the Southern District of New York, with assistance provided by Senior Trial Attorney Heather Schmidt of the National Security Division’s Counterintelligence and Export Control Section.  

Buryakov Plea Agreement

March 16, 2016 in OFAC | Permalink | Comments (0)

Tuesday, September 15, 2015

Russian Agent Pleads Guilty to Leading Scheme to Illegally Export Controlled Technology to Russian Military

Alexander Fishenko, 49, of Houston, and a dual citizen of the United States and Russia, pleaded guilty today to acting as an agent of the Russian government within the United States without prior notification to the Attorney General, conspiring to export and illegally exporting controlled microelectronics to Russia, conspiring to launder money and obstruction of justice.

“Alexander Fishenko illegally acted as an agent of the Russian government in the United States and FBISealevaded export laws by sending microelectronics and other technology with military applications to Russia,” said Assistant Attorney General Carlin.  “By purposefully circumventing U.S. law, including the International Emergency Economic Powers Act and the Arms Export Control Act, the defendant jeopardized our national security.  I would like to thank the many members of law enforcement whose tireless efforts led to this guilty plea.”

“Fishenko lined his pockets at the expense of our national security,” said Acting U.S. Attorney Currie.  “This prosecution highlights the importance of vigorously enforcing United States export control laws.” 

The Scheme

As alleged in the indictment, between approximately October 2008 and the present, Fishenko and the other defendants engaged in a surreptitious and systematic conspiracy to obtain advanced, technologically cutting-edge microelectronics from manufacturers and suppliers located within the United States and to export those high-tech goods to Russia, while carefully evading the government licensing system set up to control such exports. The microelectronics shipped to Russia included analog-to-digital converters, static random access memory chips, microcontrollers, and microprocessors. These commodities have applications and are frequently used in a wide range of military systems, including radar and surveillance systems, missile guidance systems, and detonation triggers. Russia does not produce many of these sophisticated goods domestically.

According to the indictment and a detention motion filed by the government, defendant Alexander Fishenko was born in what was, at the time, the Soviet Republic of Kazakhstan, and graduated from the Leningrad Electro-Technical Institute in St. Petersburg, Russia. He immigrated to the United States in 1994 and became a naturalized citizen of the United States in 2003. In 1998, he founded defendant Arc Electronics Inc. in Houston. Between 2002 and the present, Arc has shipped approximately $50,000,000 worth of microelectronics and other technologies to Russia. Fishenko and his wife are the sole owners of Arc, and Fishenko serves as the company’s president and chief executive officer. Fishenko is also a part owner and executive of defendant Apex System LLC, a Moscow, Russia-based procurement firm. Apex, working through subsidiaries, served as a certified supplier of military equipment for the Russian government. Between 1996 and the present, Fishenko has regularly traveled back and forth between the United States and Russia. Defendant Alexander Posobilov entered the United States from Russia in 2001 and became a naturalized citizen in 2008. He joined Arc in 2004 and serves as its director of procurement. Posobilov was arrested at George Bush Intercontinental Airport in Houston on his way to Singapore and Moscow.

The defendants allegedly exported many of these high-tech goods, frequently through intermediary procurement firms, to Russian end users, including Russian military and intelligence agencies. To induce manufacturers and suppliers to sell them these high-tech goods and to evade applicable export controls, the defendants often provided false end-user information in connection with the purchase of the goods, concealed the fact that they were exporters, and falsely classified the goods they exported on export records submitted to the Department of Commerce. For example, in order to obtain microelectronics containing controlled, sensitive technologies, Arc claimed to American suppliers that, rather than exporting goods to Russia, it merely manufactured benign products such as traffic lights. Arc also falsely claimed to be a traffic light manufacturer on its website. In fact, Arc manufactured no goods and operated exclusively as an exporter.

According to the court documents, the defendants went to great lengths to conceal their procurement activities for the Russian military. For example, on one occasion, defendants Posobilov and Yuri Savin, the director of marketing at another Russian procurement firm, discussed how best to conceal the fact that certain goods Savin had purchased from Arc were intended for the Russian military. Savin asked Posobilov, “What can we do if a client is military all over?” Posobilov replied, “We can’t be the ones making things up. You should be the ones.” Similarly, on another occasion, defendant Fishenko directed a Russian procurement company that, when the company provided false end-user information, to “make it up pretty, correctly, and make sure it looks good.” On yet another occasion, Posobilov instructed a Russian procurement company to “make sure that” the end-use certificate indicated “fishing boats and not fishing/anti-submarine ones....Then we’ll be able to start working.”

Despite this subterfuge, according to the documents, the investigation revealed that the defendants were supplying Russian government agencies with sophisticated microelectronics. For example, the investigation uncovered a Russian Ministry of Defense document designating an Apex subsidiary as a company “certified” to procure and deliver military equipment and electronics. The FBI recovered a letter sent by a specialized electronics laboratory of Russia’s Federal Security Service (FSB), Russia’s primary domestic intelligence agency, to an Apex affiliate regarding certain microchips obtained for the FSB by Arc. The letter stated that the microchips were faulty and demanded that the defendants supply replacement parts.

In addition, in anticipation of an inquiry by the Department of Commerce regarding the export of certain controlled microelectronics, defendants Fishenko, Posobilov, and Arc salesperson Viktoria Klebanova allegedly directed Apex executives Sergey Klinov and Dmitriy Shegurov, as well as other Apex employees, to alter Apex’s website and forge documents regarding certain transactions to hide Apex’s connections to the Russian military. In connection with the cover-up, Apex removed images of Russian military aircraft and missiles and other links to the Russian Ministry of Defense from its website.

The Arc Defendants

In addition to Fishenko, Posobilov, and Klebanova, the indictment charged Arc salespersons Lyudmila Bagdikian, Anastasia Diatlova, Sevinj Taghiyeva, and Svetalina Zagon, as well as Arc shipping manager Shavkat Abdullaev, with one count of conspiring to violate and 21 counts of violating the International Emergency Economic Powers Act (IEEPA) and the Arms Export Control Act (AECA) and with conspiring to commit wire fraud. According to the indictment, these defendants obtained controlled microelectronics by lying and submitting false information regarding the true nature, users, and intended uses of the high-tech goods, then exporting the goods, without the required licenses, to procurement firms in Russia. The defendants’ principal port of export for these goods was John F. Kennedy International Airport in the Eastern District of New York.

The Foreign Defendants

According to the indictment, in addition to owning and controlling Arc, Fishenko is also a controlling principal of the Russian procurement firm Apex, the defendant Sergey Klinov is the chief executive officer of Apex, and the defendant Dmitriy Shegurov is an employee of Apex. Apex and its affiliates supplied microelectronics to Russian government agencies, including Russian military and intelligence agencies. The defendant Yuri Savin was the director of marketing at Atrilor Ltd., another Russian procurement firm. Klinov, Shegurov, and Savin conspired with Fishenko and the Arc defendants to obtain controlled U.S.-origin microelectronics and to export those technologically sensitive goods to Russia without the required export licenses by falsifying information to hide the true nature, users, and intended uses of the goods. In addition, Fishenko, Posobilov, Klebanova, Klinov, and Shegurov were charged with obstruction of justice, and Fishenko and Arc were charged with conspiring to commit money laundering.

The individual defendants face maximum terms of incarceration of five years for the conspiracy charge, 20 years for each of the substantive IEEPA and AECA charges, and 20 years for the obstruction of justice charge. In addition, Fishenko faces a maximum term of incarceration of 20 years for conspiring to commit money laundering and 10 years for acting as an unregistered agent of the Russian government. The corporate defendants face fines of up to $500,000 for the conspiracy count and $1 million for each of the substantive IEEPA and AECA counts.

“The receipt of U.S.-made, cutting-edge microelectronics has advanced Russia’s military technological capabilities. NCIS and the Department of the Navy have worked closely with the FBI, the Department of Justice, and the Department of Commerce in this investigation due to the potential for significant enhancement of Russian naval weapons systems that would result from the illegal acquisition of these export-controlled technologies,” said Special Agent in Charge Timothy W. Reeves, NCIS Central Field Office.

As a result of this case, there may be victims and witnesses who need to contact the agencies involved in the investigation. If your business has been approached by one of the defendants or by someone trying to obtain export-protected, sensitive technology who appeared not to be legitimate, please report that information to The information will remain confidential and will be handled by the appropriate authorities.

The charges contained in the indictment are merely allegations, and the defendants have not yet been convicted of these offenses.

The Defendants:

Arc Electronics Inc.
Principal Place of Business: Houston, Texas

Apex System LLC
Principal Place of Business: Moscow, Russia

Alexander Fishenko, age 46 (now 49)

Shavkat Abdullaev, age 34

Lyudmila Bagdikian, age 58

Anastasia Diatlova, age 38

Viktoria Klebanova, age 37

Sergey Klinov, age 44

Alexander Posobilov, age 58

Yuri Savin, age 36

Dmitriy Shegurov, age unknown

Sevinj Taghiyeva, age 32

Svetalina Zagon, age 31

The Alexander Fishenko guilty plea took place before U.S. District Judge Sterling Johnson Jr. of the Eastern District of New York.  At sentencing, Fishenko faces up to 20 years in prison for each violation of the International Emergency Economic Powers Act and the Arms Export Control Act, up to 20 years in prison for money laundering conspiracy and obstruction of justice and up to 10 years in prison for acting as a Russian agent.  The defendant will also face potential criminal forfeiture and fines.

Four members of the conspiracy have pleaded guilty and three are scheduled to commence trial on Sept. 21, 2015.

September 15, 2015 in OFAC | Permalink | Comments (0)

Monday, August 24, 2015

Cuba Update - Tourist Travel Still Illegal

On July 22, 2015, the Bureau of Industry and Security (BIS) published a rule in the Federal
 to implement the rescission of Cuba’s State Sponsor of Terrorism designation. The rule BureauOfIndustryAndSecurity-Seal.svgremoved anti-terrorism (AT) license requirements from Cuba and eliminated references to Cuba as a State Sponsor of Terrorism in the Export Administration Regulations (EAR), while maintaining preexisting license requirements for all items subject to the EAR unless authorized by a license exception. The rule also removed Cuba from Country Group E:1 (terrorist supporting countries) in Supplement No. 1 to Part 740 of the EAR , making Cuba eligible for a general 25 percent de minimis level and portions of four license exceptions.

However, the United States continues to maintain a comprehensive embargo on trade with Cuba. The export and reexport to Cuba of all items subject to the EAR still requires a BIS license, unless authorized by a license exception specified in § 746.2(a)(1) of the EAR.

Licensing Policy

There is a general policy of denial for exports and reexports to Cuba of items subject to the Export Administration Regulations (EAR), as described in Section 746.2(b) of the EAR. However, there are exceptions to the general policy of denial, some of which are listed below:

  • Medicines and medical devices, whether sold or donated, are generally approved.
  • Vessels and aircraft on temporary sojourn to Cuba are reviewed on a case-by-case basis when they are used to deliver humanitarian goods or services or when their use is consistent with the foreign policy interests of the United States.
  • Items necessary for the environmental protection of U.S. and international air quality, waters and coastlines, including items related to renewable energy or energy efficiency, are generally approved.

In addition to authorization provided under licenses, there is authorization provided by license exception.

Other U.S. Government Agencies

Please be aware that other U.S. Government agencies administer regulations that could also impact your export or reexport transaction. For example, the Department of the Treasury’s Office of Foreign Assets Control (OFAC)maintains certain Cuba-related sanctions. Exporters and reexporters are responsible for complying with all applicable regulatory requirements.

Related to Travel Between the United States and Cuba

August 24, 2015 in OFAC | Permalink | Comments (0)

Tuesday, December 2, 2014

OECD Releases 1st Foreign Bribery Report today!

An analysis of the crime of bribery of foreign public officials

FATF logoMost international bribes are paid by large companies, usually with the knowledge of senior management, according to new OECD analysis of the cost of foreign bribery and corruption.

Bribes in the analysed cases equalled 10.9% of the total transaction value on average, and 34.5% of the profits – equal to USD 13.8 million per bribe. But given the complexity and concealed nature of corrupt transactions, this is without doubt the mere tip of the iceberg, says the OECD.

Bribes are generally paid to win contracts from state-owned or controlled companies in advanced economies, rather than in the developing world, and most bribe payers and takers are from wealthy countries.

The OECD Foreign Bribery Report analyses more than 400 cases worldwide involving companies or individuals from the 41 signatory countries to the OECD Anti-Bribery Convention who were involved in bribing foreign public officials. The cases took place between February 1999, when the Convention came into force, and June 2014.

Almost two-thirds of cases occurred in just four sectors: extractive (19%); construction (15%); transportation and storage (15%); and information and communication (10%).

Bribes were promised, offered or given most frequently to employees of state-owned enterprises (27%), followed by customs officials (11%), health officials (7%) and defence officials (6%). Heads of state and ministers were bribed in 5% of cases but received 11% of total bribes.

In most cases, bribes were paid to obtain public procurement contracts (57%), followed by clearance of customs procedures (12%). 6% of bribes were to gain preferential tax treatment.

The report also reveals that the time needed to conclude cases has increased over time, from around two years on average for cases concluded in 1999 to just over seven today. This may reflect the increasing sophistication of bribers, the complexity for law enforcement agencies to investigate cases in several countries or that companies and individuals are less willing to settle than in the past.

In 41% of cases management-level employees paid or authorised the bribe, whereas the company CEO was involved in 12% of cases.

Intermediaries were involved in 3 out of 4 foreign bribery cases. These intermediaries were agents, such as local sales and marketing agents, distributors and brokers, in 41% of cases. Another 35% of intermediaries were corporate vehicles, such as subsidiary companies, companies located in offshore financial centres or tax havens, or companies established under the beneficial ownership of the public official who received the bribes.

Governments around the world should strengthen sanctions, make settlements public and reinforce protection of whistleblowers as part of greater efforts to tackle bribery and corruption, says the OECD. The overwhelming use of intermediaries also demonstrates the need for more effective due diligence and oversight of corporate compliance programmes, and for company executives to lead by example in fighting foreign bribery.

The OECD Foreign Bribery Report seeks to illustrate the crime of foreign bribery in real terms. It ‘measures’, for the first time, the crime of transnational corruption based on analysis of data emerging from foreign bribery enforcement actions concluded since the entry into force of the OECD Anti-Bribery Convention in 1999.

Now that foreign bribery is illegal in many countries, the even greater challenge is to effectively investigate and prosecute this crime when it occurs. Often involving a series of offshore transactions, multiple intermediaries, complex corporate structures and evidence located abroad, successfully detecting, investigating and sanctioning foreign bribery requires expertise, time and co-operation.

The OECD Foreign Bribery Report, allows us to better understand the ‘who, what, where, why, and how’ of foreign bribery. It goes against some of our preconceived notions about this crime. For the first time, this report measures and describes transnational corruption with reference to actual cases, rather than with statistics derived from econometrics, perception surveys or unsubstantiated allegations.

It aims to assist the OECD Working Group on Bribery and the G20 Anti-Corruption Working Group in their efforts to combat transnational corruption. The analysis will also enable governments, companies and civil society to better understand and combat this insidious crime.

December 2, 2014 in OFAC | Permalink | Comments (0)