Treasury Sanctions Target DPRK-Russia Arms Pipeline, Highlighting Rise of Sanctions Compliance Risk

The U.S. Treasury Department has imposed sanctions on two Russian individuals and three Russia-based entities accused of facilitating unlawful weapons shipments between North Korea and Russia, further escalating sanctions risks for companies amid the war in Ukraine.

The designations announced recently by Treasury's Office of Foreign Assets Control (OFAC) targets a sanctions evasion network led by Russian nationals Ashot Mkrtychev and Rafael Gazaryan. According to Treasury, the two have worked to broker arms deals enabling North Korea to supply Russia with ballistic missiles and other munitions in exchange for military assistance from Moscow.

Among the entities designated are Gazaryan's companies Trans Kapital and Rafort, as well as Tekhnologiya OOO, a firm owned by Russian national Aleksey Budnev who is accused of shipping North Korean military communications gear to Russia.

“Today’s action reflects our commitment to disrupt the DPRK’s deepening military cooperation with Russia,” Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson stated. “The United States will continue to take action to hold accountable those who seek to facilitate the shipment of weapons and other materiel to enable Russia’s war.”

The sanctions freeze any U.S. assets of those designated and generally prohibit Americans from dealing with them, extending efforts by Washington to deprive Russia of arms and resources supporting its invasion of Ukraine.

In a related move, OFAC also announced amendments to the Iranian Transactions and Sanctions Regulations (ITSR). This includes incorporating a new Iran-related General License D-2 and publishing an associated List of Services, Software, and Hardware Incident to Communications.

OFAC is also issuing a new FAQ 1173 and amending 26 other ITSR-related FAQs providing guidance on Iran sanctions.

The amendments appear aimed at updating and clarifying provisions around information and communications technology in relation to Iran.

The moves signal sanctions enforcement remains a top priority across U.S. national security interests, from the Ukraine conflict to the longstanding economic pressure campaign against North Korea's nuclear program. This creates mounting compliance risks for companies across multiple industries.

Companies must have robust compliance programs to monitor rapidly evolving sanctions measures and to screen customers and business partners. The penalties for sanctions violations, whether intentional or inadvertent, can be severe. Policymakers have also strengthened disclosure requirements around sanctions compliance.

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