It is being reported (and here) that the Czech authorities have obtained a conviction of Vladimir Lihutin, a Czech national, for an attempt to export three luxury cars to Russia.
The sentence includes:
This is the first known conviction or fine imposed in Czechia for breaches of EU sanctions.
In a civil judgment handed down earlier this week, it was revealed (at paragraph 63) that an individual, David Crisp, was arrested by HMRC on 10 October 2023 and electronic devices were seized.
The allegation is that companies managed by Mr Crisp were knowingly exporting perfume to Russia in breach of the UK’s sanctions.
As of the date of the judgment, HMRC had confirmed (at paragraph 69) that the criminal investigation remains ongoing but so far no charges have been made and Mr Crisp is no longer on bail.
The judgment itself is of note for the Court removing Mr Crisp as a director of the relevant companies on the basis that there was a “strong prima facie evidential basis for the allegations” of breaching the UK’s sanctions. The orders were a form of interlocutory relief as part of an unfair prejudice petition brought by another of the shareholders of the companies.
On Friday the Customs office in Frankfurt raided and searched 24 residential and business premises mostly in Offenbach am Main and Aschaffenburg although Customs said the network extended across Germany. Four individuals were arrested. The actions were part of an investigation into the suspected export of luxury cars to Russia in breach of EU sanctions.
The individuals arrested were aged between 39 and 44 with one woman and three men.
The allegation is that 170 luxury cars had been exported since 2022.
Five cars were seized as part of the raids along with evidence and €300,000 in cash. In addition a freezing order was obtained over €13.3m in bank accounts said to be the profits from the enterprise.
The German authorities have been particularly active in enforcement related to luxury cars of late:
On Wednesday more than 60 officers from customs offices and prosecutors raided seven premises in Germersheim in the Rheinland-Palatinate region.
The investigation relates to the export of approximately 190 luxury cars to Russia valued at €4.5m, with the exports conducted via Kazakhstan, Kyrgyzstan, Belarus and Turkey.
As well as evidence significant amounts of cash were seized and attachment orders have been obtained over bank accounts and real estate.
It is being reported (in German and English) that the Customs Investigation Office in Essen and the Public Prosecutor’s Office in Bochum conducted raids on two premises including on a luxury car dealership on suspicion of exporting more than €5 million in cars to Russia.
The allegations include that fictitious destinations for the exports were put forward when the real destination was Russia.
Evidence and cars were seized as part of the raids.
Below is the first in our series of publishing the 10 final administrative criminal decisions reached by SECO in Switzerland. The examples below relate to Russian and Belarusian sanctions.
The next instalment will be published on Monday.
1. Final administrative criminal decision dated 21 November 2022
Original: 2022-11-21 – I.41 – Strafbescheid
Translation: 2022-11-21 – I.41 – Strafbescheid_Translated to English
The company in question attempted to export 1,850kg of a kind of lubricant (customs code 3403) included in the list of banned exports from Switzerland to Russia. The value of the products was €17,440.
The goods were stopped by Swiss customs at Mendrisio. An investigation was commenced.
The company cooperated and admitted the breach but submitted in writing that it was unaware that the product was included on the sanctions list.
SECO accepted this evidence and undertook its assessment of the penalty based on the fact that the breach was negligent and not intentional. This distinction gives rise to significantly different penalties under Swiss law.
A negligent breach can give rise to a maximum penalty of CHF 100,000 and/or a custodial sentence of up to three months.
Given the low value of the breach, and the accepted evidence of negligence rather than intent, SECO relied upon a provision of Swiss criminal procedure whereby if a fine is of no more than CHF 5,000 then the company can pay the fine without the need for further investigation to determine the specific individuals responsible. This was said to be proportionate compared to the time and cost of a full-blown investigation.
In light of this a fine of CHF 4,500 was imposed plus costs of CHF 1,260.
Comment: while the result may be proportionate to the value of the goods, it is unclear from the final decision whether the company in question received the payment of €17,440. It may be hoped that if such payment had been received that those funds would have been confiscated.
It is also noteworthy that the investigation was commenced on 5 September 2022 and finished by 26 October 2022, with the final decision issued on 21 November. As described the defendant was able to make written submissions but no person was interviewed and no documents or other evidence was sought. The submission of negligent ignorance of the sanctions appears to have been accepted without being tested.
2. Final administrative criminal decision dated 18 January 2023
Original: 2023-01-18 – I.42 – Strafbescheid
Translation: 2023-01-18 – I.42 – Strafbescheid_Translated to English
The company in question sought to export pumps (customs code 8413.9130) to Belarus valued at €39,619.20. Such goods are prohibited from sale, delivery or export to Belarus under article 6 of the Swiss Ordinance dated 16 March 2022. The goods were stopped at Zurich airport and had been due to arrive in Belarus after first being transported through Turkey and Russia.
The company accepted the breach, but submitted that it had obtained SECO clearance when the order was first placed in January 2022, but that it had mistakenly failed to re-check the tariff code against the Ordinance at the time of export in June 2022. The company also undertook remediation measures and appointed a sanctions compliance officer.
SECO accepted that the breach was not intentional, but stated that “as a company active in international trade, it had a duty to carefully analyse the embargo ordinances imposed by Switzerland and to take the necessary measures to ensure that they were not contravened“.
As with the earlier final decision, SECO relied upon the provision whereby a fine of under CHF 5,000 could be paid by the company without having to investigate the culpability of individual employees.
SECO considered as aggravating factors the value of the intended export and the fact that “more thorough control and monitoring” was expected of such a company. Mitigation consisted of the company’s cooperation, the remediation undertaken, and the fact that the export was not completed.
In light of this a fine of CHF 2,000 was imposed plus costs of CHF 560.
Comment: The case is a noteworthy statement of SECO’s expectation of a trading company’s duty to ensure compliance. Also noteworthy is the credit received for cooperation and remediation.
While one may wonder whether an export routed to Belarus through Turkey and Russia was intended as circumvention it appears that it was the company’s own customs declaration which indicated accurately both the nature of the goods and the destination. Accordingly, it is understandable why SECO took the view that the conduct was not intentional especially when combined with the fact that the company had earlier sought (and obtained) clearance for the export.
3. Final administrative criminal decision dated 1 May 2023
Original: 2023-05-01 – I.63 – Strafbescheid
Translation: 2023-05-01 – I.63 – Strafbescheid_Translated to English
The company in question attempted to exporte a painting valued at CHF 1,500 (i.e. a prohibited luxury good) to Russia, with the painting seized by the customs office at Mülligen.
An investigation was commenced as part of which the company admitted the alleged facts. The company, however, also noted that the painting had first been shipped to Moscow on 22 February 2022 (prior to the prohibition on the export of luxury goods) but that it had been returned to Switzerland undelivered as the customer was not at home at the time of the attempted delivery. By the time of the second attempted export in September 2022, the prohibition had come into place.
SECO accepted the company’s submission of a negligent rather than intentional breach noting, however, that the company “was obliged to examine more closely whether the export of the said goods to or for use in the Russian Federation was permissible“.
SECO availed itself of the same provisions allowing a simplified investigation where a company is fined CHF 5,000 or less. A fine of CHF 700 was imposed plus costs of CHF 370.
Comment: SECO noted the early admission of fault and the company’s cooperation, as well as the mitigating circumstance that the sale (when first conducted) had been lawful and that if the customer had been home at the first attempt there would have been no breach. Also noted was the low value of the breach.
The case is, however, illustrative of the expectations of due diligence and compliance expected by SECO even on a company that “is a family business and very rarely exports to Russia“, and that even a one-off, low value breach may still be the subject of investigation, conviction and fine.
It is being reported that he Lithuanian Customs Authority has today prevented the attempted export of two Tesla Cybertrucks valued at over €400,000 and has commenced a preliminary criminal investigation into the case.
The vehicles were being exported to Belarus, but the Customs Authority suspected that Russia was the intended final destination.
The drivers have been questioned and subsequently released.
On 24 April the Cologne District Court convicted a unnamed 52-year old individual of breaching the EU’s Russian sanctions by exporting 38 luxury cars and two motorcycles to Russia.
The cars were said to have totaled €4.7m in value, and were largely shipped to Russia via Belarus (where the goods are not prohibited exports). The prosecution was able to show through invoice addresses, the origins of payments and the ultimate Russian registrations of the vehicles that the individual was knowingly exporting to Russia.
The man was given a suspended two-year prison sentence, ordered to pay €20,000 and ordered to do 200 hours of community work.
It is unclear if the proceeds of the sales will be the subject of confiscation proceedings.
In terms of the sentence the court accepted as mitigating factors: i) that a previously legitimate business was made unlawful almost overnight; and ii) that the goods in question were not military or dual use. Given that these factors would be present in very many cases it is unclear why they were considered as mitigating.
Following prominent reporting in Lithuania (e.g. here), the Lithuanian Customs Department has confirmed that it has commenced an investigation into the alleged activities of the company UAB Vilpra.
It is alleged that the company exported nearly €1m in air conditioning units to Belarus via Kyrgyzstan in breach of the EU’s sanctions.
The company is reported to deny the allegations and to have stated that it complies with all sanctions.
Malta’s Sanctions Monitoring Board (the “SMB”) has, for the first time , imposed a fine for breach of EU sanctions.
The company in question was ArabMillionaire Limited. The SMB publishes the names of all company’s fined more than €800, but the size of the fine is otherwise unspecified.
Also unspecified is the conduct giving rise to the fine, but it was said to have been identified “at the time of supervisory examination conducted between June and August 2020”.
It is unclear when the fine was issued as this information is not specified on the website and the Sanctions Monitoring Board has confirmed that such information is confidential.
ArabMillionaire operated as an online casino (trading as Playfooz.com) based in Dubai. It’s licence from the Malta Gaming Authority was suspended in October 2022, and then cancelled in October 2023.
It has been reported that alongside other regulatory failings part of the reason for these actions by the Malta Gaming Authority was non-compliance with money laundering and counter terrorist financing.
