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March 15, 2023

U.S. steps up enforcement of Russian sanctions, says official

As the world recently marked the one-year anniversary of Russia’s invasion of Ukraine, the United States continues to employ economic sanctions to weaken Vladimir Putin’s regime. Front and center of the effort to enforce those restrictions is Matthew Axelrod, who in December became assistant secretary for export enforcement at the U.S. Department of Commerce’s Bureau of Industry and Security.

Assistant secretary at the Department of Commerce Matthew Axelrod addresses a luncheon of the ABA Standing Committee on Law and National Security.

Assistant secretary at the Department of Commerce Matthew Axelrod addresses a luncheon of the ABA Standing Committee on Law and National Security.

Speaking at a February luncheon sponsored by the ABA Standing Committee on Law and National Security, Axelrod detailed the recent effort by the U.S. government to bolster compliance with the growing number of restrictions against doing business with Russia.

In October, one of the latest Russian sanctions moved forward: the U.S. Bureau of Industry and Security issued an interim final rule to deny China’s access to certain semiconductor and advanced computing technology and to inhibit China’s ability to manufacture those items domestically. 

Violators of the rule will likely be added to what Axelrod calls an “export blacklist” of several dozen businesses that are called out for allegedly helping to supply Russia’s military with restricted technology.

Axelrod’s job is to enforce U.S. export laws under the Export Control Reform Act of 2018 and the Export Administration Regulations, which specifically regulate dual-use items, defined as items that are capable of ordinary civilian use but also capable of military use, such as airplanes or computer chips.

Axelrod is key to a reinvigorated U.S. enforcement effort.

He was recently appointed to co-lead the Disruptive Technology Strike Force ─ along with Assistant Attorney General Matthew G. Olsen.  The strike force was created by the Department of Justice to “target illicit actors, strengthen supply chains and protect critical technological assets from being acquired or used by nation-state adversaries,” taking aim mostly at Russia and China.

In this new role, Axelrod helps oversees a team of federal law enforcement agents from throughout government – including the FBI and Homeland Security Investigations – in 14 U.S. Attorney offices across the country.   

The strike force is designed to “bring a specific focus to particular technologies that the U.S. wants to protect, and to bring attention and the collective resources to that effort in those 14 cities,” he said.

The ramped-up enforcement includes warning companies of their obligations to comply with economic sanctions and export-control rules, including by screening their customers and closely monitoring restricted technologies.

Other changes were made in the Bureau of Industry and Security’s settlement guidelines, allowing staff to label more cases as “egregious” and impose stiffer penalties, to ensure that fines are commensurate with the harm they cause to U.S. national security.

Further changes eliminate a practice of allowing companies to reach settlements with the bureau without “admitting or denying” a violation. To be eligible for a settlement with the bureau — as well as any credit, such as a reduced fine — companies need to admit to the underlying misconduct that occurred.

“The whole idea of the controls was not to punish the Russian people, it was to try to degrade Russian’s military. And so we’ve been focused on trying to make sure that people aren’t circumventing the controls.”

For example, he said members of his team will inspect shipments bound for Russia if they suspect prohibited items are onboard, and the changes seem to be working. “So … the number changes a little bit week to week, but I think it’s currently an 87% drop in U.S. exports to Russia from the same period a year ago.”