US sanctions on Singapore-based Alexsong a warning to all firms to stay compliant

Singapore

THE United States has designated Singapore-based electronics wholesaler, Alexsong Pte Ltd, among those that have breached its sanctions against Russia, a case which serves to remind businesses that they must have robust sanction compliance policies.

Nathanael Lin, partner, shipping and international trade, at Rajah & Tann in Singapore, said the issue of sanctions compliance is not new.

"The latest designation drives home the importance of having a robust and responsive sanctions compliance programme for each company, especially for those dealing with international trade and those involved in the global supply chain," he said.

On Mar 31, the US Department of the Treasury's Office of Foreign Assets Control (OFAC) imposed fresh sanctions on 21 entities and 13 people as part of its crackdown on the Kremlin's sanctions evasion networks and technology companies, which are enabling Russia's war on Ukraine.

In general, US persons are prohibited from conducting any transaction with a party that has been designated as Specially Designated Nationals (SDN).

Alexsong was among those designated for its involvement in providing western technology to Russia's defence sector.

According to OFAC, Singapore-based Alexsong Pte Ltd facilitated transactions in support of sanctions evasion by the Serniya network. "OFAC is designating Alexsong Pte Ltd pursuant to Executive Order 14024 for being owned or controlled by, or having acted or purported to act for or on behalf of, directly or indirectly, the Government of the Russian Federation (GoR)," it said.

Executive Order 14024 allows the US Treasury to impose sanctions on any individual or entity determined to operate or have operated in sanctioned sectors, which now include the Russian aerospace, marine and electronics sectors.

According to the company's very basic website, Alexsong is a distributor for global manufacturers involving in electronics, test and measurement equipment as well as radio communications equipment and systems, among others.

Regulatory filings name a Cano Laskin Alexandro David as Alexsong's chief executive officer from Nov 10, 2021 to Mar 4, 2022. He was also a shareholder from Sep 18, 2019 to Apr 2, 2022. The company also goes by another name, Champion Way Pte Ltd.

In response to Russia's unprovoked invasion of Ukraine on Feb 24, the US, together with its global allies, imposed broad and far-reaching sanctions against Russia. Singapore, too, has imposed its own sanctions against Russia.

The extensive nature of these sanctions has been a compliance nightmare, prompting a growing number of companies to announce they would limit, suspend or fully exit their Russia operations. These businesses include American Express, Apple, Shell plc, Starbucks and Visa Inc. Many of these firms have taken this initiative, even when not legally required to do so.

"Companies have had a matter of days, sometimes even less, to monitor and understand the rapidly changing regulatory environment, evaluate their risk profile and compliance with applicable law, and adjust operations accordingly," George Wang and Abram Ellis, partners at Simpson Thacher & Bartlett LLP, said in a Law360 article.

To understand and stay compliant with the tightening restrictions on dealings with Russia, businesses must analyse all of their Russian touch points.

"Potential touch points run the gamut. They include big obvious ones, such as having a Moscow office or direct sales to Russia. But many companies have also had to analyse both legal compliance and the business wisdom of continuing a wide assortment of less direct dealings with Russia," they said.

Examples include whether goods made in a third country, based in part on US technology, can be exported to Russia; whether to continue business with a counterparty that is not on any sanctions list, but that operates through entities in a third country, such as Cyprus, with historical connections to Russia; and evaluating alternative means of transmitting funds to satisfy an existing debt where the Russian recipient's bank is now sanctioned; among others.

Matthew Borman, Deputy Assistant Secretary for Export Administration, at the US Department of Commerce, said companies should do two analyses of their exports to Russia: one, whether the US content is more than 25 per cent of the value of the overall product.

If so, a licence is required; and two, if the foreign-made product - even without that US content - is based on US software or technology or produced on a line that uses a US tool or piece of equipment. That will also be subject to restrictions.

Those in violation can be fined or face jail time if subject to US jurisdiction as well as risk losing access to the US markets and the US financial system.