Illicit Procurement Patterns by Russian Defense Sector

In this article we provide further insight into our analysis of ROSOBORONEKSPORT’, a Russia’s only state-controlled intermediary in the area of exports and imports of the entire range of military and double-purpose products, technologies and services, and methods its uses to evade sanctinos.

BITE analysis shows several Russian companies utilizing ROSOBORONEKSPORT’s corporate TAX ID for trade transactions, to include LAZERSERVIS. ROSOBRON is an OFAC-listed denied party, added Significance of Analysis: In this report, our analysis identifies ROSOBORONEKSPORT as using non- sanctioned LAZERVIS as a ‘cut-out’ or alternative company to transact trade and evade sanctions, sometimes known as ‘sanctions busting’.

Summary of Suspicious Trade Pattern

Between January of 2019 and December of 2020, BITE identified 183 trade transactions for LAZERSERVIS, a Russian company based in Moscow. Although open-source research identifies the TAX ID for LAZERSERVIS as 7731280660, 51 of those 183 transactions were conducted using the Tax ID for ROSOBORONEKSPORT, 7718852163. Those transactions, which originated in various places around the globe, were valued collectively at over $5 Million dollars. These transactions included commodities under Chapters 84, 85 and 90 of the Harmonized System and commodity descriptions to include, block of gyroscopic sensors, pressure regulators and sensors.

Background

As the US and Western allies ratchet up sanctions and enhance strategic trade controls, Russia’s military- industrial and defense sectors must increasingly rely upon transshipment methods and other illicit approaches to procure critical components. Recovered Russian military equipment in post-invasion Ukraine clearly indicates Russia’s urgent need for critical foreign components for military production. This supply-chain model demonstrates an important strategic vulnerability for Russia and opportunity to constrain its military industrial sector.

Typical transshipment patterns include sourcing military and dual-use equipment from North American and Western suppliers through points in Asia, former Soviet Union members, and the Middle East, to disguise the ultimate end users of the controlled commodities. Additionally, prohibited end-users in Russia will obfuscate Russian consignee information to hide the true military end-use of the shipments which often contain dual use items having both commercial and military applications.

Analysis Methodology

NU Borders’ Business Intelligence for Trade Enforcement (BITE) platform ingests hundreds of millions of open-source trade transactions and other relevant data, such as global watch lists and corporate information, and analyzes that data using state-of-the-art AI and Machine Learning tools and models. NU Borders team of data scientists and enforcement SMEs continually interrogate BITE data to reveal high- level procurement patterns down to granular details of specific illicit transactions associated with Russian military supply chains. NU Borders will be publishing our findings monthly to inform the global strategic trade community.

This month’s report focuses on a BITE-identified pattern whereby Russian importers, who are not currently on watch lists, are used as cutouts for denied Russian entities’ international trade transactions. In these cases, non-sanctioned entities are the listed importer on the shipment, but other identifying information - the denied entity’s address, email, telephone and/or corporate ID - are still listed in the trade transaction.

Lessons learned from the BITE data suggest international enforcement officials and risk management operators should include in their best-practices vetting of additional data elements in international trade transactions beyond company name, including all corporate identifiers (address, phone, fax, email) and, critically, corporate identification numbers.

This best practice is supported by several other BITE use cases which reveal similar patterns of Russian cutouts utilizing denied entities' corporate IDs. Please note these companies and other intermediaries (defined as facilitating shipments/transshipments to denied entities in Russia, Iran, DPRK and other prohibited regions and/or end users but not captured on watch lists) are available through BITE List subscription.

Results

This month’s post features Russian Designated Entity, ROSOBORONEKSPORT OAO.

Designated Company:

ROSOBORONEKSPORT OAO
27 Stromynka Ul.
Moscow 107076 Russia
Registration ID: 1117746521452
Government Gazette Number: 56467052
Tax ID No: 7718852163 Russia
US OFAC Listing

Reason for placement on the BITE LIST:

BITE analysis shows several Russian companies utilizing ROSOBORONEKSPORT’s corporate TAX ID for trade transactions, to include LAZERSERVIS.

Non-Sanctioned Associated Company:

LAZERSERVIS
Vereyskaya Street, D39
Moscow 121357 Russia
Tax ID: 7731280660 Russia
https://www.list-org.com/company/78524
http://www.laserservice.ru/

Summary of Suspicious Trade Pattern

Between January of 2019 and December of 2020, BITE identified 183 trade transactions for LAZERSERVIS, a Russian company based in Moscow. Although open-source research identifies the TAX ID for LAZERSERVIS as 7731280660, 51 of those 183 transactions were conducted using the Tax ID for ROSOBORONEKSPORT, 7718852163. Those transactions, which originated in various places around the globe, were valued collectively at over $5 Million dollars. These transactions included commodities under Chapters 84, 85 and 90 of the Harmonized System and commodity descriptions to include, block of gyroscopic sensors, pressure regulators and sensors.

Analysis Support

183 international trade transactions for LASER SERVICE in BITE
51 with Laser Service using Rosboroneksport Tax id: 7718852163
Cargo value for 51 hits is $5,907,064

Legal address:
MOSCOW, VEREYSKAYA STREET, D 39

Shippers to LASER SERVICE:
Malaysia-listed exporting country
India-listed as origin country

List of shippers:
CORPORATION OF AVIATION TECHNOLOGICAL SYSTEMS SDN. BHD
HINDUSTAN AERONAUTIKS LTD
MINISTRY OF NATIONAL DEFENSE OF THE PEOPLE'S DEMOCRATIC REPUBLIC OF ALGERIA
MINISTRY OF DEFENSE OF THE SYRIAN ARAB REPUBLIC
THE PRESIDENT OF INDIA REPRESENTED BY THE MINISTRY OF DEFENSE OF THE REPUBLIC OF INDIA
MINISTRY OF DEFENSE OF THE SYRIAN ARAB REPUBLIC ARMY SUPPLY BUREAU

Commodity Descriptions:
Sensors, signaler of computer and power units
4.2 products
Transmitter
Gyroscopic sensor
Pressure regulators
BLOCK OF GYROSCOPIC SENSORS

Primarily HS Code chapters:
90
84
85
PRESSURE REGULATOR VALVE EXHAUST

Addresses and Tax IDs for Laser Service
https://www.list-org.com/company/78524
https://sbis.ru/contragents/7731280660/773101001

АО "ЛАЗЕРСЕРВИС" (laserservis cyrillic)

Quick reference

Laserservice, JSC is registered at 121357, Moscow, st. Vereiskaya, 39. General director of the organization JOINT-STOCK COMPANY "LAZERSERVIS" Andrey Alexandrovich Pavlov. The main activity of the company is the Repair and maintenance of aircraft, including spacecraft. Also, Laserservice, JSC works in 17 more areas. The size of the authorized capital is 10,300,000 rubles.
The organization has 1 established company. Has 5 licenses.
Laserservice, JSC took part in 10 auctions and won 10 of them. The main customer is 514 Arz, JSC. In courts, the organization won 33% of cases as a plaintiff
JOINT STOCK COMPANY "LAZERSERVIS" was assigned TIN 7731280660 , KPP 773101001 , OGRN 1047731013857 , OKPO 55196964
Valid from 14.07.2004
https://sbis.ru/contragents/7731280660/773101001

Conclusion:

BITE investigative analysis identifies non-sanctioned company (LASERSERVIS) being used as a ‘cut-out’ for a sanctioned company. LASERSERVIS was involved in 183 total trade transactions in BITE, but the ROSBORONEXPORT  TAX ID was listed in 51 of those transactions.

In the vast majority of their transactions in BITE, their own tax id (7731280660) was listed in the data. However, in 51 of their 183 transactions, their TAX ID was listed as 7718852163, which is registered to ROSBORONEKSPORT, a sanctioned company.

So this is potentially a way for ROSBORONEXPORT to have goods, which are actually destined for them, shipped to LASERSERVIS, to avoid detection/seizure and to evade sanctions, otherwise known as ‘sanctions-busting’.

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