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De Facto

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LTV's De Facto examines sanction breaches with Russia and Belarus

Entrepreneurs have found ways to circumvent the sanctions imposed on Russia and Belarus. Most of the reports received by the Financial Intelligence Unit of Latvia (FID) involve moving goods across the border. Latvian Television's broadcast De Facto reported on August 29 that entrepreneurs both cheat on commodity codes and indicate intermediary countries in transactions.

On Thursday, August 25, about 500 trucks were waiting at the border crossing point in Terehova. Trade with Russia is not completely banned, but outbound goods are now being checked more carefully by customs.

A rather classic way of trying to circumvent sanctions is to switch customs codes.

For example, timber cannot be imported into the European Union, but wooden structures may. Recently someone tried to rename old cross-ties and nails transported from Belarus as construction structures. In another cargo, alcohol bottles were called kitchenware. There have also been attempts to import pellets into Latvia by changing the codes.

On Thursday in Terehova, a driver was caught trying to transfer exercise equipment to Russia for the second time in a week. Its value exceeds EUR 300, therefore it is considered to be a luxury product that cannot be brought to Russia. “The client took repeated actions to deliberately circumvent the sanctions. Changed the item code. Criminal proceedings have been initiated,” says Irina Golubova, deputy supervisor of the State Revenue Service (VID) Terehov customs control post. 

Besides luxury goods, plants, chemicals, paper, machinery, electrical equipment, engines and other things are not allowed to be brought to Russia. No wood, alcohol, fertilizers, glassware, tires, engines, gold and coal can be imported from Russia. 

As of the end of August, customs recorded 1,339 alleged violations of sanctions imposed on Russia and Belarus on the merchant side. 32 criminal proceedings have been initiated at the VID.

Cases have also been identified that goods are marked as being sent to Kazakhstan but are actually intended for the Russian market.

Normunds Krūmiņš, head of the Latvian Logistics Association, says that news from Russia's information space shows that many Western brands that left Russia immediately after the war began are back on the shelves of Russian shops. Kazakhstan features as one of the countries that Russia can use to circumvent sanctions. Both are in the same customs union.

“It is not difficult for a Russian company to establish, for example, a company in Kazakhstan that buys goods from a legal dealer, and further, since it is a customs union, borders do not exist in principle, these goods appear on Russian shelves. Whether it is a circumvention of sanctions, it should be decided by those who have drafted the legislation, but in any case, this system is currently working,” said Krūmiņš.

Latvian railway statistics show that Kazakhstan's freight share in rail transport increased significantly from 0.4% last year to 25% this year. 

“Not all trade that has increased with Kazakhstan and with other countries will automatically mean circumventing sanctions. This is an indicator,” says Paulis Iļjenkovs, deputy head of the Strategic Analysis Division of the Financial Intelligence Unit (FID).

Kazakhstan, Uzbekistan, Kyrgyzstan, Serbia, Turkey and African countries, which have also not imposed sanctions against Russia, are used for breaching sanctions.

The FID, in cooperation with other institutions and major banks, has compiled the most typical cases that can signal a circumvention of sanctions. For example, people from Latvia show an interest in opening accounts in countries that do not join sanctions. “Very often it is the use of some kind of proxies from countries that do not impose sanctions against Russia. These are often types of new payment services that are less transparent, like virtual currencies,” Iļjenkovs said.

 

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