HSI investigation leads to $500K forfeiture to Estonia for benefit to Ukraine

The United States officials and Estonian Secretary General Tõnis Saar announced today an agreement to transfer nearly $500,000 to Estonian authorities for the purpose of providing aid to Ukraine. The funds were forfeited by the United States following a Homeland Security Investigations (HSI) counterproliferation investigation resulting in the breakup of an illegal procurement network attempting to import into Russia a high-precision, U.S.-origin machine tool with uses in the defense and nuclear proliferation sectors. Additionally, on Wednesday, Feb. 14, a citizen of Latvia charged criminally in connection with the procurement scheme pleaded guilty to violating U.S. export laws and regulations.

This transfer is the first of its kind from the United States to a foreign ally for the express purpose of assisting Ukraine, and the second time the Justice Department’s Task Force KleptoCapture has made confiscated Russian assets available for Ukraine — having provided $5.4 million in forfeited funds last year to the State Department for the support of Ukrainian war veterans. The confiscated funds are being transferred to Estonia since under current authorities, the facts of this case do not allow for a direct transfer to Ukraine. Estonia will use the funds for a project to expedite damage assessments and critical repairs to the Ukrainian electrical distribution and transmission system, which have been purposefully targeted by Russian forces.

“Today’s announcement demonstrates the unwavering resolve of the United States and our Estonian partners to cut off President Putin's access to the western technologies he relies on to wage an illegal war against Ukraine,” said Deputy Attorney General Lisa Monaco, who signed the transfer agreement on behalf of the United States. “This step for justice and restoration blazes a new trail toward combating Russia’s ongoing brutality. The Department of Justice will continue pursuing creative solutions to ensure the Ukrainian people can respond and rebuild.”

“Preventing cross-border crime has been and will be an even greater priority in the future,” said Secretary General Tõnis Saar of the Estonian Ministry of Justice. “Effective prosecution of sanctioned crimes is a very important part of this. In my opinion, this agreement provides additional motivation to deal with sanctions violations even more. The reason is very simple, the goal here is not only to detect, prosecute and ensure justice, but to direct illegal income to the victim, i.e. Ukraine. I hope that this will become the new normality for sanctioned crimes in other countries in the future.”

“This agreement between the United States and Estonia not only reinforces our strong partnership, it fortifies the commitments of both countries to stand up to Russian aggression,” said Executive Associate Director Katrina W. Berger of HSI. “This transfer stems from a joint investigation into the attempted illegal shipment of military materials to aid the Russian war against Ukraine. HSI will continue to ensure the safety of the homeland of this great nation, and when necessary, that of our allies.”

“Since the start of Russia’s full-scale invasion of Ukraine, the Department of Justice, together with its U.S. and overseas partners, has leveraged every tool available to cut off the Kremlin from the resources it needs to prosecute its war of aggression. These efforts are yielding results,” said Assistant Attorney General Matthew G. Olsen of the Justice Department’s National Security Division. “Today, we demonstrate once again our commitment to holding Russia to account and to aiding the people of Ukraine as they bravely resist and rebuild.”

“I commend the investigators who prevented this sensitive piece of Connecticut-manufactured equipment from crossing the Russian border, and our team of prosecutors who are not only bringing the individuals and entities involved to justice but have worked to seize and forfeit the funds involved in its purchase,” said U.S. Attorney Vanessa Roberts Avery for the District of Connecticut. “We thank our law enforcement partners and the Government of the Republic of Estonia for helping us achieve our mission to chase down the assets of those who violate our laws and to ensure proper compensation to their victims.”

“The Putin regime has purposefully targeted critical and civil infrastructure in Ukraine to weaken morale, cripple the Ukrainian economy, and use winter as a weapon of war. The funds we are providing to Estonia today will be used to dramatically reduce the time needed to evaluate and prioritize urgent repairs to Ukraine’s electrical infrastructure, all in effort to literally keep the lights on,” said Task Force KleptoCapture Co-Director Michael Khoo.

The agreement with Estonia showcases the joint commitments of the United States and Estonia to both enforce the export control regimes that deprive the Russian war machine of critical technologies and supplies and use the confiscated criminal proceeds to sustain Ukraine as it resists illegal Russian aggression.

In March 2023, an HSI investigation into the attempted smuggling of a dual-use export-controlled item to Russia resulted in the forfeiture of $484,696, representing funds wired into the United States to purchase the item. The item, known as a jig grinder, was intercepted before it could reach Russia.

A jig grinder is a high-precision grinding machine system that does not require a license to export to European Union countries but does require a license for export and reexport to Russia because of its potential application in nuclear proliferation and defense programs. The attempted smugglers and co-conspirators did not apply for, receive, or possess a license of authorization from the U.S. Department of Commerce to export or reexport the jig grinder to Russia, as required by the Export Control Reform Act of 2018 and the Export Administration Regulations (EAR), which restrict the export of items that could make a significant contribution to the military potential of other nations or that could be detrimental to U.S. foreign policy and national security.

In addition to the forfeiture, U.S. authorities, with the active support of the Estonian Prosecutor General’s Office and the Estonian Tax and Customs Board, charged multiple individuals and companies who were part of the smuggling network. The transfer of the forfeited funds to Estonia is in recognition of the crucial assistance received from the Estonian authorities.

Among those criminally charged following HSI’s investigation into the smuggling case, Latvian national Vadims Ananics, 47, was arrested in Latvia on Oct. 18, 2022, and pleaded guilty earlier this week in federal court in Connecticut. Ananics admitted to his role in the scheme to violate U.S. export laws and regulations by attempting to smuggle a dual-use export-controlled item to Russia.

According to court documents and statements made in court, Ananics was the general manager of CNC Weld, a Latvia-based corporation. Beginning in 2018, Ananics conspired with others, including individuals in Russia and a Russia-based company, to violate U.S. export laws and regulations to smuggle a 500 Series CPWZ Precision jig grinder that was manufactured in Connecticut to Russia.

In August 2019, to finalize the purchase of the jig grinder, Ananics and others traveled to Bridgeport, Connecticut, where he informed the sellers that the jig grinder was being purchased for the benefit of CNC Weld. Only after the jig grinder was exported from the United States did Ananics inform the sellers that CNC Weld was not the end user.

Ananics pleaded guilty to one count of conspiracy to violate the Export Control Reform Act, an offense that carries a maximum penalty of five years in prison. A sentencing date has not yet been scheduled.

U.S. authorities, working with Latvian authorities, intercepted the jig grinder in Riga, Latvia, before it was to be shipped to Russia. In March 2023, $484,696 in funds involved in the purchase of the jig grinder were subsequently forfeited.

In turn, Estonia has, in consultation with the United States, agreed to use the transferred funds to finance a drone-based program to assess the damage Russian aggression has done to Ukraine’s electrical distribution and transmission infrastructure.

In April 2023, an additional €312,192.44 (approximately $342,000) was ordered forfeited as part of a criminal sentence imposed on one of the shell companies involved in the jig-grinder smuggling network. The funds are currently held in Latvia pending final enforcement of the U.S. forfeiture order.

HSI Field Offices in New Haven, Connecticut; Portland, Oregon; and The Hague, Netherlands; the U.S. Department of Commerce’s Office of Export Enforcement in Boston; and the FBI collaborated on the investigation. In addition to the assistance by Estonian authorities, the Prosecutor General’s Office of the Republic of Latvia, the Latvian Tax and Customs Police, the Latvian State Police, and Europol provided valuable assistance.

The investigation was coordinated through the Justice Department’s Task Force KleptoCapture, an interagency law enforcement task force dedicated to enforcing the sweeping sanctions, export controls, and economic countermeasures that the United States, along with its foreign allies and partners, has imposed in response to Russia’s unprovoked military invasion of Ukraine. The jig-grinder smuggling case is being prosecuted through the Organized Crime Drug Enforcement Task Forces (OCDETF) Program and is being supported by OCDETF’s International Organized Crime Intelligence and Operations Center (IOC-2). OCDETF identifies, disrupts and dismantles drug traffickers, money launderers, gangs and transnational criminal organizations through a prosecutor-led and intelligence-driven approach that leverages the strengths of federal, state and local law enforcement agencies. Learn more about the OCDETF Program.

HSI special agents assigned to the agency's counter-proliferation investigations program are on the front lines of the U.S. government's fight to prevent the illicit export and transfer of sensitive military and dual-purpose technology and defense articles to transnational criminal organizations, terrorist groups, adversarial nation states and other nefarious entities operating around the world. As the only U.S. government agency with full statutory authority to enforce all U.S. export control laws relating to military items, controlled dual-purpose goods and sanctions violations, HSI stands at the forefront of the government’s counter-proliferation mission.

Source: U.S. Immigration and Customs Enforcement (ICE.gov)