U.S. Airplane Parts Distributor Penalized for Violating Russia Sanctions

Nearly three years after Russia’s invasion of Ukraine, U.S. sanctions against Russian entities involved in the war have created significant risks for businesses operating in the region. This reality was highlighted recently when New York-based airplane parts distributor SkyGeek Logistics was found to have violated U.S. sanctions six times, according to an enforcement order issued on December 31 by the Treasury Department’s Office of Foreign Assets Control (OFAC).

SkyGeek was initially conducting business legally with two Russian companies, Flavic FZE and Mirage Air Craft Services, until both firms were sanctioned by the U.S. in 2023. The violations occurred when SkyGeek shipped products and attempted to provide refunds to these companies after sanctions had been imposed. Specifically, SkyGeek shipped items and attempted to refund Flavic FZE 56 days after the sanctions were enacted and Mirage Air Craft Services 25 days post-sanction.

In both instances, U.S.-based partner banks flagged the refund payments as violations of U.S. sanctions.

SkyGeek self-reported four of the violations, while partner banks reported the other two. OFAC determined the violations to be non-egregious and levied a fine of $22,172. Neither SkyGeek nor its parent company, aerospace chemical firm GracoRoberts, provided a comment when requested.

The enforcement order underscores the risks businesses face when dealing with entities in Russia, which has been subject to increasing sanctions by the U.S., U.K., European Union, and other nations since the invasion of Ukraine in February 2022. In April 2023, additional sanctions were imposed by the U.S. and U.K., including bans on the import of Russian-origin aluminum, copper, and nickel, and restrictions on companies producing metals supporting Russia’s war efforts.

OFAC acknowledged that SkyGeek and its parent company, GracoRoberts, implemented extensive measures to address the compliance issues that led to the violations. SkyGeek has ceased sales to 45 jurisdictions, updated its sanctions compliance protocols to include rescreening of customers requesting refunds, and adopted AI tools and a new vendor to enhance its screening processes.

“Now [SkyGeek] conducts regular screening of customer orders before they are accepted and throughout the process until orders are fulfilled,” OFAC noted.

This case highlights the ongoing challenges for companies navigating sanctions against Russia, where even minor compliance lapses can carry significant legal and financial consequences.

By fLEXI tEAM