By Al-Fassel | 2024-02-05

WASHINGTON -- Four Chinese nationals have been charged in the United States with crimes related to a conspiracy to unlawfully smuggle US-origin electronic components to Iran, the US Department of Justice said Wednesday (January 31).

Arrest warrants have been issued for all four, who remain fugitives.

The indictment, tied to the work of the Disruptive Technology Strike Force, charges the four with "a years-long, complex conspiracy" to violate US laws by procuring US technology with military uses for entities in Iran.

The Disruptive Technology Strike Force is an interagency law enforcement strike force co-led by the US Departments of Justice and Commerce.

It is designed to target illicit actors, protect supply chains and prevent critical technology from being acquired by authoritarian regimes and hostile nation-states.

According to court documents, the four unlawfully exported and smuggled US export controlled items through China and Hong Kong, ultimately for the benefit of entities affiliated with the Islamic Revolutionary Guard Corps (IRGC).

The smuggled components also benefitted Iran's Ministry of Defense and Armed Forces Logistics (MODAFL), which supervises Iran's development and production of missiles, weapons and military aerial equipment, including drones.

Iran has long served as a regional hub for the production and export of unmanned aerial vehicles (UAVs), commonly known as drones, which its proxies have used to carry out deadly attacks in the region and beyond.

There is ample evidence that Russia has used Iranian-made drones in its attacks on Ukraine.

"For more than a decade, the defendants allegedly orchestrated a scheme to smuggle US manufactured parts to the IRGC and the Iranian agency charged with developing ballistic missiles and UAVs," said Justice Department official Matthew G. Olsen.

"Such efforts to unlawfully obtain US technology directly threaten our national security, and we will use every tool at our disposal to sever the illicit supply chains that fuel the Iranian regime's malign activity," he said.

"Aggressively combating illicit procurement networks that support Iranian military systems like radars and UAVs is essential to US national security," said US Department of Commerce export enforcement official Matthew S. Axelrod.

The indictment "reaffirms that proliferators cannot hide behind front companies in third countries to funnel technology to our adversaries," he said.

Deceptive practices

The indictment names the defendants as Baoxia ("Emily") Liu; Yiu Wa ("Stephen") Yung; Yongxin Li ("Emma Lee"); and Yanlai Zhong ("Sydney Chung").

Between around May 2007 and July 2020, they used an array of front companies in China to funnel dual-use US-origin items to sanctioned Iranian entities with ties to the IRGC and Ministry of Defense and Armed Forces Logistics.

The blacklisted entities include Shiraz Electronics Industries, Rayan Roshd Afzar, and their affiliates, according to the indictment.

The dual-use items include electronics and components that could be used in the production of drones, ballistic missile systems and other military end uses.

"Throughout the course of the conspiracy, the defendants concealed the fact that the goods were destined for Iran and Iranian entities and made material misrepresentations to US companies regarding the end destination and end users," the US Justice Department said in a statement.

Through these deceptive practices, the defendants concealed that the ultimate destination of these products was Iran as opposed to China, it said.

"As a result, a vast amount of dual-use US-origin commodities with military capabilities were exported from the United States to Iran in violation of US sanctions and export control laws and regulations," it said.

If convicted, the defendants face a maximum penalty of 20 years in prison for violating the International Emergency Economic Powers Act, and up to 10 years in prison for smuggling goods from the United States.

They also face up to five years in prison for each count of conspiracy and submitting false or misleading export information.

Illicit procurement

The US Treasury on June 6, 2023 blacklisted a network operating in Iran, China and Hong Kong that it said was supplying material for Iran's ballistic missile program, as Iran claimed to unveil its first "hypersonic missile."

The network of seven individuals and six entities conducted financial transactions and facilitated procurement of sensitive and critical parts and technology for key actors in Iran's ballistic missile development, the Treasury said.

In June 2023, the US Department of Justice joined with the Departments of Commerce, State and Treasury to issue an advisory to share information about the threat posed by Iran's procurement, development and proliferation of UAVs.

Four months later, in October 2023, the department joined with the same interagency partners to issue an advisory describing the threat posed by Iran's ballistic missile procurement activities.

The advisories gave an overview of the key components sought by Iran, the regime's use of deceptive practices to acquire certain types of technologies, and recommendations for implementing effective compliance controls.