Four Chinese nationals are charged in an indictment in the District of Columbia with various federal crimes related to a years-long conspiracy to unlawfully export and smuggle U.S.-origin electronic components from the United States to Iran.
According to court documents, Baoxia Liu, aka Emily Liu; Yiu Wa Yung, aka Stephen Yung; Yongxin Li, aka Emma Lee; and Yanlai Zhong, aka Sydney Chung, unlawfully exported and smuggled U.S. export controlled items through China and Hong Kong ultimately for the benefit of entities affiliated with the Islamic Revolutionary Guard Corps (IRGC) and Ministry of Defense and Armed Forces Logistics (MODAFL), which supervises Iran’s development and production of missiles, weapons, and military aerial equipment to include Unmanned Aerial Vehicles (UAVs).
“For more than a decade, the defendants allegedly orchestrated a scheme to smuggle U.S. manufactured parts to the IRGC and the Iranian agency charged with developing ballistic missiles and UAVs,” said Assistant Attorney General Matthew G. Olsen of the Justice Department's National Security Division. “Such efforts to unlawfully obtain U.S. 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.”
“Aggressively combating illicit procurement networks that support Iranian military systems like radars and UAVs is essential to U.S. national security,” said Assistant Secretary for Export Enforcement Matthew S. Axelrod of the Department of Commerce. “Today’s indictment, tied to the work of the Disruptive Technology Strike Force, reaffirms that proliferators cannot hide behind front companies in third countries to funnel technology to our adversaries.”
“Our indictment alleges a years-long, complex conspiracy to violate U.S. laws by procuring U.S. technology with military uses for entities in Iran who would do us harm – a serious offense that endangers our national security,” said U.S. Attorney Matthew M. Graves for the District of Columbia. “Our office, along with our federal law enforcement partners, will continue to turn over every stone to find those who break our laws and put us at risk. We are committed to making sure that U.S. technology is kept out of the hands of those taking aim at the United States and its citizens through robust enforcement of U.S. sanctions.”
“Our foreign adversaries use many tactics to gain access to critical U.S. technologies and innovation,” said Executive Assistant Director Larissa L. Knapp of the FBI’s National Security Branch. “In this instance, it is alleged that U.S.-origin equipment was smuggled by front companies to the benefit of end users in Iran. Any circumvention of U.S. export control law is simply unacceptable – the FBI will work diligently with its partners across the globe to hold all accountable who jeopardize our national security.”
According to the indictment, beginning as early as May 2007 and continuing until at least July 2020, the defendants utilized an array of front companies in the People’s Republic of China (PRC) to funnel dual-use U.S.-origin items, including electronics and components that could be utilized in the production of UAVs, ballistic missile systems, and other military end uses, to sanctioned Iranian entities with ties to the Islamic Revolutionary Guard Corps (IRGC) and Ministry of Defense and Armed Forces Logistics (MODAFL) such as Shiraz Electronics Industries (SEI), Rayan Roshd Afzar, and their affiliates.
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 U.S. companies regarding the end destination and end users. These deceptive practices caused the U.S. companies to export goods to the defendants’ PRC-based front companies under false pretenses and under the guise that the ultimate destination of these products was China as opposed to Iran. As a result, a vast amount of dual-use U.S.-origin commodities with military capabilities were exported from the United States to Iran in violation of U.S. sanctions and export control laws and regulations.
The defendants are charged with conspiring to violate the International Emergency Economic Powers Act (IEEPA), violating IEEPA, smuggling goods from the United States, and one count of submitting false or misleading export information. If convicted, the defendants face a maximum penalty of 20 years in prison for violating the IEEPA; up to 10 years in prison for smuggling goods from the United States; and up to five years in prison for each count of conspiracy and submitting false or misleading export information. Arrest warrants have been issued for Liu, Yung, Li and Zhong who all remain fugitives.
The FBI’s Detroit Field Office and Commerce Department’s Office of Export Enforcement Chicago Field Office are investigating the case.
Assistant U.S. Attorney Jack F. Korba for the District of Columbia and Trial Attorneys Heather Schmidt and Yifei Zheng of the National Security Division’s Counterintelligence and Export Control Section are prosecuting the case.
In June 2023, the 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 to minimize sanctions and export control risk.
Today’s action was coordinated through the Disruptive Technology Strike Force, an interagency law enforcement strike force co-led by the Departments of Justice and Commerce designed to target illicit actors, protect supply chains, and prevent critical technology from being acquired by authoritarian regimes and hostile nation-states. Under the leadership of the Assistant Attorney General for National Security and the Assistant Secretary of Commerce for Export Enforcement, the Strike Force leverages tools and authorities across the U.S. government to enhance the criminal and administrative enforcement of export control laws.
An indictment is merely an allegation. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.