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Despite Sanctions, Fentanyl Exporter Maintains Ownership and Control

09/30/19 4 minute read

On August 21, 2019, the U.S. Department of the Treasury sanctioned Chinese national Yan Xiaobing for shipping hundreds of packages of synthetic opioids, including fentanyl, to the United States. However, the designation did not mention Yan’s associate, Hu Qi, who is also his wife, nor did it name the company Yan may have used to export fentanyl overseas.

Public records reveal that Yan and his wife own and control a company actively registered in China named Wuhan Livika Technology Co Ltd. According to Treasury’s 50 Percent Rule, Livika Technology is legally blocked due to its majority ownership by a specially designated national (SDN).

This finding demonstrates how public records can be used to identify companies not officially sanctioned by Treasury but still owned by an SDN. This can be useful in helping to disrupt criminal networks so closely linked to the U.S. opioid crisis.

Yan’s Drug Trafficking History

Yan’s activities first received attention on September 7, 2017, when a grand jury in the Southern District of Mississippi returned a federal indictment against him. Yan was charged on two counts of conspiracy to manufacture and distribute multiple controlled substances, including fentanyl. He was also charged with seven counts of manufacturing and distributing the drugs.

The indictment further alleges that Yan operated at least two chemical plants capable of producing acetyl fentanyl, and other fentanyl analogues. He then sold these substances directly to U.S.-based customers in multiple cities through several websites and mail carriers using different names and companies over six years. Yan is the first manufacturer and distributor of fentanyl to be indicted in the history of the United States.

Public Records Reveal Chinese Company Still Active Despite Sanctions

Corporate records in Mainland China (see fig. 1) and Hong Kong (see fig. 2) reveal that Yan owns two companies. While the Hong Kong entity has closed, Wuhan Livika Technology Co Ltd remains active. In fact, Yan maintains a sixty percent stake in the company, and his wife owns the remaining forty percent of shares.

Left: Corporate record for Wuhan Livika Technology; Right: Corporate record for Hong Kong-based company

According to guidance issued by the U.S. Department of the Treasury, “any entity owned in the aggregate, directly or indirectly, fifty percent or more by one or more blocked persons is itself considered to be a blocked person.” Given that Livika Technology is majority owned by Yan, it is itself legally blocked.

Tactics Used by SDNs to Unblock Legally Blocked Companies

However, Livika Technology’s blocked status could change. It is common practice for individuals engaged in money laundering, fraud, and other transnational and financial crime to have their names removed from public records. Control and ownership relationships often continue through nominees, associates, or family members. Furthermore, these individuals often reduce their ownership stake to forty-nine percent, just under the threshold identified by Treasury.

For example, Yan could sell his shares to his wife, Hu Qi, who was not sanctioned. If that happened, Livika Technology would no longer be legally blocked since it would no longer be owned by an SDN. In theory, it could resume business uninhibited.

Next Steps?

If that’s the case, fentanyl could still reach the United States through Livika Technology and/or Hu Qi. As the United States seeks to respond to the U.S. opioid crisis, it is clear that public records can help identify entities involved in a drug trafficking network, even non-sanctioned ones.

The public records data used to power this research is available through Sayari Search! If you’re curious how this data could drive insights for your team, please reach out here.

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