Traders in Hong Kong and mainland China are supplying Russia’s war machine with European electronics and military technology, exploiting loopholes in international sanctions, according to a new report.
Researchers at the Committee for Freedom in Hong Kong Foundation, an advocacy group, found that the merchants that have not been sanctioned have enabled hundreds of semiconductors, sensors, electrical connectors, microchip components and other devices produced by Western specialized firms to reach the battlefield in Ukraine. Many of these products, including some designed by the Dutch NXP Semiconductor and the German Infineon Technologies, are used to build cars, aircraft parts and other civilian purposes, but also used to make drones and missiles.
“European components remain deeply embedded in Russia’s weapons systems and military infrastructure, often routed through the same small group of repeat Hong Kong intermediaries,” the researchers found.
Samuel Bickett, a human rights lawyer who co-authored the report, said the findings show that sanctions aren’t working as effectively as they could.
“Ukraine’s allies have failed to coordinate on which suppliers of these components to sanction, and haven’t moved quickly enough or reached broadly enough into these international transshipment networks to prevent these components from reaching the Russian military,” Bickett told the International Consortium of Investigative Journalists.
the procurement of military technology for Russia. But the Hong Kong government saidit would not enforce Western sanctions on Russia — only those imposed by the United Nations.
The report, titled “Bypassing the Blockade,” is based on the Ukraine defense ministry’s database that traces foreign components found in deconstructed or destroyed Russian weapons, as well as export data and corporate records.
Hong Kong functions not merely as a permissive business environment but a systemic hub for the routing of sanctioned goods and payments to Russia.
— The Committee for Freedom in Hong Kong Foundation report
The researchers found that seven Hong Kong and China-based traders shipped to Russian importers — including sanctioned ones — military-use technology produced by more than 20 electronicsmanufacturers headquartered in Switzerland, the Netherlands, France, Germany, the U.K. or with subsidiaries in Poland.And they did so without attracting scrutiny from international authorities.
Some of the Hong Kong traders controlled by Russians bypassed checks by selling Western technology manufactured at factories in Asia or Northern Africa, the researchers wrote.
One of the top suppliers identified in the report, Woeroon Electronic Sourcing Ltd. (and its Shenzhen sister company), was a key intermediary in the transfer of hundreds of technological goods worth nearly $28 million between 2022 and 2024. Woeroon is not sanctioned by any government, the report said.
Woeroon’s case is “indicative of a much bigger problem,” the researchers concluded. “Hong Kong functions not merely as a permissive business environment but a systemic hub for the routing of sanctioned goods and payments to Russia,” they wrote.
Woeroon did not respond to ICIJ’s requests for comment.
The report is part of a seriesauthored by CFHK researchers that exposed how Hong Kong has become the “single largest global transshipment node” for procuring billions of dollars-worth of Western technology for Russia, Iran, and North Korea.
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The researchers also urged Western governments to do more to enforce existing sanctions laws and add Hong Kong to the list of high-risk jurisdictions that facilitate financial crimes.
“These findings show that European countries cannot stop the flow of these goods by crackingdown at their own export points,” the researchers concluded. “The decisive levers are not at local borders, but in rules imposed on European firms with respect to their global manufacturing, distribution, and compliance practices.”
The researchers noted that the “patchwork approach” to enforcement and “structural weaknesses” in coordination undermine the sanctions’ effectiveness.
“[D]espite their breadth, these systems remain uneven in design, enforcement,and coordination, creating gaps that sophisticated evasion networks have repeatedly exploited,particularly through third-country hubs such as Hong Kong.”
The researchers’ findings provide new insights into sanction evasion patterns previously identified by international investigators and journalists.
Last year, a cross-border investigationled by ICIJ’s media partners NDR, WDR and Süddeutsche Zeitung, uncovered details of a network of middlemen that used shell companies in Cyprus and other secrecy jurisdictions to procure Western military technology for Russia’s surveillance programme.
t-weight: 400;”>Representatives from the Chinese Embassy and the Hong Kong Economic and Trade Office in Washington D.C. did not reply to ICIJ’s request for comments.
ICIJ
As crypto industry expands, U.S. slashes office examining dirty money safeguards of cryptocurrency exchanges
As cryptocurrency use in the United States surges, the number of federal investigators assigned to review safeguards against dirty money in the industry plummeted last year to the lowest level since at least 2017, according to federal data obtained by the International Consortium of Investigative Journalists.
The cuts weaken the anti-money laundering watchdog’s office within the U.S. Internal Revenue Service, which is tasked with overseeing protections against dirty money in crypto exchanges and other firms registered as so-called money service businesses. Even before the recent reductions, the IRS struggled to oversee dirty money in the fast-growing crypto sector, according to experts. The cuts come amid the Trump administration’s broader easing of oversight of crypto exchanges that now move trillions of dollars in value annually.
“The reduction in supervisory staff at the IRS matches a trend we’ve seen across [anti-money laundering] enforcement agencies,” said Erica Hanichak, deputy director at the FACT Coalition, a Washington-based nonprofit group that advocates for strong safeguards against illicit financial flows. “This sends the signal that the US is open to dirty money. It undermines our national security and market integrity.”
The IRS did not respond to requests for comment.
Even as the industry has sought mainstream acceptance, cryptocurrency has played a key role in recent money laundering scandals.
Last November, ICIJ collaborated with 37 media partners in 35 countries to publish The Coin Laundry, an investigation into dirty money in the cryptocurrency industry. The investigation revealed that as recently as July 2025, Huione Group, a Cambodian financial institution flagged by US authorities in May as a “primary money laundering concern,” sent large sums of cryptocurrency to accounts at some of the world’s largest cryptocurrency exchanges, including Binance and OKX.These fund flows continued even after US authorities found major problems relating to the firms’ anti-money laundering protocols.
Recommended reading goal of many crypto-reliant money launderers.
U.S. regulators classify crypto exchanges in the same category as so-called money services businesses (MSBs) like Western Union. Even before last year’s cuts, the IRS office tasked with overseeing these businesses struggled to adequately supervise cryptocurrency operations, according to the agency’s inspector general.
In 2021, then-IRS commissioner Charles Rettig told Congress in a letter that the agency needed more staff to address the “rapidly evolving and expanding” cryptocurrency industry. That year, the IRS had 193 agentstasked with examining the anti-money laundering protocols of crypto exchanges and other MSBs, significantly more than in 2025, according to federal data.
“Conducting MSB examinations is an inherently laborious activity,” Rettig said in the letter. “[Examiners] need reinforcements to conduct more examinations of both traditional and digital asset MSBs, especially money transmitter principals. Increased funding for personnel and expenses, such as travel and analytical tools, is also necessary to supervise MSBs.”
The following year, in 2022, Congress awarded the IRS tens of billions of dollars in additional funding, and the agency began rapidly expanding its ranks and embarked on a push to modernize its systems. But, early last year, the Trump administration’s cost-cutting stopped this effort in its tracks, rapidly firing many of the new hires as Republicans in Congress also clawed back much of the new funds awarded to the agency.
In April, the new administration also disbanded a Justice Department unit that investigated crypto-related crimes. In doing so, the department saidit would still “pursue the illicit financing of these enterprises by the individuals and enterprises themselves, including when it involves digital assets, but will not pursue actions against the platforms that these enterprises utilize to conduct their illegal activities.” The Trump administration also quickly dropped enforcement actions against more than a dozen cryptocurrency firms, and the president pardoned several crypto executives who had pleaded guilty to violating anti-money laundering laws.
Cryptocurrency oversight is a very loosely knitted-together safety net.
— Alison Jimenez, an anti-money laundering expert
In 2025, the number of IRS investigators assigned to oversee the dirty money defenses of crypto firms and other money transmitters fell 33 percent to 139 agents, down from 208 in 2024.The falling numbers do not necessarily equate to layoffs, but rather the number of agents assigned to examine anti-money laundering practices in so-called nonbank financial institutions, which include cryptocurrency exchanges and other MSBs. The 2025 number is the lowest in the dataset, which dates back to 2017. ICIJ obtained the data through a public records request. Some U.S. states also supervise anti-money laundering practices at MSBs.
Christina Rea, a compliance specialist who advises crypto firms on IRS anti-money laundering examinations, says the agency appears to be struggling to keep pace with overseeing dirty money safeguards in cryptocurrency. Rea says a small and dwindling group of IRS agents who possess deep virtual currency experience are tasked with overseeing a booming and highly complex new financial sector.
“What’s notable is that this contraction appears to be happening while the regulated crypto and fintech ecosystem has grown dramatically in scale, transaction volume, product complexity and risk exposure,” Rea told ICIJ. “Compared to 2017 and 2018, today’s firms are larger, more interconnected with traditional financial institutions, and operating far more sophisticated platforms, and yet examiner resources appear to have decreased rather than expanded.”
Jimenez said. “They are larger than a lot of banks but they are not getting the frequency of examinations or the in-depth examinations that banks get. If there are violations found, there is often no formal action taken.”
Jimenez said that fewer examiners overseeing crypto exchanges and other money transmitters could mean more problems with anti-money laundering safeguards will go undetected for longer and could eventually balloon into larger scandals that hurt consumers and damage the broader industry.
“Cryptocurrency oversight is a very loosely knitted-together safety net,” Jimenez said. “Now it’s just getting pulled farther apart.”
Nearly half of powerful .50-caliber ammo seized by Mexican government came from US Army plant, defense minister says
A United States Army ammunition plant was the source of almost half of all the .50-caliber rifle rounds seized by Mexican authorities over more than a decade, the country’s defense minister told reporters Tuesday, after an investigation by the ICIJ and media partners revealed how the powerful ammunition has been used by Mexican drug cartels in attacks on the government and civilians.
“According to the records we have,” Defense Minister Gen. Ricardo Trevilla Trejo said during a presidential news conference, “137,000 cartridges have been seized since 2012. Of those, 47% come from that company and have been sold in gun shops in the southern United States,” referring to the Lake City plant.
The sprawling, government-owned facility, which is located outside of Kansas City, Missouri, is the largest manufacturer of rifle rounds for the U.S. military and has been a major supplier of ammunition to American consumers for over two decades.
Agreements between the U.S. Army and the private contractors that run Lake City have allowed .50-caliber ammunition and components made at the plant to enter retail markets and fall into the hands of Mexican cartels, according to millions of pages of court documents, seizure records and government data obtained by ICIJ and its partners.
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Mexican cartels overpower police with ammunition made for the US military
On the morning of Nov. 30, 2019, a convoy of pickup trucks carrying men armed with a heavy machine gun and powerful .50-caliber rifles entered the Mexican town of Villa Unión and opened fire.
The men had been sent on a mission of intimidation: They planned to set fire to the town hall. Their superior firepower pinned down state and local police officers as they waited for military reinforcements. Terrorized residents scrambled to take cover from the hail of bullets.
Luis Manzano, 27, a local Villa Unión reporter who drove into town during the shootout. Image: Marian Carrasquero / The New York Times
The smell of smoke filled the streets and spent casings covered the ground like “fallen leaves,” said Luis Manzano, a Mexican journalist who drove into town during the shooting. But his most vivid memory was the thunder of .50-caliber guns. The “ground trembled” as they fired, he said. “I had never experienced anything like that.”
The military drove off the assailants. In the end, four police officers, two civilians and 19 cartel members were killed. Afterward, as investigators collected evidence from the scene, they gathered at least 45 .50-caliber casings stamped with the initials “L.C.”
The letters stand for the Lake City Army Ammunition Plant, a sprawling facility just outside Kansas City, Missouri, that is owned by the U.S. government and is the largest manufacturer of rifle rounds used by the American military.
It has also been a major supplier of ammunition for American consumers, including .50-caliber cartridges. These powerful rounds — as big as a medium-sized cigar and designed to be used by the military to destroy vehicles and light aircraft — are currently available for purchase by civilians across the United States.
Millions of pages of court documents, seizure records and government data obtained by the International Consortium of Investigative Journalists and The New York Times show how agreements between the Army and the private contractors that run Lake City have allowed .50-caliber ammunition and components made at the plant to enter retail markets and fall into the hands of Mexican cartels.
Mexico’s government has also purchased Lake City ammunition, the documents show, although they do not indicate the caliber.
The U.S. domestic market for the ammunition is small: .50-caliber rifles, which have limited civilian application, typically retail for thousands of dollars, and heavy machine guns like the one used in Villa Unión cost considerably more. The guns’ standard cartridges average between $3 and $4 apiece and are rarely purchased by American gun owners.
But in Mexico, where cartels have deep pockets and a seemingly endless appetite for .50-caliber firearms, demand is high.
Cartel gunmen armed with .50-caliber firearms have downed helicopters, assassinated government officials, shot at police and military forces, and massacred civilians.
A police officer holds a round of .50 caliber ammunition in Villa Unión. Image: Marian Carrasquero / The New York Times
Since 2012, the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives has seized more than 40,370 rounds of .50-caliber ammunition in states bordering Mexico, according to data obtained through public records requests. Lake City’s product accounted for about a third of them, a larger share than any other manufacturer.
While .50-caliber ammunition from other companies — located primarily in Brazil and South Korea — has also made its way to Mexican cartels, the data makes clear that the U.S. Army plant has been a major source of the destructive ammunition being used to wage military-style battles with Mexican authorities.
This includes a particularly powerful version of Lake City’s ammunition — incendiary rounds capable of piercing armor, which were used in an attack on Mexican police in 2024 and are for sale online today
In February of last year, the Trump administration declared six Mexican cartels to be foreign terrorist organizations, yet these same organizations are acquiring ammunition made at the plant owned by the U.S. Army.
At least 16 online retailers have sold armor-piercing ammunition made at Lake City or made with components from the plant, according to a count by ICIJ and The Times.
Vasily Campbell, who owns one of those businesses, said he stopped selling the ammunition “about two years ago once we found out where it was going and how it was getting there.”
He said he became suspicious when buyers began asking to have 100-round ammo cans delivered to residential addresses. “That’s not a normal purchase,” he said. “There’s several orders I straight-up canceled.”
The U.S. Army did not respond in detail to questions about the use of Lake City ammunition by drug cartels. In an email, a spokesperson said that allowing commercial sales from the plant has saved taxpayers around $50 million annually, primarily by lowering the government’s cost for ammunition.
The impact that one .50-cal has in a firefight is outrageous … They really, really tip the scale — former ATF agent Chris Demlein
Successive presidential administrations have pledged to crack down on the flow of arms to Mexico. And in September, Secretary of State Marco Rubio announced a new initiative with the Mexican government to stop gun trafficking to the country.
The number of .50-caliber rounds seized is small compared with that of other cartridges. But it’s the power of the .50-caliber ammunition, not its quantity, that has made it a game changer for the cartels, giving them the ability to overwhelm police and even the military, according to Chris Demlein, a former ATF agent, who spent years investigating gun smuggling to Mexico.
“The impact that one .50-cal has in a firefight is outrageous,” he said. The weapons allow cartels to engage with targets at distances of more than a mile: “They really, really tip the scale.”
ICIJ and the Times obtained investigative files from three incidents involving .50-caliber rifles, including the assault on Villa Unión. In each of them, Mexican authorities reported finding casings marked with the Lake City imprint.
In a fourth example in early 2024, gunmen used the more destructive variant, .50-caliber armor-piercing incendiary rounds, from Lake City to attack a police convoy, according to a press briefing given by then Defense Secretary Luis Cresencio Sandoval. One of the bullets pierced an armored vehicle, killing one of the crew members and wounding three others. “The armor that we have cannot protect our personnel from this kind of penetration,” he said.
Brenda Aparicio Villegas’ husband, Edder Paul Negrete Trejo, was one of 13 police officers killed in October 2019 in an ambush in Michoacán. Image: Enrique Castro
Brenda Aparicio Villegas is all too familiar with the devastating power of .50-caliber weapons. Her husband, Edder Paul Negrete Trejo, was a police officer who died on October 14, 2019 when he and his fellow police officers were ambushed in the western state of Michoacán. Authorities blamed the attack on the New Generation Jalisco Cartel, news media reported at the time.
Her husband and his colleagues — who often had to purchase their own bullets — did not stand a chance against the cartel’s .50-caliber rifles, she said. Negrete, the father of three children, died from a gunshot wound to the chest. Twelve other officers were also killed in the attack, including one who burned to death. Investigators later found .50-caliber casings from Lake City at the scene.
Not enough has been done to stop the flow of guns and ammunition to Mexico, Ms. Villegas said. “Sadly, many of us pay the price.”
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y quantity, but taking it across the border requires a license.
“Our mantra became, follow the ammo and you’ll get to the guns,” Red said in a recent interview. “We were tracking shipments from all over the country.”
The team seized hundreds of thousands of rounds of ammunition likely bound for Mexico, according to Red and court records. The vast majority of the ammunition was 7.62-mm rounds, most commonly used in AK-47s, he said.
Seizures of .50-caliber ammunition were small and infrequent at the time, according to ATF and Customs and Border Protection (CBP) records.
Our mantra became, follow the ammo and you’ll get to the guns. — former investigator Jason Red
But as American authorities introduced new initiatives and increased resources aimed at reducing gun trafficking to Mexico, the numbers grew.
Between 2019 and 2024 the ATF seized more than 36,000 rounds of .50-caliber ammunition in border states. About a third of them were identified as coming from Lake City.
During the same period, CBP seized nearly 21,400 units of .50 caliber ammunition. This included 2,850 of the armor-piercing incendiary rounds.
acted with the company to demilitarize unneeded ammunition from Lake City, American Marksman wrote on its website, adding that it “gets many of its components from its Lake City recycling operations.” That included components for its armor-piercing incendiary rounds.
Olin Winchester’s policies on the sale of .50-caliber ammunition from Lake City are unclear. The company’s catalog does not offer the rounds for sale to civilians. But Lake City cartridges and components, including armor-piercing incendiary rounds and bullets, have continued to appear on the market.
Pallets of the armor-piercing incendiary ammunition, labeled with a code denoting they were manufactured by Olin Winchester at Lake City, were being sold by at least one online retailer in March 2023. And American Marksman continues to sell armor-piercing incendiary ammunition on its website. (It is unclear which Lake City contractor manufactured the components used to make those rounds.)
In January 2022, the Department of Justice announced the indictment of members of a gun trafficking ring, run by a former U.S. Marine, that sold guns and ammunition, including .50-caliber rifles, to the Jalisco Cartel, the same group that was accused of killing Villegas’s husband, the police officer. Four months later, the Marine pleaded guilty.
During the operation, U.S. federal agents seized approximately 10,210 .50-caliber armor-piercing incendiary rounds with Lake City markings. There is no indication that the ammunition came from American Marksman or SGAmmo.
Outside the Lake City Army Ammunition Plant in Independence, Missouri. Image: Emily Rhyne for The New York Times
In an email, the Army said that Lake City’s contractors are “required to comply with all federal and state regulations governing the sale of commercial ammunition. While the operating contractor does not sell directly to the public, it sells to distributors, resellers, and retail stores, which are also required to adhere to federal, state, and local laws regulating ammunition sales.”
Olin Winchester did not respond to a detailed list of questions about its Lake City operations and its policies on the sale of .50-caliber ammunition and components made at the facility.
In an email, Northrop Grumman said that it “fully complied with government contract obligations in its sales of ammunition” during the two years it ran Lake City. SGAmmo did not respond to multiple emails about its purchases of .50-caliber ammunition. American Marksman also declined to comment.
letholes-mayor-NYT-768×432.jpg 768w, https://media.icij.org/uploads/2026/02/Villa-Union-bulletholes-mayor-NYT-1536×864.jpg 1536w, https://media.icij.org/uploads/2026/02/Villa-Union-bulletholes-mayor-NYT-1109×624.jpg 1109w, https://media.icij.org/uploads/2026/02/Villa-Union-bulletholes-mayor-NYT.jpg 1920w” sizes=”auto, (max-width: 1138px) 100vw, 1138px” /> Villa Unión’s former mayor Sergio Cárdenas in his butcher shop, right. Buildings in the town still sport bullet holes from the 2019 attack.
Image: Marian Carrasquero / The New York Times
Authorities traced one of the .50-caliber guns used in the assaultto a store in Texas. The owner, investigators found, had sold nearly 500 guns that ended up in the hands of the C.D.N, including a .50-caliber machine gun and at least six .50-caliber rifles. A federal court sentenced him to 10 years in prison, following a guilty plea.
American authorities indicted 14 members of the gun-smuggling ring, seizing over 2,300 rounds of Lake City ammunition.
Upon learning that the .50-caliber rounds he had heard in Villa Unión came from an ammunition plant owned by the U.S. Army, Cárdenas did not seem surprised.
“The drug traffickers can get their hands on anything,” he said. “And they get the best weapons from the United States.”
Times reporter Emiliano Rodríguez Mega reported from Mexico City and Villa Unión, Mexico.
Contributors: Jesús Escudero, Miguel Fiandor Gutiérrez, Delphine Reuter (ICIJ); Paulina Villegas (NYT); Mathieu Tourliere (Proceso, Mexico).