In recent years, we have observed a surge in sanctions and export controls circumvention activities, including, but not limited to, the use of indirect channels, misclassification of goods and the use of proxies or front companies to obscure the destination of sanctioned items. Regions such as Central Asia, Eastern Europe and the Middle East have emerged as key transit and transshipment hubs for re-export of sanctioned items to Russia. This trend highlights how adaptable circumvention tactics can be and reflects a broader increase in illicit practices in response to the expanding landscape of international sanctions.
Western countries have stepped up efforts to address this issue, and businesses are finding themselves grappling with increasingly complex sanctions obligations while trying to remain competitive on the global market.
Western countries’ response to circumvention techniques
In December 2023, as part of the 12th package of sanctions on Russia, the EU announced the “no-Russia” clause. Designed to tackle the risk of sanctions circumvention via third countries, this constitutes a requirement for all EU exporters to include in contracts a clause that expressly prohibits the re-exportation of certain sanctioned goods.
The clause has wide-ranging repercussions on non-EU supply chains as EU operators must integrate the clause when engaging with non-EU counterparts.1 As one of the largest economic blocs on the planet, regulations enacted in the EU have an impact far beyond the borders of the Union, thereby creating a form of de facto extraterritoriality.
On 18 July 2025, the EU adopted its 18th package of sanctions against Russia. It includes additional anti-circumvention measures to address increasingly sophisticated efforts from individuals and entities across the globe to frustrate sanctions provisions. The package reflects the EU’s willingness to close loopholes in its sanctions architecture and to push forward with anti-circumvention measures and enforcement action targeted at third country enablers.2
Specifically, the package extends the list of controlled items, adds new listings targeting entities in third countries (notably in Turkey and China) helping supply (directly or indirectly) Russia’s military-industrial complex, and imposes additional restrictions on the “shadow fleet”. It also introduces a new “catch-all” provision allowing member states to require prior authorisation for exports of certain goods and technologies to any third country if they suspect that the items are intended for Russia, effectively providing an additional export investigation tool to member states’ arsenals.
Despite the absence of an identical legal requirement in the United States or the United Kingdom, both jurisdictions have introduced functionally equivalent measures to the “no-Russia” clause through regulatory guidance and export control practices:
- The US’ Bureau of Industry and Security (BIS) encourages exporters to include contractual language prohibiting re-export to Russia or Belarus, particularly for sensitive dual-use items. These clauses are not legally required but are considered part of best compliance practice and may help mitigate liability in case of diversion.
- In the UK, the Office of Trade Sanctions Implementation issued guidance in January and August 2025 stating that businesses may want to consider adding such a clause in contracts involving restricted items. While not mandatory, this clause is promoted as both a due diligence tool and a deterrent to actors seeking to re-export to Russia.
Beyond contractual arrangements: operational challenges for downstream compliance
Introducing new contractual requirements may initially seem straightforward, but existing partners may be reluctant to renegotiate contracts while others may have differing views on sanctions on Russia. For example, some countries, including global economic powerhouse China, have responded to Western sanctions with their own countermeasures, also known as blocking sanctions. It doesn’t seem far-fetched to imagine a scenario where an EU exporter or multinational with operations in both the EU and China finds that adhering to EU sanctions may expose them to legal or commercial risk in China, and vice versa.
And new contractual clauses are only part of the story – each new sanctions package or designation adds to a growing compliance burden for businesses who will need to conduct additional due diligence, transaction monitoring and screening, causing operational delays and frustrations. As the sanctions landscape and circumvention techniques are constantly evolving, businesses need to continuously adapt their approach to assessing and managing sanctions risks, across their distribution channels, third-party and customer relationships to ensure that internal controls and processes, including due diligence and screening, remain effective.
Ensuring a robust compliance framework
Businesses should ensure that they conduct regular, thorough risk assessments to identify potential exposure points across supply chains, third party and customer relationships, and geographic operations. This should be complemented by a comprehensive risk and control mapping exercise to ensure controls align with identified threats and vulnerabilities.
Due diligence procedures need to be reviewed and updated regularly to reflect heightened regulatory expectations, including expanded jurisdictional risks and the growing use of intermediary countries for circumvention. This applies equally to long-established trading partnerships to ensure that the risk profile has not changed.
Regular monitoring of transactions and counterparties is essential to detect suspicious activity patterns and adapt controls dynamically. Businesses should also maintain and regularly update a list of red flags, such as unnecessarily complex shipping routes, mismatched trade documentation and dealings with high-risk jurisdictions near sanctioned countries. These should be clearly communicated to alert staff in relevant roles to identify suspicious behaviour and trigger escalations for compliance review and onward self-reporting as appropriate.
Additional measures should include:
- Broad employee training to ensure awareness of evolving sanctions obligations and to communicate the business’ commitment to sanctions compliance
- Embedding compliance checks within procurement and onboarding processes
- Implementing processes for incident reporting and investigation
- Regular testing and monitoring of your sanctions compliance programme to assess the effectiveness of controls and ensure adherence to evolving regulatory standards and updated guidance.
Maintaining open and proactive communication with counterparties is also vital to ensure a shared understanding of, and contractual commitment to, compliance.
Conclusion
In an increasingly complex geopolitical and regulatory landscape, a comprehensive and proactive sanctions compliance strategy is essential to manage risk and preserve market access and reputational integrity. The emergence of downstream compliance obligations, particularly in the context of Russia-related sanctions, is part of a broader shift toward more emphasis on anti-circumvention tools across EU and allied jurisdictions. As enforcement is expected to intensify, we can expect further regulatory tightening and deeper coordination between the EU, US, UK and other partners. The cost of getting it wrong is likely to be higher than ever.
If you would like to talk to someone about improving your sanctions compliance framework, get in touch with Sarah Wrigley, Tom Townson, Nicolas Guillaume (Nicolas.guillaume@fr.gt.com) or Tristan Cartier (Tristan.cartier@fr.gt.com).
[1] The no-Russia clause is not required for intra-EU commercial operations between entities that are, by default, subject to EU sanctions enforcement. Similarly, since June 2024, countries considered strategic allies and maintaining comparable sanctions regimes against Russia are exempt from the contractual implementation of the clause when dealing with EU operators. This includes the United Kingdom, the United States, South Korea, Australia, Canada, New Zealand, Norway and Switzerland.
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