On 7 January 2025, the Office of Trade Sanctions Implementation (OTSI), part of the UK’s Department for Business and Trade, published Countering Russian sanctions evasion - guidance for exporters to help UK exporters understand how Russian sanctions circumvention occurs and minimize the risk of inadvertently facilitating Russian sanctions evasion.
Below we provide an overview of the new guidance and the steps UK businesses can take to ensure compliance.
Russian sanctions evasion
Since February 2022, the UK has deployed a wide-ranging set of sanctions and export controls aimed at preventing the flow of strategic goods, services, and technologies to Russia to curtail its ability to sustain the war in Ukraine. Although these restrictions have led to a substantial drop in direct UK-Russia trade – reportedly over £20 billion of UK trade value now falls under sanctions – Russian networks have allegedly intensified efforts to source prohibited goods through intermediaries and complex, layered transactions in third countries.
The guidance outlines common evasion tactics, including the use of shell companies, falsified documentation, and anomalous shipping routes to obscure the ultimate destination of goods. One of the central focuses of the guidance is on the Common High Priority List (CHPL), which the UK government developed alongside its partners in the EU, Japan and the US.
The CHPL identifies 50 items considered crucial to Russia’s military supply chain and therefore most at risk of diversion. Beyond the CHPL, the UK government also highlights additional categories – such as industrial machinery, vehicle parts, aeronautical instruments, and oil lubricants – as frequently targeted by Russian circumvention networks. Heavy machinery, microelectronics, aerospace, and automotive components are singled out as being especially vulnerable to diversion, which may require exporters to add additional oversight and controls.
Circumvention red flags
According to the guidance, to circumvent UK trade restrictions, Russia increasingly relies on third-country intermediaries, including Armenia, China, India, Israel, Kazakhstan, Kyrgyzstan, Malaysia, Mongolia, Serbia, Thailand, Türkiye, UAE, Uzbekistan and Vietnam, where heightened due diligence is recommended. These countries have varying levels of sanctions enforcement and, in some cases, share land borders with Russia, making them attractive transshipment hubs for illicit trade.
While listing these countries does not mean that the UK government attributes responsibility to them, UK exporters conducting business there should not ignore these issues and should tailor their due diligence accordingly. The guidance highlights four key categories where suspicious activity may emerge: product, customer, transaction, and export destination.
- Product: Pay close attention when items appear unsuitable for the buyer’s stated needs or have clear military or dual-use capabilities.
- Customer: Be wary of unclear or frequently changing corporate structures, direct or indirect links to Russia, and multiple businesses operating from the same address.
- Transaction: Look out for large cash payments, cryptocurrency use, incomplete documentation, or last-minute changes to shipping routes and invoices.
- Export Destination: Stay alert if goods transit through countries with weaker export controls or follow shipping routes that do not make commercial sense, as this may indicate a likely path to Russia.
By focusing on these categories and investigating irregularities in any of them, businesses can help protect themselves from inadvertently facilitating sanctions evasion.
Due diligence – best practice
“Due-diligence” as a term can cover a multitude. The reality is that, in any corporate transactions of significance, such records as may be obtainable are rarely definitive without a great deal of contextual interpretation and analysis. There is also the basic problem of proportionality of cost and resource when considering sanctions risks, and indeed many other financial crime compliance risks generally. In our view, companies should approach these issues with a robust understanding of their attitude towards such risks, especially if their business-model is such that there is a greater propensity for infringement and/or investigation.
The Guidance makes clear that it is the responsibility of UK businesses to determine the extent of their specific sanctions risk exposure and to develop an appropriate set of safeguards and controls tailored to their unique circumstances. No single, one-size-fits-all approach exists, so each exporter should consider factors such as product types, jurisdiction and customer profiles, and supply chain complexity when designing its compliance programme. Compliance frameworks should be developed in proportion to the size, nature, and complexity of the export business.
For example, a large multinational with diverse supply chains and international subsidiaries may require a far more detailed compliance programme and enhance due diligence than a small UK exporter focused on low-risk goods in low-risk jurisdictions. Similarly, businesses dealing in dual-use items or operating in regions with higher circumvention risks may need to adopt enhanced due diligence measures to address these specific vulnerabilities.
While each case is unique, the following OTSI recommendations can assist exporters in mitigating relevant risks:
1.Strategic risk assessment
Conduct a comprehensive review of the business to identify areas most susceptible to sanctions evasion, including specific products, transactions, or supply chain activities. Upon identifying higher-risk products, robust checks should be established, such as enhanced due diligence on customers and supply chains, increased scrutiny of end-use documentation, and safeguards tailored to the most sensitive product lines.
For operations involving subsidiaries or factories in third countries, it is essential to ensure adherence to the same standards. Front companies may target overseas operations to access sanctioned items, making adequate oversight of international sites crucial.
2. Enhanced due diligence
Implementing a robust enhanced due diligence program is vital to prevent inclusion in a sanctions circumvention network. Focus should be placed on transactions that present higher risks based on both the nature of the products and the involved destinations.
- Verify details such as identity, ownership, and business history for new or existing customers.
- Investigate all parties involved in transactions, including brokers, freight forwarders, and subcontractors.
- Cross-check the UK Sanctions List to ensure no directors or related entities are listed.
- Examine the customer’s background to understand the necessity for the products and assess their record of legitimate trade.
- Utilize in-house databases to identify any recurring addresses, directors, or bank accounts linked to past high-risk activities.
- Consider incorporating a “no export to Russia” clause in contracts to further mitigate exposure (for more details about such clauses, refer to the section below).
3. Screening tools
External databases such as Open Sanctions, War Sanctions, or the Trade Integrity Project can aid in identifying red flags associated with third parties. It is important to note that these tools are not official UK government resources, but can complement an overall compliance strategy. Ultimately, the responsibility for ensuring due diligence rests with the business.
4. Ongoing monitoring
As sanctions evasion tactics evolve rapidly, compliance measures must also adapt accordingly. Monitoring changes in customer orders or shipping patterns can help identify new risks. Regular reassessment of vulnerabilities should be conducted in light of updated sanctions lists, business growth, or shifts in the supply chain. Even established customers may become risky if their ownership or business activities change.
Maintaining records of all checks and decisions is essential as part of a broader risk management strategy. Preventing Russia from accessing Western technology remains a key UK priority, and vigilance plays a significant role in this effort.
5. Reporting
Breaching UK sanctions can lead to substantial civil penalties or criminal prosecution. Therefore, any suspicions of breaches or actual violations must be reported immediately to the relevant authority (HMRC or OTSI).
Practical application of this guidance requires businesses to carefully evaluate how it aligns with their operations. Companies should consider to what extent the specific measures outlined – such as heightened due diligence or monitoring suspicious shipping routes – are applicable in their context. In many cases, seeking independent legal counsel is essential, especially when navigating overlapping or complex regulatory frameworks or determining whether certain goods, destinations, or activities fall under UK sanctions rules.
Stay informed
It is also worth noting that, on the same day Countering Russian Sanctions Evasion: Guidance for Exporters was published, OTSI released a second guidance document on the “No-Russia clause”. This document addresses how contractual clauses can help prevent goods from reaching Russia through indirect channels. We will publish a separate Law-Now analysis of this guidance soon, so the reader is encouraged to monitor our Law-Now space for further insights.
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