New FAQ added – Asset freeze exception: crediting interest or other earnings on a frozen account
OFSI has published a new FAQ (203) clarifying whether a relevant institution may credit interest or other earnings accruing on one frozen account into a separate frozen account held for the same designated person.
The FAQ explains that regulation 58(3) of the Russia Regulations, and equivalent provisions in other regimes including the counter-terrorism regimes, only permits a relevant institution to credit a frozen account with interest or other earnings due on that account. The exception only applies where the interest or other earnings are credited to the same account on which they accrue.
The FAQ also applies where a separate frozen account has been nominated to receive the interest or earnings. Relevant institutions should consider whether a licence is required before making such payments.
The FAQs respond to stakeholder queries and aims to support a consistent understanding of the regime, helping to reduce the risk of circumvention. We encourage insurers, financial institutions and maritime operators to review the guidance and ensure internal processes reflect these considerations.
and the FAQ:
Asset freeze exception: crediting interest or other earnings on a frozen account
203. Does regulation 58(3) of The Russia (Sanctions) (EU Exit) Regulations 2019 (“the Russia Regulations”), and its equivalent in other regimes including the counter terrorism regimes permit a relevant institution to credit interest or other earnings accruing on one frozen account into a separate frozen account held for the same designated person?
No. OFSI considers that regulation 58(3) of the Russia (Sanctions) (EU Exit) Regulations 2019 (“the Russia Regulations”), and its equivalent in other regimes including the counter terrorism regimes only permits a relevant institution to credit a frozen account with interest or other earnings due on that account. The exception only applies where the interest or other earnings are credited to the same account on which they accrue.
This is the case even where the separate account has been nominated to receive the relevant interest or other earnings or has otherwise been identified as the receiving account of such earnings under the contractual or other arrangements governing the accounts.
Relevant institutions should consider whether a licence is required before making such payments.
The prohibitions on importing the revenue-generating goods listed in Schedule 13 entered into force on June 13, 2025 as part of broader amendments to the Russia Regulations.
In some cases, during the customs process in Canada, goods were identified as Russian origin and were subsequently detained by CBSA. In others, customs brokers and/or vendors advised Canadian customers of the prohibition before the purchase was completed.
Non-Canadian vendors outside Canada are not subject to Canada’s sanctions regime. Responsibility for complying with Canada’s sanctions regulations rests with persons (individuals or entities) in Canada and Canadian persons outside Canada, including when importing goods from countries not directly subject to sanctions.
Global Affairs Canada recommends that stakeholders seeking to import goods confirm, prior to purchase, whether the goods are prohibited under the Canada’s sanctions regime and verify the origin of the goods with the vendor.
As each circumstance is specific and may engage sanctions obligations in a different way, it is important to carefully review the applicable sanctions regulations before undertaking any activity. Global Affairs Canada does not provide legal advice to the public and is unable to confirm if a particular activity or transaction is permitted under Canadian sanctions. Persons in Canada and Canadian persons outside Canada should therefore ensure compliance with Canadian sanctions, including by consulting private legal counsel, as required.
Let’s assume I am the new sanctions officer at a company with exposure to maritime shipping – but that I have never had experience in this field. Tell me, as a non-expert professional, what the things I have to look out for (e.g. AIS manipulation, falsified documents), how in general each is addressed, and which public and commercial data, services and technical solutions can help address each, to what extent and how well. When you’ve listed all these out, then produce a separate section just to lay out, by type of solution (e.g. data, software, services), all the items listed in the previous section, with a synopsis of what they can do, and how well they do it – plus, of course, who provides them, and their URL.
and one of the more important follow-up prompts (besides the ones to fix formatting):
Some of these solutions sound interesting, but I have no idea how one would use them. Please, for each solution in sections C, D, G and H provide 1 or 2 use cases for how one would use these tools – explain the situation, the problem, and what the tool can do, and the timeframe (real-time, post-mortem, etc.)
and the specific response to this:
Section C: Integrated maritime risk and compliance platforms
Windward
Your chartering desk is about to fix a tanker for a cargo lift and needs to clear the vessel before signing. A plain sanctions-list check would come back clean, since the vessel isn’t formally designated yet, but Windward pulls up its behavioral score anyway: recent AIS gaps in a known STS corridor, an ownership change six weeks ago, a jump in risk rating. It returns a go/escalate/no-go recommendation with the evidence attached, in minutes, so it fits inside the negotiation window rather than delaying it. That’s a real-time, transaction-level check.
The second use is different in kind. Say your trade finance desk has already financed a dozen cargo shipments, and the vessels involved were clean at onboarding. Windward re-screens the existing book continuously and pushes an alert if any of those vessels’ risk scores cross a threshold later, catching drift (a reflag, a new STS pattern) that a one-time check at onboarding would never see. This is ongoing portfolio monitoring, not a point-in-time lookup.
PurpleTRAC (Pole Star Global)
A cargo arrives with a bill of lading claiming a certain origin and goods description. Before your team accepts it, PurpleTRAC’s document-screening module (DUG Screening) checks that description and discharge country against 26 restricted-goods and sanctioned-region lists and returns an OK, Warning, or Critical flag in near-real time, catching the specific falsified-certificate pattern OFAC has called out by name.
Separately, your compliance officer needs to screen the whole existing vessel and counterparty list weekly and produce something a regulator would accept as evidence of due diligence. PurpleTRAC runs that as an automated batch job and stores the reports for retrieval, so it’s a periodic, scheduled process rather than a one-off check, and the output is the audit trail itself, not just the answer.
Seasearcher (Lloyd’s List Intelligence)
A vessel your company chartered went dark for four days, and a news report afterward suggests something happened during that window. This is a post-mortem: your team needs to reconstruct the voyage to decide whether to escalate internally, notify a regulator, or exit the relationship. Seasearcher’s analysts and Lloyd’s Agents rebuild the voyage from multiple independent sources and produce a timeline flagging any STS activity or dark port calls, typically over hours to a few days, since it involves human review, not an instant automated answer.
The other common use is upfront, not retrospective: a new ship owner approaches your company as a potential long-term counterparty, and you need a first-pass due diligence pull before the relationship starts. Seasearcher returns ownership up to seven levels deep, sanctions status, and casualty and detention history in one same-day report.
Sea-web / Maritime Intelligence Risk Suite (S&P Global)
An insurer is pricing a hull policy and needs accurate technical specifications and ownership history to confirm the vessel hasn’t passed through a sanctioned owner’s hands at some point. Sea-web is the reference-grade source for that: over 600 data fields per vessel, with historical name, owner, and flag changes going back through the vessel’s life. This is a static, on-demand reference lookup rather than a monitoring function, essentially instant retrieval used as one input into a pricing decision that itself takes longer.
Section D: Commodity flow, cargo, and freight intelligence
Kpler (including MarineTraffic and FleetMon)
A trading desk is offered a cargo that changed hands via an open-ocean STS transfer and has only the seller’s word for what it actually is. Kpler correlates both vessels’ AIS tracks, models the transfer, and estimates the cargo grade and volume that moved, cross-checked against its own shadow-fleet list. That’s a same-day, pre-purchase check, not instantaneous, since reconstructing a specific past event takes some processing.
The second use sits at a different altitude entirely. Your risk function wants to know whether shadow-fleet activity is rising in a corridor the company operates in, as a signal to tighten internal thresholds before a specific transaction forces the question. Kpler publishes aggregate flow and dark-fleet trend data monthly, which is a strategic, periodic input into policy review rather than a transaction-level tool.
Vortexa
You’re buying a cargo of Russian-origin refined product, and the seller attests the price was under the G7 cap. Price-cap compliance runs on attestation, not physical verification, so you need a same-day sanity check: Vortexa’s grade-level market pricing and freight data let you confirm the attested price is plausible against what the market was actually doing that week.
Separately, a vessel presented to your chartering team looks slightly off, unusually capable specs for its claimed age. Vortexa’s cargo and fleet-movement history can surface the kind of inconsistency that points to a “zombie tanker,” a scrapped hull’s identity reused to move cargo under a clean-looking name, before your team commits to the charter.
Section G: Independent vessel geolocation and remote sensing
Spire Maritime
Vessels you charter transit open ocean where terrestrial AIS coverage is thin, and a legitimate coverage gap looks identical to deliberate manipulation from the outside. Spire’s satellite AIS network fills that gap with near-real-time position data (some latency versus terrestrial AIS, but still operationally current), so your team isn’t flagging a routine dead zone as evasion.
The other case is investigative: a chartered vessel’s AIS went fully silent for four days in a high-risk corridor, and you need an independent read on where it actually was. Spire’s RF-monitoring satellites can pick up other emissions from the vessel (radar, VHF) during that window and estimate its position. This is retrospective, typically turned around over a few days once tasked, not instant.
HawkEye 360
An AIS gap lines up with just enough time for a vessel to have reached a sanctioned port, and your compliance team needs to know whether it actually went there before deciding how to respond. HawkEye 360 geolocates the vessel’s other radio emissions during that specific gap window to answer that question. This is a tasked, retrospective investigation, resolved over days as its satellites pass over the area, and it’s exactly this capability that let it publicly trace an AIS-dark cargo vessel to a Syrian port in a documented 2021 case.
A second, broader use: before investing in or servicing a port in a region known for shadow-fleet activity, you want an independent read on how much dark-vessel traffic actually passes through, not just what’s officially reported. A regional RF sweep over some days to weeks establishes that baseline as part of the due diligence, rather than confirming any one vessel.
ICEYE
Two vessels’ last known positions before going dark suggest they may have met at sea. If that inference matters (say, to a decision about exiting a counterparty relationship or filing a report), you want visual confirmation, not just inference. ICEYE tasks a synthetic aperture radar satellite over the suspected location; because SAR sees through cloud and darkness, it can catch two vessels alongside each other regardless of weather. This is a tasked, investigative pull, typically same-day to a few days depending on the satellite’s revisit schedule.
A related but different use is pattern-of-life: you suspect a vessel is repeatedly loitering at a known STS anchorage rather than making a one-off legitimate stop. Repeated ICEYE passes over the same location, spread across days to weeks, build the time series that turns a single suspicious sighting into an established pattern.
BlackSky
RF or SAR has narrowed a dark vessel down to a location but can’t put a name to it. BlackSky tasks a high-resolution optical satellite for a close look, which the company markets as arriving within roughly 90 minutes of a request, the fastest of the imagery layers, though still dependent on daylight and clear skies since it’s optical rather than radar. This is the confirmation step that typically follows an RF or SAR detection, not a first-detection tool on its own.
The second use is more of a standing watch: an independent read on vessel traffic and congestion at a specific high-risk port over time, since official port-call records for some ports are incomplete or simply not published. Repeated imaging over days to weeks builds that picture.
Section H: Open-source and NGO investigative trackers
Russian Shadow Fleet Tracker (KSE Institute)
Your compliance team is deciding how aggressive to set internal shadow-fleet criteria (an age cutoff, how much scrutiny a non-IG insurer gets) and wants an independent benchmark rather than relying entirely on a vendor’s undisclosed methodology. KSE’s monthly, methodologically transparent tracker gives current data on typical shadow-fleet vessel age, ownership jurisdictions, and insurance patterns to calibrate against. This is periodic and strategic, used to set or revisit policy, not to clear an individual transaction.
The more everyday use is a quick, free sanity check: a vessel name comes up in a proposed charter, and before paying for a full commercial screening pull, someone runs the name against KSE’s public reporting to see if it’s already been flagged. On-demand, free, and fast, but a supplement to paid screening rather than a replacement for it.
UANI Tanker Tracker
A vessel in a proposed transaction has some connection to routes UANI covers, and you want an independent cross-reference specifically on the Iran side, where UANI’s tracking is particularly well regarded. Its public reporting, refreshed roughly monthly and built on AIS analysis, satellite imagery, and its MINERVA behavioral system, gives a same-day reference check against a regularly updated public record.
The other use is upward, not transactional: leadership wants a periodic, plain-English update on how Iranian oil sanctions evasion is trending, to inform a strategic decision about the company’s exposure in the region, not the compliance-officer-level detail a vendor platform provides. UANI’s monthly tracker functions as that briefing input.
eventually, we rolled this section into an appendix – here’s the final guide:
Now, I literally have not worked in this part of the field – but probably 3/4 of the webinars I attend deal with maritime shipping issues. I welcome comments on this, since I am really in the dark here.
Count the EU’s Russia packages by designations added and you learn almost
nothing. Package 21 alone carried 218 listings, the largest single batch in four
years, and not one of them changed how a screening program works. What changes
your program is a new kind of restriction: a category of counterparty you now
have to test for, a contract term you now have to insert, a service you can no
longer provide.
By that measure the twenty-one packages contain roughly two dozen genuinely
distinct restriction types, and they did not arrive evenly.
One note on where this starts. The EU has had Russia sanctions since 2014,
and the post-Crimea framework already limited Russian bank and corporate access
to European capital markets. Package 1 extended that framework rather than
inventing it, and the same is arguably true of parts of the early export
controls. The 2022 measures are different enough in scale and in kind to be
worth treating on their own terms, which is what this article does, but the
baseline was not zero.
Note: this is a long article. A PDF version is available for download at the end, and it adds an appendix listing the amending regulation behind each of the twenty-one packages.
Package 1 restricted Russian access to EU capital and financial markets
(Regulation 2022/262). Package 2 opened the export control front, covering goods
and technology for defence, aviation and space, and oil refining (Regulation
2022/328).
Package 3 is the consequential one. It banned transactions with the Central
Bank of Russia, cut seven banks off the SWIFT financial messaging network, and
closed EU airspace to Russian aircraft (Regulation 2022/334, extended by
2022/345, 2022/350 and 2022/394).
Package 4 added three measures (Regulation 2022/428). The first banned new
investment in Russia’s energy sector. The second barred imports of Russian iron
and steel. The last prohibited exports of luxury goods.
Timing matters here in a way it rarely does later. The Central Bank measure
landed on 28 February, four days into the invasion, alongside parallel US and UK
action. That simultaneity was the point. A reserve freeze telegraphed in advance
is a reserve freeze that gets moved.
Why it mattered
The immediate effect was severe and short-lived. The ruble fell from roughly
80 to 120 per dollar within two weeks. Russia’s central bank raised its key rate
from 9.5 percent to 20 percent on 28 February.
Within about two months the currency had recovered to pre-invasion levels.
Capital controls, a requirement that exporters convert 80 percent of their
foreign currency earnings, and a demand that energy buyers pay in rubles did
most of that work. Analysts have generally read this as the financial shock
being absorbed rather than proving decisive. Roughly €300 billion in Russian
central bank reserves sat frozen across the EU, other G7 states and Australia,
about two-thirds of it in the EU, but Russia’s current account surplus kept
climbing on continued energy sales.
The EU’s approach already differed from Washington’s in one visible way. It
deliberately left Sberbank and Gazprombank off the SWIFT cutoff, because those
were the payment channels for European gas. The United States had no equivalent
reason to carve anyone out.
Switzerland aligned almost immediately, a real departure from its historical
posture. It did so by mirroring EU measures through its own Ukraine Ordinance
rather than adopting them directly, and that mechanism would later produce
timing gaps that still cause trouble. Belarus was pulled in from package 3
onward, establishing the mirroring pattern that has held since.
Packages 5-9: building the sectoral toolkit
April to December 2022
This is where the sectoral measures were built.
Package 5 carried four distinct measures (Regulation 2022/576). It closed EU
ports to Russian vessels and barred Russian road hauliers from EU territory. Coal
imports were banned outright. And this package introduced the first restriction
on crypto assets, capping what Russian persons could hold.
Package 6 delivered the crude oil and refined products import ban, the
measure that took longest to negotiate (Regulation 2022/879). The ban reached oil
arriving by sea but excluded oil delivered to the EU through pipelines, an
exemption Hungary, Slovakia and Czechia still operate under. The same package
brought the first professional services ban, covering accounting, audit,
bookkeeping and consulting.
Package 7 banned gold imports and extended the port access ban to locks
(Regulation 2022/1269).
Package 8, in October 2022, did two things that would define the following
four years (Regulation 2022/1904). It created a listing criterion aimed
specifically at people facilitating circumvention, which meant the EU could now
designate someone for helping others evade sanctions rather than for any
underlying conduct. The same package established the oil price cap. Less
prominently, it also widened the services bans to architectural, engineering, IT
consultancy and legal advisory work (Article 5n).
Package 9 closed the year with a ban on new investment in Russian mining and
a prohibition on advertising and market research services (Regulation
2022/2474).
Why it mattered
The revenue effect was real and measurable. The Council reported Russian
revenues down 26.9 percent in January 2023 against January 2022, and down 41.7
percent in February. The Council’s explanation of these figures is somewhat
vague, but they most likely refer to oil and gas revenues. The February number
is the one most plausibly connected to package 6, since the refined products ban
and the price cap only took effect on 5 February 2023.
The price cap is the more interesting story, because it is the clearest case
of a sanctions measure generating its own countermeasure. The cap was designed
to keep Russian oil flowing to global markets while limiting what Russia earned
from it, and it worked through leverage over Western shipping and insurance.
Russia’s answer was to assemble a fleet of older tankers under opaque ownership
and arrange insurance outside the coalition, so the shipping and insurance
leverage the cap depended on no longer reached the trade. The shadow fleet went
from essentially nothing to carrying most Russian crude within about two
years. Elisabeth Braw has argued publicly that Western governments would not
have imposed the cap had they anticipated that outcome, which is a strong claim
but not an unreasonable one.
The cap is also the most genuinely coalition-built instrument of the entire
effort, agreed across the G7, the EU and Australia. That agreement did not
extend to enforcement. The United States leaned on the threat of secondary
sanctions against foreign financial institutions that handled capped oil. The EU
leaned instead on its jurisdiction over the shipping and insurance companies
themselves. Same cap, different levers, and third-country intermediaries learned
quickly which one bit harder.
Packages 10-13: the circumvention turn
February 2023 to February 2024
Four packages over a full year, and almost everything in them is aimed at closing the routes goods were taking around the restrictions already in place, rather than at adding new targets. These packages also refined measures already on the books in three places.
Package 10 banned transit of dual-use goods and arms through Russian territory (Regulation 2023/427). Package 11 extended that transit ban and formalised cooperation with third countries (Regulation 2023/1214).
Package 12 introduced three measures worth singling out (Regulation 2023/2878). The first is the “no-Russia clause”, which requires EU exporters to write a contractual prohibition on re-export to Russia into their sales agreements (Article 12g). The second is a ban on providing enterprise management and industrial design software. The third is a reporting requirement for outbound transfers above €100,000 by EU companies owned or controlled by Russian persons. Package 12 also banned imports of Russian diamonds, along with LPG and several metals, which is a story in itself and taken up below.
Package 13, at the two-year mark, was mostly additional sanctions designations (Regulation 2024/745). It added 194 individuals and entities and took the total past 2,000. But two things in it pointed forward.
The first was a widening of export controls. Aluminium electrolytic capacitors went onto the list of goods that could strengthen Russia’s military and technological base (Annex VII Part B). Electrical transformers, static converters and inductors went onto the separate list of goods that could build up Russian industry generally (Annex XXIII, Article 3k). That second list had previously covered three specific tariff codes. Package 13 replaced them with the entire tariff heading that sits above those codes, so every transformer, converter and inductor became controlled rather than three named types. For an exporter, that is the difference between checking a code list and re-screening a product line. Existing contracts had until 25 May 2024 to complete.
The second was the addition of 27 entities to the list carrying stricter dual-use and advanced technology export restrictions (Annex IV). Those designations reached into mainland China, India, Sri Lanka, Serbia, Kazakhstan, Thailand and Turkey.
The no-Russia clause, and why it has no US twin
The no-Russia clause deserves attention because it is an EU original. Washington’s route to the same problem runs through the BIS Entity List and the foreign direct product rules. The Entity List is the Bureau of Industry and Security’s roster of foreign parties that US exporters need a licence to ship to, with those licences generally presumed denied. The foreign direct product rules extend US licensing authority to goods manufactured outside the United States when they were made using US technology or equipment, which is how Washington reaches transactions with no American party in them at all.
Brussels went the other way. It pushed the obligation into private contracts, making the exporter responsible for a term in a sales agreement. Neither approach has obviously won. The EU version is cheaper to administer and harder to enforce. The US version is the reverse.
Diamonds, and the limits of provenance
The diamond ban deserves its own treatment, because it shows what happens when a restriction depends on where something came from rather than who paid for it.
Russia is the world’s largest diamond producer by volume, at roughly a third of global supply. Alrosa accounts for over 90 percent of Russian production, and the Russian state holds a majority stake in it, split between the federal government and the Republic of Sakha (Yakutia), the region of eastern Siberia where the mines sit, together with that republic’s districts. Diamond revenue therefore reaches the Russian state rather than private shareholders. In absolute terms the target is small. Alrosa’s 2023 results put the business at around $3.5 billion, a rounding error against hydrocarbons.
The cost to Antwerp was more visible. Belgium imported roughly €1.8 billion of Russian rough diamonds in 2021, about a quarter of its total rough imports. That fell to around €1.4 billion in 2022 and to €288 million in the first half of 2023, most of the decline arriving before the ban did. The Antwerp World Diamond Centre argued throughout that an EU-only ban would be dramatic for Antwerp and produce no impact on Russia, because trade would simply reroute through Dubai and Mumbai.
Belgium’s position is the interesting part. Rather than resisting, it ended up leading the coordination, on the reasoning that serving as the world’s Russian-diamond laundromat was doing more damage to Antwerp’s standing than a ban would do to its trade.
India is where enforcement actually lives. Over 90 percent of the world’s diamonds are cut and polished there, and Alrosa supplied around 40 percent of India’s rough imports. A ban on Russian-origin stones only means something if Indian polishers segregate Russian goods from everything else, which is why G7 delegations went to India in September 2023 to make the case. The EU’s answer was to require that rough diamonds of half a carat or more be certified through Antwerp from September 2024, with the record kept on a blockchain ledger. Smaller stones fell outside the requirement.
Then the coalition came apart. The United States disengaged from the G7 traceability working groups after pushback from African producers, Indian polishers and New York jewellers. A Biden administration official’s position was that the September 2024 commitment bound the EU rather than the United States. The polished-diamond traceability deadline slipped from 1 March 2025 by ten months, and Botswana was added as a second verification hub alongside Antwerp.
That is a sharper illustration of the pattern than anything in the financial measures. Everyone agreed on the target. Only the EU built the verification regime.
Russian countermeasures become a compliance problem
This is also when Russian countermeasures stopped being defensive and became something screening and legal teams had to account for.
Presidential Decree 302 of April 2023 created a mechanism for placing assets of companies from “unfriendly states” under external management. It was used. Carlsberg and Danone are the well-known examples.
In parallel, Russian claimants began using Article 248 of the Arbitrazh Procedure Code to pull disputes into Russian courts in breach of arbitration agreements. The results included the seizure of roughly $155.8 million of JPMorgan funds on VTB’s application, and a freeze of around $1.15 billion of assets held by a UK subsidiary of Linde.
For EU companies still holding Russian assets, this is when exit became materially more expensive than staying.
Switzerland was still keeping close pace, completing its package 10 alignment on 29 March 2023, about a month behind.
Packages 14-17: shadow fleet and the third-country pivot
June 2024 to May 2025
Package 14 is the densest single package in the entire set of measures (Regulation 2024/1745). It banned LNG re-exports and new investment in Russian LNG projects. Use of the Central Bank’s SPFS financial messaging system, Russia’s domestic alternative to SWIFT, was outlawed. The same package created a port access and services ban aimed at vessels supporting the war, which is the first version of what became the shadow fleet regime. Least noticed at the time, it also built a litigation and expropriation shield, letting EU companies claim damages in member state courts from Russian parties that benefited from expropriation (Articles 11a and 11b).
Package 15 completed that last thought by making Russian court judgments obtained under Article 248 unrecognisable and unenforceable in the EU (Regulation 2024/3192).
Packages 16 and 17 were mostly additional sanctions designations, but with a telling shift. Of the 53 entities added to export restrictions in package 16, roughly two-thirds were located in third countries (Regulation 2025/395). Package 17 added chemical precursors and 189 more vessels, taking the listed total to 342 (Regulation 2025/932).
Why it mattered
This is where the EU stopped writing rules about Russia and started writing rules about everyone else who deals with Russia. The third-country listing shift matters operationally more than the vessel counts. A screening hit on a Kyrgyz, Emirati or Hong Kong trading company is now a routine outcome rather than an anomaly.
The shadow fleet data is the most useful evidence available on whether any of this works, and it points somewhere specific. Alignment beats aggression. Robin Brooks’ analysis of tanker departures found activity in vessels sanctioned jointly by the United States, EU and UK down about 90 percent year over year, against 86 percent for US-only designations. The gap is small, but the direction matches what practitioners see. A vessel designated in one jurisdiction shops for ports. A vessel designated in three runs out of them.
The litigation shield is worth flagging as a genuine novelty. Sanctions regimes normally regulate what their own persons may do. Articles 11a and 11b instead create a private right of recovery against Russian beneficiaries of expropriation, which is closer to a tort remedy than a restrictive measure. No other major regime has copied it.
Switzerland’s lag started lengthening here. Package 16 was adopted on 24 February 2025 and implemented on 14 May 2025.
Packages 18-21: the energy endgame and the crypto build-out
July 2025 to July 2026
Energy tightened on every remaining front.
Package 18 lowered the oil price cap and, more significantly, set it to adjust periodically under the terms of the relevant Council Decision rather than sitting at a fixed number (Regulation 2025/1494). It also banned imports of refined products made from Russian crude, regardless of where the refining took place.
Package 19 banned LNG imports outright (Regulation 2025/2033). It also prohibited transactions involving Mir and the Faster Payments System, known as SBP. Mir is Russia’s domestic card scheme, built after 2014 precisely so that being cut off from Visa and Mastercard would not stop domestic payments. SBP is the central bank’s instant payments system. Prohibiting them closes the retail payment channels that survived the SWIFT measures.
Package 20 banned the provision of services to Russian LNG terminals and imposed due diligence obligations on tanker sales (Regulation 2026/506). Package 21 extended the terminal services ban to third-country operators controlled by Russian companies (Regulation 2026/1848).
The second development is crypto becoming a separate target category in its own right, rather than an incidental restriction attached to other measures.
Package 5 capped the value of crypto assets Russian persons could hold. Package 8 banned providing crypto wallets to them outright. Package 20 went considerably further, prohibiting transactions with crypto-asset service providers and platforms established in Russia, and naming RUBx, a ruble-pegged stablecoin, as a specific target (Article 5bb). Package 21 added a prohibition on Russian citizens and residents owning, controlling or holding positions in EU crypto-asset service providers, effective 25 August 2026.
The price cap is the clearest case in the whole set of a restriction that kept being re-tuned after it was imposed. Package 18 set it to adjust on a periodic basis. Package 21 then suspended that adjustment for a full year, to July 2027, loosening a measure the EU had built specifically so that it would keep tightening without further decisions.
That is the kind of regulatory detail that disappears when a package is summarised by its number of sanctioned designations.
October 2025: same targets, three different rules
Three jurisdictions moved on Russia’s two largest oil companies inside nine days, using three different legal instruments.
Date
Jurisdiction
Action
Mechanism
15 Oct 2025
UK
Rosneft and Lukoil designated, with 88 other targets
Asset freeze. OFSI licensed certain German Rosneft subsidiaries through at least October 2027, in coordination with German authorities, so those refineries could keep operating.
22 Oct 2025
US
Rosneft, Lukoil and more than 30 subsidiaries designated
SDN listing under EO 14024, pulling in the 50 percent rule and exposing foreign financial institutions to secondary sanctions risk.
23 Oct 2025
EU
Package 19 adopted
Full transaction ban on Rosneft and Gazprom Neft under Article 5aa, applying the EU’s own ownership and control test.
Same companies, same week, three different legal hooks. A screening team covering all three regimes got three different answers about the same corporate family in the same month.
Does any of it work
The evidence is genuinely contested, and the research organizations disagree with each other.
The evidence that oil is still moving despite the designations is substantial. As of mid-June 2026, the United States, UK, EU, Australia, Canada and New Zealand had collectively designated 653 unique tankers. Analysis from earlier in the year found 111 of the 623 then-designated vessels still loading Russian cargo, and G7-plus sanctioned tankers carrying roughly 68 percent of Russian crude exports. KSE put Russian oil export revenues at $20.8 billion in April 2026, down slightly month over month but $8.2 billion above the prior year.
The evidence pointing the other way is thinner but real. Russian reliance on Western maritime services climbed back to around 42 percent by May 2026, and new shadow fleet entrants slowed to a trickle across 2026. Both suggest vessel designations have made the shadow route expensive enough to push cargo back under the price cap’s reach.
Both can be true. Designating vessels one at a time degrades the alternative faster than it stops the trade. CREA has argued the entity-based approach is too easily defeated by intermediaries and special purpose vehicles, and has pushed for a full maritime services ban instead. Package 20’s groundwork for exactly that suggests the argument landed.
Two other developments
In December 2025 the EU moved to freeze Russian central bank assets in Europe indefinitely rather than on a renewable basis. That is a change in the character of the measure, not just its duration, and it has drawn commentary about longer-term effects on how other states think about holding reserves in European institutions.
Switzerland’s lag became a live compliance problem. Package 19 was adopted on 23 October 2025. Swiss implementation was partly done on 12 December 2025 and only completed on 25 February 2026. Baker McKenzie noted plainly that the delay created legal uncertainty for firms operating across both jurisdictions, and that the pattern is likely to repeat.
All twenty-one, grouped
Twenty-one packages, and the pattern is hard to miss once it is laid out. Everything the EU uses today was invented in the first ten months. The four years since have been spent extending those measures to new counterparties, new routes and new intermediaries.
There is a useful corollary for anyone tracking alignment with other regimes. Gaps between the EU, United States and UK appear when someone invents a mechanism, not when someone extends one. The moment a new tool is created is the moment the other jurisdictions either copy it or decline to, and the diamond traceability regime is the clearest example. Packages that extend existing measures rarely change the alignment picture, because whatever alignment there was got settled when the measure was first built.
The practical implication is that a new package is not by itself news. The question is what kind of change it contains. If all that changed is more names on the list, your existing screening already absorbs it. If there is a new kind of restriction, meaning a contract term you have to insert, a class of counterparty you now have to test for, or a service you can no longer provide, that is the one where somebody has to read the annex.
Sourcing and self-check
Documented, traceable to primary or official sources. Every package’s contents, adoption date and amending regulation number come from the Council of the EU’s package timeline, the Official Journal, and the Council’s own press releases. The Council’s timeline page was last reviewed on 23 April 2026 and therefore stops at package 20. Package 21 content comes from the Council’s 23 July 2026 press release and from law firm and P&I club analyses published since. Central bank reserve figures and the January and February 2023 revenue decline percentages are the Council’s own published numbers. The 28 February 2022 rate move from 9.5 to 20 percent and the ruble’s move from roughly 80 to 120 per dollar are contemporaneous reporting. Swiss implementation dates are from SECO decrees as reported by Lenz & Staehelin and Baker McKenzie. The October 2025 Rosneft and Lukoil actions and their differing legal bases are from Covington, Sullivan & Cromwell, Arnold & Porter and McDermott alerts. Diamond trade figures are from IPIS and Reuters reporting.
Secondary analysis, flagged as such. The shadow fleet effectiveness figures of 90 percent against 86 percent are Robin Brooks’ calculation from his own vessel database. Vessel counts, revenue figures and the share of exports carried by sanctioned tankers come from KSE Institute, CREA and GSSC, which use different methodologies over different reporting periods and do not fully agree with each other. The claim that the price cap caused the shadow fleet is widely held but not formally established, and the Braw remark is an argument rather than a finding. CREA’s call for a full maritime services ban is advocacy, though package 20’s language suggests the EU is moving that way.
Editorial judgment, not anyone’s official framing. The six-category taxonomy and the decision about what counts as a distinct restriction type rather than an extension of an existing one are mine. Reasonable practitioners would draw some of these lines differently.
Known gaps. Belarus is treated here as a mirroring jurisdiction rather than as an actor in its own right, and the Belarus packages are not traced individually. The parallel EU regimes covering hybrid threats, human rights and riot control agents are outside scope except where they intersect, and the boundary between “the Russia package” and “the other measures adopted the same day” has been getting blurrier since package 17.
and now, a PDF which might be easier for you to digest:
Actually, I do have a question: If I provided an update, could you pull all the info you could, plus identify for each listing, where else I should look, based on the nature of the listing?
and the response (ignore the fact that Claude and I already have a relationship):
Yes – and it would layer naturally on top of your existing reformatting workflow rather than replace it.
For each listing you pass along, I’d do two separate things. First, pull whatever’s publicly findable on it – press releases, prior designation history, news coverage, anything that adds context beyond the bare SDN entry. Second, and this is the part you’re actually asking about, tell you specifically where to go dig further, chosen by what kind of listing it is rather than handing you the same generic list every time.
That second part is where the nature of the listing matters. A few examples pulled straight from the pattern in your own recent updates:
A vessel or shipping entity tied to an Iran designation (HormuzSafe, the shadow fleet tankers) – I’d point you to Equasis for registered owner, manager, and flag history, plus Windward or Lloyd’s List Intelligence and UANI or C4ADS for the network picture.
A crypto exchange entity like the Shelbit network – blockchain analytics platforms (Chainalysis, TRM Labs, Elliptic) and on-chain explorers matter more here than corporate registries, since the trail runs through wallets as much as paperwork.
A Cuba military-industrial entity tied to GAESA or MINFAR (Tecnoimport, UIM) – ASCE and Cuba Study Group research tend to go deeper than general corporate databases, since a lot of that structure never shows up in any commercial registry.
A Russia entity – OpenSanctions or OCCRP Aleph first, since they’ve already scraped a good deal of EGRUL, then the Ukrainian NSDC list and the KSE tracker for anything more recent than what’s been indexed.
A plain corporate or individual addition with no obvious sector hook – OpenCorporates and the registry of wherever it’s domiciled, plus a check of whether OFAC’s own AKA or Linked To fields already answer the question.
One caveat, consistent with what I said earlier: the first half I can actually run myself. The second half means I’m handing you the right door, not opening it – I still can’t get past the paywalls on Orbis, Sayari, or Kontur/SPARK, so for anything that needs those, that’s where you’d take it from there.
let’s assume I see a new set of designations from a regulator who has some sort of ownership and control sanctions requirement. How would I research to find the additional entities implicated by this? What sources would I be looking at – both global coverage and ones with more targeted geographic coverage (e.g. Iran or Crimea)? And how much of this can you do, and what are you not able to , and why?
and the response:
Good question, and the timing is useful because there’s a live example running right now: BIS just built a brand-new automatic O&C mechanism into the export control system. The Affiliates Rule automatically extends the Entity List and Military End-User List to entities owned 50 percent or more by listed entities, modeled explicitly on OFAC’s rule. It was adopted as an interim final rule with immediate effect in September 2025, then stayed by BIS until November 9, 2026 – so it reactivates in three months. That’s a genuinely useful anchor for this answer since it’s exactly the “new O&C requirement, now go find the implicated universe” scenario you’re describing.
First, the framing question that determines your whole approach: is this regime self-executing or discretionary?
Self-executing/arithmetic regimes (OFAC’s 50% Rule, OFSI’s 2022 update, and BIS’s Affiliates Rule once it’s live) don’t require the regulator to take further action – an entity is captured the moment aggregate ownership crosses the threshold, regardless of whether it’s ever named. Your research task here is essentially corporate math: build the ownership tree and sum the stakes held by listed/blocked parties.
Discretionary/control-test regimes (the EU’s “owned or controlled by” doctrine, and UK guidance beyond the pure ownership percentage) require an affirmative designation or a documented control assessment – board composition, contractual control, negative control rights, etc. Here you’re not doing arithmetic, you’re building an evidentiary case, and “implicated” doesn’t mean “automatically caught,” it means “worth flagging as a candidate.”
Worth noting on the BIS rule specifically, since it’s new: if Company A, an Entity List party, owns 50 percent of Company B, which owns 50 percent of Company C, Company C is subject to the same restrictions as Company A – so it chains through multiple tiers, and the rule applies regardless of the foreign country in which the affiliate is located. It also creates an affirmative duty to determine ownership rather than letting silence default to clear.
Research workflow, roughly in order:
Start with the regulator’s own materials – the designation notice, Federal Register/OJEU entry, and any accompanying press release or FAQ. Regulators frequently name known subsidiaries in the announcement itself (Treasury in particular tends to do this for network-style designations, e.g. IRISL-related actions), which shortcuts a lot of downstream work.
Pull the existing entry’s own metadata – AKAs, “linked to,” prior addresses, registration numbers. This is the cheapest signal and gets skipped constantly.
Confirm the exact threshold mechanic for that regime (aggregate vs. per-owner, direct vs. indirect, does it chain through unlisted intermediate tiers).
Build the tree in both directions – not just subsidiaries down, but parents and sibling entities, since aggregation across multiple blocked co-owners can trip the threshold even when no single owner does.
Cross-check each node against the list itself – a subsidiary you find might already be separately listed under a different name.
Validate anything load-bearing against a primary-source document (registry filing, share register, annual report), not a secondary aggregator’s summary.
Flag and document anything where ownership can’t be resolved – under a rule like BIS’s this is now itself a compliance-relevant fact, not a dead end.
Sources – global coverage:
OpenCorporates – aggregates official company registries, decent free tier
Moody’s Orbis/Bureau van Dijk, Sayari Graph, LSEG World-Check, LexisNexis Risk Solutions (Dow Jones’s old risk data now sits inside RELX alongside your former employer Accuity) – all paid, all built for exactly this
OpenSanctions.org – free for non-commercial use, and genuinely useful here: it structures identifying information consistently so that relationships between entities, like company ownership or control, can be easily identified, integrating data from 444 global sources
OCCRP Aleph and ICIJ’s Offshore Leaks Database – investigative-journalism-sourced, unusually good at surfacing offshore shell layers that official registries don’t show
Open Ownership (the BODS standard) – complements OpenSanctions for beneficial-ownership-specific queries
Primary registries where they’re genuinely free: UK Companies House + PSC register, SEC EDGAR, EU member-state beneficial ownership registers (coverage is uneven post-rollback in some states)
Targeted – Iran:
Iran-linked evasion structures are disproportionately asset-based (vessels, shipping management companies) rather than pure holding-company trees, so vessel data matters as much as corporate data:
Lloyd’s List Intelligence / Windward – AIS tracking and beneficial-ownership-behind-flag analysis, paid
UANI and TankerTrackers.com – track Iran-linked shadow fleet vessels and front companies specifically
C4ADS – has published detailed network maps of IRISL/NITC successor structures
Treasury’s own past IRISL-related press releases and designation packages, since OFAC did a lot of this mapping itself over 15+ years
Targeted – Russia/Crimea:
EGRUL/EGRIP-based aggregators (Kontur.Focus, SPARK-Interfax, Rusprofile) – the authoritative underlying data, but increasingly hard to access from outside Russia and typically require Russian payment/phone verification
OpenSanctions and OCCRP Aleph both scrape a meaningful amount of EGRUL data already, so they’re often the more practically accessible route to the same underlying facts
KSE Institute’s Leave Russia tracker – useful for corporate exit/restructuring signals
YouControl – Ukrainian-sourced data with good Russia-adjacent coverage
Ukraine’s own NSDC/”War and Sanctions” designations – frequently anticipate or run parallel to Western lists and come with their own ownership rationale worth cross-referencing
RUSI and Transparency International UK – both have done sustained investigative work specifically mapping Russian elite ownership networks
What I can and can’t do here, honestly:
I can search the open web, read regulator press materials and FAQs, pull from freely accessible registries, and synthesize investigative/NGO reporting – and I can help you build and document the research workflow itself, with citations kept separate from inference.
What I can’t do, and the reasons matter for how you’d rely on this:
No login or API access to any paid platform – Sayari, Orbis, World-Check, LexisNexis Risk, Kontur/SPARK. I have no account, no credentials, and no way to acquire them mid-session even if you have a license, so anything behind those walls I simply cannot see.
No independent verification of an ownership percentage. If I surface a number from a news article or aggregator, that’s secondhand until checked against a primary document – I’ll flag it as such rather than presenting it as established.
No guaranteed completeness. Web search samples the indexed internet; it doesn’t exhaustively traverse a six-tier ownership graph the way a purpose-built product claims to, and coverage of non-English-language and offshore-secrecy-jurisdiction filings is systematically thin. Absence of a hit from me is not evidence the entity isn’t captured.
Can’t get past geo-blocking or verification walls (EGRUL-adjacent systems requiring Russian phone/payment being the clearest case).
Can’t make the actual compliance determination – whether to block, whether the evidence meets your institution’s risk threshold – that’s a licensed judgment call, not a factual output, and especially with a discretionary-control regime like the EU’s, it’s inherently a judgment exercise, not a lookup.
On genuinely obscure multi-hop chains, an LLM’s biggest risk is producing a plausible-sounding structure that isn’t actually sourced. I’ll cite as I go specifically so that risk stays visible to you rather than hidden in confident prose.
well, OFAC is also a strict liability regime – all who touch the transaction have violated the regulations, but the consequences, if any, vary according to the Enforcement Guidelines. So, OFAC just balances the scales differently, wouldn’t you say?
Claude responded:
Yes — and that’s a genuinely better way to put it than how it was left last message, so it’s worth correcting rather than defending the weaker version.
The mechanics check out
OFAC’s civil liability is strict: a violation exists the moment a blockable transaction occurs, full stop — OFAC need not prove fault or intent to bring an enforcement action and issue a civil penalty, and a civil penalty can be assessed even if the violator had no idea they were dealing with a sanctioned party. What actually happens next is calibrated entirely by the Enforcement Guidelines at 31 CFR Part 501, Appendix A — egregious versus non-egregious, voluntary self-disclosure, willfulness or recklessness, quality of the compliance program, awareness of the conduct, harm to program objectives. So the fault inquiry hasn’t been discarded, it’s just been relocated to the remedy stage instead of the liability stage. “Balances the scales differently” describes that far more precisely than the earlier “bets on speed vs. bets on accuracy” line, which overstated the contrast.
And here’s the part that actually strengthens the parallel rather than just conceding it: the UK made exactly this same move. For breaches committed on or after 15 June 2022, OFSI can impose civil monetary penalties on a strict liability basis, regardless of the absence of knowledge or a reasonable cause to suspect — before that date, OFSI had to show knowledge or reasonable cause to suspect on the balance of probabilities. So the “we wait for fault before we act” framing offered earlier doesn’t even hold up as a clean description of the UK’s own penalty regime anymore. Knowledge and intent still matter there, but now as a severity factor within OFSI’s case assessment, not as a threshold for liability — the same architecture as OFAC’s General Factors.
So where does the real difference actually live now?
Not in whether fault matters — both regimes have converged on “fault affects the size of the punishment, not whether a violation occurred.” It survives in what strict liability is allowed to reach. OFAC’s fault-blindness attaches to an immediate, automatic property action: the money gets locked up the moment the objective trigger exists, and that seizure doesn’t reverse just because a later fault inquiry clears the customer — unblocking still requires its own separate license. The UK’s 2022 reform, notably, didn’t build an equivalent mechanism. It made it easier to fine someone for the underlying conduct without proving they knew — but it stopped there. It didn’t create a parallel power to seize Customer A’s payment while that question gets sorted out, because there’s still nothing belonging to the designated person to seize in Scenario A, for the reasons worked through earlier.
That’s actually a more interesting finding than where things were left before: it isn’t that UK-style regimes are squeamish about strict liability in general — 2022 proves they aren’t. It’s that they’ve kept strict liability confined to punishing conduct after the fact, and never extended it into a mechanism for provisionally seizing an uninvolved party’s property before fault is even alleged. OFAC does both.
In a practical sense, isn’t freezing the assets in Scenario A a more forceful way to accomplish the goals of sanctions policy, even if the transaction can get accomplished through some other means – by creating immediate real-world economic consequences for the failed attempt that even reporting on attempted transactions just can’t measure up to?
Claude responded:
This is the crux of it, and the sharpest way to answer is: forceful against whom?
Walk through what actually happens to the designated person under each model
In Scenario A, freeze and reject produce the identical outcome for the sanctioned party: they don’t get paid, either way. They’re equally free, either way, to go find the same money — or different money — through Beijing or Istanbul. Freezing the funds doesn’t touch anything the designated person owns, because as established previously, nothing was theirs yet. So the marginal “forcefulness” being described isn’t landing on the sanctions target at all. It’s landing on Customer A — the non-designated party whose money actually gets locked away, indefinitely, based on nothing more than their instruction to pay someone.
That’s a real distinction worth sitting with: freezing in Scenario A is expropriating an unadjudicated third party’s property because of what they attempted, not punishing the person the sanctions regime actually targets.
But there’s something real here too
There is a genuine difference between freeze and reject that survives this reframing, and it’s not nothing: reject hands Customer A their money back, fully unencumbered, free to try the exact same payment again five minutes later through a different bank — the “ammunition” is untouched. Freeze removes that specific pool of liquidity from anyone’s use entirely. If the underlying deal is going to happen at all now, it needs fresh capital, not this capital. That’s a real cost, and it’s the honest, defensible case for the US approach here — it just achieves that cost by seizing the property of someone who hasn’t been found to have done anything wrong, rather than the property of someone who has.
And the EU-family model doesn’t actually leave the attempt costless — it just sequences the cost differently
If Customer A knowingly tried to pay a designated person, that attempt is itself a prosecutable sanctions offense in every jurisdiction covered — participating in or facilitating a breach of the making-available prohibition carries real civil and often criminal penalties, frequently well beyond the value of the blocked transaction itself. So both models are capable of imposing a serious, real cost on Customer A specifically. The difference is procedural: OFAC’s block is automatic and immediate, applied the instant the instruction is given, regardless of whether Customer A knew anything about the designation. The EU-family model waits for an investigation to actually establish knowledge or intent before it converts “you tried this” into a penalty. One bets on speed and volume (freeze everything that touches you, sort out culpability later, if ever); the other bets on accuracy (don’t touch anyone’s property until you can show they did something wrong).
So a gentle pushback on “even reporting can’t measure up” — reporting isn’t the alternative to a real economic consequence, it’s the on-ramp to one. It’s slower and it requires someone to actually build the case. Whether that trade-off is worth it depends on how much you weight “we caught more bystanders along with more real violators, faster” against “we only touched people we could actually show did something wrong.” That’s a genuine values question in sanctions design, not a case of one side simply declining to try.
let’s go back to Scenario A: there has to be, in order to effectuate the instruction, an account relationship of some kind, doesn’t there? So why is that case different? You’ve got assets being allocated for a sanctioned party – the only difference is that, in Scenario A, it’s being taken from an existing pooled asset. Or am I missing something?
Claude responded:
You’re not missing something, and it’s a sharp catch — there genuinely is an “account relationship” and something IS being drawn from a pooled asset. But the question is whether that operational fact amounts to a legal interest for the designated person, and here payment law itself already draws the line you’re looking for, independent of sanctions law entirely.
A wire transfer isn’t one asset moving through a pipe — it’s a chain of separate obligations
Under the commercial law that actually governs funds transfers (UCC Article 4A in the US; the EU’s Settlement Finality Directive and the payment-services framework in Europe), a beneficiary acquires zero legal claim against their own bank until that bank “accepts” the payment order — the beneficiary’s bank is only obliged to pay the beneficiary once it accepts the order, and acceptance itself is defined narrowly: the earliest of the bank paying the beneficiary, notifying them of receipt, or receiving settlement for the order. Before that moment, nothing has legally reached the beneficiary — the money belongs to the recipient, free of any strings, only once finality is reached. This isn’t a sanctions-specific fiction. It’s the ordinary rule that governs every wire transfer on earth, sanctions or not — it’s what determines, say, whose money it is if a bank fails mid-transfer, or if a payment gets mis-keyed to the wrong account.
So what is actually happening at your end when you debit Customer A?
Bank A debiting Customer A’s account and sending a payment message isn’t Bank A moving the designated person’s property — it’s Bank A discharging (or beginning to discharge) its own contractual obligation to Customer A, funded out of Bank A’s own balance sheet and correspondent liquidity. That pooled asset is Bank A’s, being drawn down pursuant to A’s instruction; the designated person is a total stranger to that relationship until their own bank actually accepts the order on their behalf. If you refuse at that point, nothing reverses because nothing left — Customer A’s account was never debited (or is simply uncredited if it briefly was), and there’s no moment where the designated person held anything that now has to be “returned.” That’s precisely why refusal doesn’t require a licence the way unwinding a completed freeze does: there’s nothing to unwind.
Why “belonging to/held/controlled by” tracks this, and why OFAC doesn’t
The EU-family test (belonging to, owned, held, or controlled by) is simply importing the ordinary payment-law vesting point rather than inventing its own. OFAC’s blocking regime is the outlier specifically because its “interest of any nature whatsoever, direct or indirect” definition is deliberately written to reach behind that ordinary vesting rule — US commercial law (the same UCC 4A) agrees with the EU-family approach that the beneficiary has no claim pre-acceptance, but OFAC’s sanctions regulations override that for blocking purposes, treating mere intended-beneficiary status as sufficient. So the divergence being described here isn’t a difference in what property law says happens to a payment in flight — both systems’ underlying commercial law agrees on that. It’s that only one of them layers a sanctions-specific rule on top that disregards it.
This also explains the countermand test from the UK “trapped payments” guidance covered previously — asking whether a designated bank still had the right to recall the funds is just asking whether finality/irrevocability had occurred yet. Same doctrinal line, applied to figure out whether the freeze duty travels with the money through a correspondent chain. And it’s why an intermediary bank in the EU-family model typically has nothing of the designated person’s to freeze mid-chain at all: under this same logic, none of the intervening correspondent legs constitute the beneficiary holding anything either, right up until the final beneficiary’s bank accepts.
One thing worth keeping separate: this settles whether the Scenario A/B line is legally real rather than cosmetic — it doesn’t reopen the policy question of whether refuse is a strong enough response on its own. Those are different questions.
By refusing or rejecting a transaction, isn’t the regulator copping out? After all, the transaction could be accomplished somewhere else – say, in China or Turkey
Claude responded:
It’s a fair gut reaction, but it conflates two different questions: “does this stop the sanctioned party from ever getting the money” and “what happens to the specific transaction sitting in front of this specific firm.” Those aren’t the same question, and once you separate them, block doesn’t actually beat reject on the first one.
The workaround problem is real, but it’s not a reject-specific problem
If a UK bank refuses to send the payment, sure, the customer can try Beijing, Istanbul, or Dubai. But if a US bank blocks the payment instead, the designated person’s next attempt at financing can just as easily route through those same channels — blocking one wire doesn’t inoculate the rest of their commercial life. This is a well documented, general limitation of unilateral and even coordinated multilateral sanctions: research on sanctions evasion has tracked how Chinese and Russian arms have continued flowing to embargoed destinations for decades through non-dollar channels that sit outside any single regime’s reach. So “they’ll just go elsewhere” is a real critique of sanctions regimes in general — it applies to block just as much as reject. Neither mechanism solves global circumvention; both only capture what happens to already be within a given firm’s grasp at a given moment.
So is releasing that specific transaction really nothing?
Not quite. A rejected payment still comes with a mandatory report to the competent authority in every jurisdiction covered so far — so even though the money moves on, the attempt gets logged: who tried to pay whom, through which counterparties, on what pretext. That’s raw material for future listings, for identifying facilitators, and for building the kind of evidentiary record these regimes’ own courts increasingly demand. It’s a much thinner form of “action” than seizing the money, and it isn’t honest to pretend otherwise — but it isn’t nothing either.
The real reason isn’t laziness, it’s legal exposure
Here’s the part that actually answers the question. The EU, UK, Switzerland, Canada, and Australia are all legal systems where courts have been genuinely aggressive about policing sanctions listings on due-process and property-rights grounds — and the cleanest illustration is that the same person, Mr. Kadi, brought parallel challenges in EU and US courts over the same asset freeze, and the EU courts ruled the listing process lacked fundamental protections while the US courts rejected the equivalent constitutional claims. If that’s how exacting these courts are about freezing a person who has actually been designated, extending that seizure power further — to a non-designated customer’s own money, based solely on their stated intent to pay someone else — would be a considerably bigger and more legally exposed step, one these systems have chosen not to take. The US, operating under IEEPA’s far more executive-deferential tradition, doesn’t face the same internal constraint, which is a large part of why it’s comfortable blocking property whose ownership hasn’t fully vested yet.
There’s a structural reason layered on top of the legal one. The US can afford to cast that wide a net because so much of world trade has no way to avoid touching dollar clearing — roughly 88 percent of foreign-exchange transactions involve the dollar, and the correspondent banking system that actually moves the money concentrates through a small number of banks in New York and London. Blocking a dollar payment captures real marginal value precisely because rerouting around the dollar is genuinely hard. A rejected euro, pound, franc, Canadian, or Australian dollar payment is comparatively easy to complete elsewhere without touching that currency’s clearing system at all, so the deterrent value of seizing a non-designated customer’s funds is lower relative to the legal and political cost of doing it — this half of the explanation is an original synthesis of the two facts above, not something any regulator has stated as its rationale.
And this isn’t a “the EU goes soft” story — the freeze side still bites, hard
Worth remembering: none of this caution applies once a resource actually belongs to the designated party. The clearest proof is sitting in Belgium right now — roughly €210 billion of Russian Central Bank reserves are frozen in Europe, most of it at the Euroclear depository, and that’s a Scenario B freeze, not a reject outcome, because those securities already belonged to the CBR the moment it was designated. And the EU’s own hesitation about going one step further — from freezing that money to actually using it for a reparations loan — is itself a live demonstration of the exact caution just described: Belgium has resisted precisely on expropriation grounds, warning other reserve holders might flee European custody, and Russia’s central bank has already sued Euroclear for roughly $230 billion over the freeze itself. That’s not a regime being casual about property rights; if anything it’s the same instinct that keeps the reject rule in place for in-flight payments, now playing out at nation-state scale.
Self-check
Kadi I/II outcomes and the EU/US divergence: confirmed across multiple sources including a direct comparison piece and the CJEU’s own case summary.
Dollar/FX and correspondent-concentration figures: from a 2026 explainer drawing on the Farrell & Newman “weaponized interdependence” literature — solid secondary sourcing, not a primary BIS/Fed data pull.
Euroclear/CBR figures (~€210bn, ~€193bn at Euroclear, Belgium’s objections, the Russian lawsuit): converging figures across CFR, CEPR, Squire Patton Boggs, and AP reporting from November 2025–January 2026 — figures move slightly by source and date, so treat the exact number as “roughly €200–210bn” rather than a fixed figure if publishing this.
The causal argument connecting legal-rights culture and dollar centrality to the reject/block design choice is original synthesis — no regulator has published that rationale in those terms.
