The involvement of European companies in business dealings with sanctioned countries or entities is on the rise, notably since the onset of Russia’s conflict with Ukraine in 2022. This trend was highlighted in the “Kleptotrace” report by Transcrime, a research center at the Catholic University of Milan. Presented to Europol, the EU’s police cooperation agency, the study was co-funded by the European Union and concentrated on sanctions imposed by the bloc on Russia and Kremlin-linked oligarchs since 2014. These measures were intensified following Russia’s full-scale invasion in 2022. The report reveals the existence of complex networks of intermediary companies, often fictitious and represented by frontmen, operating in jurisdictions that do not align with sanctions regimes, turning sanctions into profitable ventures.
European companies, particularly small and medium-sized enterprises (SMEs), are frequently caught in these schemes due to a lack of necessary tools and security infrastructure to identify potential risks. Larger economic operators have managed to adapt to the sanctions quickly, but SMEs continue to struggle with assessing the sanction risks of their stakeholders. Gaining reliable information about business partners is both time-consuming and costly, often requiring professional investigations involving lawyers and accountants, which can be financially burdensome for SMEs. Without access to adequate tools or databases, these companies may rely on self-declarations from suppliers or customers, which are insufficient for thorough background checks. Sectors most exposed to this risk include electronic components, mechanical engineering, aeronautics, and dual-use technologies.
In response, the European Union has launched the EU Sanctions Helpdesk to assist companies, particularly SMEs, in conducting due diligence on their business partners. Transcrime’s research indicates that the ownership structures of many European companies may belong to entities subject to sanctions. At the time of Russia’s full-scale invasion, thousands of companies within the EU and other European countries were owned by Russian nationals under sanctions. During the early months of 2022, nearly 10,000 companies were identified as owned by sanctioned individuals. However, the enforcement of sanctions remains a national responsibility, which can sometimes be inadequate.
The global financial network offers protected channels for those seeking to evade sanctions, often the same routes used by organized crime for money laundering, as noted by Europol’s EU Serious and Organised Crime Threat Assessment 2025 report. Corrupt political sectors play a crucial role in these evasion networks. Transactions are often funneled through intermediary banks in countries with lax financial regulations, such as Caribbean nations, where banks do not enforce stringent know-your-customer procedures. Sectoral sanctions evasions account for 80% of all cases, frequently involving intermediary or paper companies with no real economic activity. The average transaction circumventing sanctions involves three paper companies and at least five countries, using payment methods typical of organized crime, such as offshore bank transactions and the exchange of luxury goods.
Europol has highlighted the challenges in effectively restricting economic exchanges amid high interdependence between states, private companies, and transnational criminal networks.
The Bottom Line
The increasing complexity of sanctions evasion networks presents significant challenges for European companies, particularly SMEs, which may inadvertently become involved in illegal transactions. The lack of adequate resources and tools to conduct thorough due diligence exposes these companies to legal and financial risks, potentially impacting their operations and reputations. The EU’s efforts to assist businesses through initiatives like the Sanctions Helpdesk aim to mitigate these risks by providing the necessary support for compliance.
For consumers and communities, the effects of these developments can manifest in various ways. Increased scrutiny and regulatory measures may lead to higher costs for goods and services, as companies invest more in compliance and risk management. Additionally, the potential for economic instability in regions heavily reliant on trade with sanctioned countries could affect job opportunities and economic growth. As the landscape of international business continues to evolve, staying informed and prepared for these changes will be crucial for companies and individuals alike.
