Overview
The Sanctions Update is compiled by Steptoe’s International Trade and Regulatory Compliance team and Steptoe’s Strategic Risk team. You can subscribe to receive the Sanctions Update every week through Steptoe’s International Compliance Blog and Stepwise Risk Outlook publication home pages.
For more information or advice on any of the developments discussed below, please contact a member of our sanctions team here.
US Developments
Courts Find Trump Overstepped in Use of Sanctions Statute for Tariffs
In a much-anticipated decision regarding the legality of tariffs imposed by President Trump under the International Emergency Economic Powers Act (IEEPA), the US Court of International Trade (CIT) unanimously held that IEEPA, a statute primarily used to impose economic sanctions and similar measures, did not grant the President the statutory authority to impose the tariffs outlined in Executive Orders (EO) 14257 and 14266 (the trade deficit and retaliatory tariffs) or to impose the tariffs outlined in EOs 14193, 14194, or 14195 (the fentanyl and drug trafficking tariffs). The CIT decision did not apply to tariffs on steel, aluminum, and automobiles under Section 232 of the Trade Expansion Act.
Despite the CIT’s decision enjoining and vacating the IEEPA-based tariffs, the tariffs are now back in effect after the US Cout of Appeals for the Federal Circuit stayed the CIT’s order until further notice as it considers whether to grant the Trump administration’s motion for a longer stay of the CIT’s order.
In a separate case before the US District Court for the District of Columbia, Judge Rudolph Contreras held that IEEPA “is not a law providing for tariffs.” Judge Contreras’ opinion went a step further than the CIT decision by holding that IEEPA does not authorize tariffs in any circumstances.
The Trump administration has filed notice that it intends to appeal both the CIT and DC District Court decisions. In the meantime, the Trump administration is likely to consider alternative legal pathways to pursue its tariff policies. For more information on these tariff developments, see this blog post by Steptoe’s Global Trade & Investment team.
Trump Considers Sanctions on Russia as Tensions Mount
President Trump is reportedly considering sanctions against Moscow amid growing frustrations over the Kremlin’s continued attacks on Ukraine. While President Trump tempered the rumors, stating that, if he felt he was getting “close to a deal,” a hasty imposition of sanctions would “screw it up,” he did not entirely dismiss the possibility of new sanctions if President Vladimir Putin continued “tapping [the US] along.”
As we noted last week, senior administration officials have recently expressed similar frustration with Russia and Congress is considering adopting significant new sanctions as part of the Sanctioning Russia Act of 2025 (S. 1241/H.R. 2548).
OFAC Sanctions Cyber Scam Facilitator
The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has sanctioned Funnull Technology Inc., a Philippines-based company, along with its administrator, Liu Lizhi, for their alleged involvement in “pig butchering” virtual currency scams perpetrated against US-based victims. Notably, OFAC does not allege that Funnull directly scammed US victims. Rather, Funnull allegedly facilitated the scams by selling IP addresses, domain names, and website design templates to cybercriminals that would use them to host scam platforms and other malicious web content. US-based victims of these scam websites have reported over $200 million in losses.
Alongside the designations, the Federal Bureau of Investigation, which closely coordinated with OFAC on this matter, published a cybersecurity advisory relating to Funnull’s operations.
Commerce Department Cracks Down on Exports to China
The Commerce Department has reportedly moved to suspend existing licenses or impose greater restrictions on pending licenses that enable American companies to sell certain products to Chinese firms. These restrictions allegedly target technologies related to jet engines and semiconductors, as well as certain chemicals.
The Commerce Department’s restrictions follow guidance documents issued by its Bureau of Industry and Security (BIS), which, among other things, warn the public of the risks of using certain Chinese integrated circuits or allowing US artificial intelligence (AI) chips to be used for training of Chinese AI models. They also come as some in Congress have expressed reservations about unilateral US export controls. It remains to be seen whether these restrictions will place stress on the preliminary trade agreement reached between the US and China in May.
The Financial Times quoted an anonymous Commerce Department official as stating that the Department was “reviewing exports of strategic significance” to China, which suggests that there may be additional products that will encounter similar hurdles in the near future.
State Department Revokes Visas for Chinese Students
The State Department announced that it will be working with the Department of Homeland Security to “aggressively revoke” visas for Chinese students, including those with connections to the Chinese Communist Party or studying in critical fields. It will also revise its criteria for evaluating visa applications from China or Hong Kong to provide for “enhanced scrutiny.” This announcement follows a number of other visa-related actions the State Department has taken over the previous two weeks to advance the Trump administration’s immigration agenda.
Asia-Pacific Developments
China and Iran Launch New Commercial Railway Bypassing US Sanctions
In an effort to bypass US sanctions limiting its oil exports and economy, Iran inaugurated a new train rail route from Xi’an, China, to the Aprin dry port near Tehran. The rail line not only facilitates Iranian oil exports to China but also provides China a route to export its goods to Europe, avoiding US naval interference. Cutting delivery times between Shanghai and Tehran from 30 days by sea to 15 days by rail, the Aprin port is expected to play a key role in lowering transport costs and reducing reliance on coastal shipping hubs. In May, officials from six countries—China, Iran, Kazakhstan, Uzbekistan, Turkmenistan, and Turkey—met in Tehran to advance a transcontinental rail network connecting Asia to Europe. The nations agreed on competitive tariffs and standardized operations to streamline trade and boost connectivity along the route.
Japan Partially Lifts Sanctions on Syria
On May 30, 2025, the Japanese government partially lifted its economic sanctions against Syria, aligning its policy with the United States and European Union, which have already eased measures against the country. The decision, made during a cabinet meeting, aims to support Syria’s reconstruction efforts indirectly through its interim government, established after the collapse of former President Bashar al-Assad’s administration in December last year. The sanctions, originally implemented in 2011 under the former Democratic Party of Japan’s leadership, targeted the assets of Assad and other individuals accused of suppressing anti-government demonstrations, and were later expanded to include 59 individuals and 35 organizations.
As part of the recent move, Japan has removed four banks from its sanctions list, though restrictions on Assad and other key figures—who have been granted asylum by Russia—remain in place. This adjustment reflects Japan’s cautious approach, balancing its support for Syria’s rebuilding process with its stance against Assad’s regime. The partial lifting of sanctions represents Japan’s alignment with wider international efforts to assist Syria’s recovery while maintaining pressure on individuals and entities connected to the former leadership.
EU Finds China Responsible for 80 Percent of Russia Sanctions Avoidance, Says German Report
The European Union has accused China, including Hong Kong, of being responsible for approximately 80 percent of the circumvention of sanctions imposed on Russia, despite Beijing’s denials. According to a classified German Foreign Ministry report cited by German media, the EU sanctions commissioner acknowledged that sanctions are impacting Russia's economy but noted ongoing challenges in enforcement. Ukraine’s Foreign Intelligence Service has also accused China of supplying Russian defense factories with goods for military purposes, a claim Beijing has strongly denied, reiterating its opposition to groundless accusations and emphasizing that it strictly controls exports of dual-use goods. The report, summarizing an EU Foreign Affairs Council meeting, also highlighted difficulties with sanctions enforcement involving Kazakhstan, the UAE, and Turkey, despite UAE assurances that exports had stopped. EU companies themselves have contributed to sanctions violations, complicating the effort to gain third-country support for stricter measures.
Report Details North Korea’s Military Aid to Russia to Circumvent UN Sanctions
North Korea has emerged as a key supporter of Russia’s war in Ukraine, providing missiles, munitions, and even soldiers, according to a report by 11 nations including the US and Japan. The alliance has proven mutually beneficial, with Russia helping North Korea circumvent UN sanctions and providing military assistance, including advanced electronic warfare systems.
The Multilateral Sanctions Monitoring Team revealed that North Korea transferred at least 100 ballistic missiles to Russia last year, which were used to target civilian infrastructure and cities like Kyiv and Zaporizhzhia. Additionally, Pyongyang deployed over 11,000 troops to Russia in late 2024, with soldiers stationed in the Kursk Oblast engaging in combat alongside Russian forces. These troops disguised their origins by wearing Russian uniforms and received training from Russian soldiers before being deployed. North Korea’s involvement was publicly acknowledged in April, marking a growing alignment between Kim Jong Un and Vladimir Putin, reinforced by a 2023 mutual defense treaty between the two nations.
Malaysian Central Bank Fines Three Banks for Sanctions Screening Non-Compliance
Bank Negara Malaysia (BNM), the Malaysian central bank, has imposed over RM4.9 million in penalties on three major financial institutions for regulatory breaches in customer due diligence, sanctions screening, and credit reporting, reflecting its commitment to safeguarding the integrity of Malaysia’s financial sector. HSBC Bank Malaysia Bhd (HBMY) and HSBC Amanah Malaysia Berhad (HBMS) were fined RM3.26 million for failing to comply with anti-money laundering (AML), counter-terrorism financing, and sanctions screening requirements, with recurring lapses in verifying beneficial ownership and conducting timely sanctions screenings that exposed the system to risks. Maybank Islamic Bhd (MIB) was penalized RM1.2 million for submitting inaccurate and delayed reports to the Central Credit Reference Information System (CCRIS), impacting borrower credit assessments, while Bank Pembangunan Malaysia Bhd (BPMB) faced RM493,500 in fines for deficiencies in customer due diligence and sanctions screening due to internal control gaps. All three institutions have since implemented corrective measures, while BNM emphasized the importance of rigorous compliance practices to protect the financial system from abuse and maintain public trust.
