Overview
The Sanctions Update, compiled by attorneys from Steptoe’s award-winning International Trade and Regulatory Compliance team and the Stepwise: Risk Outlook editorial team, publishes every Monday. Guided by the expertise of Steptoe’s industry-leading IRC team, the Sanctions Update compiles and contextualizes weekly developments in international regulatory enforcement and compliance, as well as offers insights on geopolitical context, business impacts, and forthcoming risks.
For more detailed analysis on related issues, see Steptoe’s International Compliance Blog. For information on industry-specific monitoring or bespoke services, please contact the team here.
Lede
US Sanctions Mexican Cartel Members Amid Intensified Clampdowns by US and Mexico
On Wednesday, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) imposed sanctions on three high-ranking members and one associate of the Mexico-based Cartel del Noreste (CDN). Known for its significant influence on the US-Mexico border, CDN is deeply entrenched in narcotics trafficking, human trafficking, extortion, arms smuggling, and kidnappings for ransom. This latest round of sanctions marks OFAC’s second wave of action against CDN, following sanctions on two high-ranking members of the cartel in May.
Securing the US-Mexico border has been one of US President Donald Trump’s signature campaign promises. On his first day in office, Trump issued an executive order declaring a national emergency at the southern border, citing it as being “overrun by cartels, criminal gangs, known terrorists, human traffickers, smugglers, unvetted military-age males from foreign adversaries, and illicit narcotics that harm Americans.” In a separate executive order, Trump elevated cartels to higher-threat categories, officially designating them as Foreign Terrorist Organizations (FTOs) and Specially Designated Global Terrorists (SDGTs), placing them on par with groups like ISIS and al-Qa’ida. In February, CDN and seven other transnational organizations were classified under these designations, underscoring their elevated threat status to US national security.
These orders have spurred significant enforcement measures by the US, including expanded military deployments at the southern border and the designation of parts of the border as federally controlled national defense areas, aimed at achieving “100% operational control.” Reports have surfaced that Trump signed a directive to the Pentagon authorizing the use of military force against cartels, potentially establishing an official foundation for military operations on foreign soil. This follows earlier reports of increased drone surveillance over Mexico to identify fentanyl labs. However, no form of military operation has yet received congressional authorization.
Trump also took punitive steps directly against Mexico, issuing sweeping 25% tariffs on Mexican exports to the US for the country’s perceived role in facilitating (or at least, not interdicting) illegal drug flows, specifically fentanyl. These tariffs, declared in a February executive order under the International Emergency Economic Powers Act (IEEPA), framed the drug crisis as a US national emergency. The order went further by explicitly accusing the Mexican government of collaborating with cartels and providing them safe havens—marking an unprecedented formal allegation linking the Mexican government to cartel activities.
Since taking office in October, Mexican President Claudia Sheinbaum has launched a vigorous campaign against cartels and fentanyl flows to the US. Trump’s accusations and tariff threats have added further urgency to Mexico’s efforts. In February, Sheinbaum deployed 10,000 troops to the US-Mexico border, sent hundreds more to Sinaloa state—home to the notorious Sinaloa Cartel, resulting in raids on labs, arrests, and drug seizures—and extradited 29 alleged drug cartel members to the US. Reports also suggest that increased US and Mexican enforcement measures have forced traffickers to adapt, even bringing rival cartels—like the Sinaloa and Jalisco organizations—into closer collaboration. However, Trump continues to pressure Mexico to crack down harder on cartels, deeming its efforts insufficient, and has even threatened to raise tariffs to 30% last month if more was not done by Mexico to stop fentanyl trafficking.
OFAC’s actions on Wednesday targeted three top CDN members: Abdon Federico Rodríguez García, Antonio Romero Sánchez, and Francisco Daniel Esqueda Nieto. García is the cartel’s second-in-command and faces accusations of drug trafficking, money laundering, fuel theft, and extortion. Sánchez, a former police officer, has allegedly carried out executions, beheadings, and an assassination attempt on a Nuevo Laredo official on behalf of CDN. Nieto, responsible for CDN’s tactical operations in Nuevo Laredo, was implicated in an attack on Mexico’s army, including an assault targeting a military helicopter during the arrest of CDN’s leader. Alongside the three high-ranking members of CDN, OFAC also sanctioned rapper Ricardo Hernandez Medrano for using his concerts and events to launder money on behalf of CDN.
While Mexico is looking to walk back the threatened 30% blanket tariff on its exports to the US, it still faces a range of trade penalties, including a 25% tariff on goods not covered by the US-Mexico-Canada Agreement (USMCA), a 25% tariff on automobile and auto parts, and a 50% tariff on steel, aluminum, and copper. It is estimated that 48% of imports from Mexico are USMCA compliant. On the one hand, Mexico was the only country able to secure a major concession—a 90-day extension on trade negotiations—likely due to Sheinbaum’s demonstrated willingness to cooperate on Trump’s top priorities. Nonetheless, Sheinbaum finds herself in a difficult balancing act: taking steps to address Trump’s demands to safeguard the US-Mexico trade relationship while also defending Mexico’s own interests and sovereignty.
Highly contentious issues, such as allowing US troops into Mexico to help local law enforcement authorities combat cartels and drug trafficking—an offer Trump made earlier this year, but Sheinbaum rejected—may resurface on the negotiating table. In the meantime, the US Treasury Department is expected to continue leveraging its sanctions authority to financially weaken cartels while partnering with the Mexican government to apply maximum pressure on groups like the CDN.
US Developments
Trump Imposes Novel “Secondary” Tariffs on India for Importing Russian Oil
Last Wednesday, President Trump issued an Executive Order (EO) imposing an additional 25 percent “secondary” tariff on most imports from India in response to its importation of Russian-origin oil. As detailed in our recent blog post, the secondary tariff, which will be imposed in addition to the 25 percent reciprocal tariff on India, becomes effective on August 27. This action is the first ever use of “secondary” tariffs. The EO follows Trump’s statements that he would impose significant sanctions against Russia, including 100 percent secondary sanctions on countries importing Russian oil, if President Vladimir Putin did not agree to a peace arrangement over the war in Ukraine. Trump has also stated that further measures on other nations, such as China, are forthcoming. China and India are the two largest importers of Russian-origin oil.
Trump and Putin are scheduled to meet in Alaska on August 15 to negotiate an end to the Ukraine war. Trump has suggested “land swaps” may be part of a peace deal and public reporting indicates that the proposed peace deal under consideration by the US and Russia would cement Russia’s territorial gains in Ukraine – a concept that the administration has not confirmed. On Sunday, Ukrainian President Volodymyr Zelensky and his European allies publicly reiterated their stance that any negotiations involve Ukraine and Europe. The Trump administration has called for Zelensky’s participation in a trilateral summit, which Russia has rejected. It does not appear as though the Trump administration will precondition talks between Trump and Putin on Zelensky’s participation. As the summit approaches, it appears unlikely that the administration will impose new secondary tariffs or other sanctions on Russia until the negotiations in Alaska conclude.
Senate Democrats Decry Trump Administration’s Russia Sanctions Pause
The Democratic staff of the Senate Foreign Relations and Banking Committees has published a report on President Trump’s sanctions and export controls policies toward Russia during his second term. The report was prepared for Senators Jeanne Shaheen (D-NH) and Elizabeth Warren (D-MA), Ranking Members of the respective committees. The report argues the Trump administration “immediately stopped” implementing sanctions and export controls on Russia after coming into power, thereby easing the pressure on the Kremlin and enabling sanctions and export controls evaders. The report further claims that policy failures and government staffing cuts have bolstered Russia and undermined Ukraine. The Democratic staff released the report as the Trump administration neared the administration’s self-imposed deadline for progress on Ukraine peace talks.
OFAC Continues Pressure on Iran with New Designations
The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has imposed sanctions on 18 individuals and entities for their alleged involvement in “sophisticated banking schemes and alternate payment messaging systems specifically designed to bypass sanctions” and generate revenue for the Iranian regime. According to OFAC, these alternative payment systems enable the Iranian regime’s funding of terrorist proxies and oppression of its people, including through restricted internet access and heightened surveillance.
The Trump administration has continued to apply pressure on Iran through sanctions, in accordance with the President’s National Security Presidential Memorandum 2 (NSPM-2). These sanctions, in particular, follow similar designations from July 30 and July 31, which targeted Iran’s oil trade and weapons procurement networks, respectively.
Treasury Sanctions Members of Mexican Cartel
OFAC has designated alleged high-ranking members and an associate of the Cartel del Noreste (CDN), a Mexico-based Foreign Terrorist Organization (FTO), Specially Designated Global Terrorist (SDGT), and Transnational Criminal Organization (TCO). According to OFAC, the most recent CDN-related designations are for individuals who play “key roles” in aiding CDN’s crimes. Among those sanctioned was Ricardo Hernandez Medrano (“Hernandez”), a rapper also known by the stage names “El Makabelico” or “Comando Exclusivo.” OFAC alleges that Hernandez’s concerts and events are used to launder money on behalf of CDN, with 50 percent of his royalties from streaming platforms going directly to the group.
UK Developments
OFSI Extends General Licence for Mongolia Energy Payments
OFSI has extended the duration of General Licence, INT/2022/2085212, for Mongolia Energy Payments (the “GL”). The GL allows a person to continue to make payments to a sanctioned bank (i.e., Credit Bank of Moscow, Gazprombank, and Sberbank) or any subsidiary of such a bank for the purpose of making energy available for use in Mongolia, and to carry out any activity reasonably necessary to effect this. The GL originally came into effect on August 15, 2022, and was due to expire on August 14, 2025. The extended GL will now expire at 23:59 on August 14, 2027.
UK Updates Red Flag Guidance on Russia Sanctions Evasion
The UK government has updated its previously published red flag guidance to help industry detect attempts to evade sanctions imposed in response to Russia’s invasion of Ukraine. Aimed at industry and other stakeholders, the guidance, “Countering Russian sanctions evasion - guidance for businesses”, is intended to support frontline actors in identifying and responding to suspicious activity linked to sanctions breaches. The updated version of the guidance includes additional examples of evasionary activity based on recent case experience, with a stronger focus on financial transactions, procurement practices, shipping, and logistics. Notable updates highlight risks such as third-country payments with no clear link to the transaction, increased use of intermediaries or shell companies, altered shipping documentation, and suspicious changes to trade routes. The guidance encourages businesses to apply enhanced due diligence when these red flags arise and to report suspected breaches of trade sanctions to HMRC or OTSI, as applicable.
EU Developments
EU Reportedly Preparing Sanctions Against China For Aiding Russia’s War Efforts In Ukraine
The European Union is reportedly preparing a new round of sanctions targeting China in response to its alleged role in supporting Russia's war efforts in Ukraine. This development comes after a July report exposed covert shipments of Chinese-made drone engines to Russia, which were mislabeled as "industrial refrigeration units" to circumvent existing sanctions. These shipments have reportedly allowed Russia's state-owned arms manufacturer, IEMZ Kupol, to scale up the production of Garpiya A1 attack drones, which are being deployed to strike civilian and military targets in Ukraine.
In response to the report, representatives from fifteen EU member states have reportedly raised the issue with the Chinese government. However, China has either denied its involvement in the shipments or declined to provide a clear explanation. According to EU diplomats, the EU had knowledge of these shipments prior to the publication of the report and considers them a significant escalation of China's backing for Russia.
The EU is expected to advance its sanctions initiative after August, as part of broader efforts to address China’s growing economic and military alignment with Russia.
Third Countries Align with EU Sanctions
The High Representative of the EU has announced that Albania, Bosnia and Herzegovina, Iceland, Liechtenstein, Montenegro, North Macedonia, Republic of Moldova, and Ukraine have aligned themselves with several recent Council decisions concerning restrictive measures. First, these countries have aligned themselves with the review of the EU Terrorist List sanctions regime, which removed one deceased individual while retaining 13 individuals and 22 groups or entities to the listing of those subject to restrictive measures. Second, this group of countries also aligned with Council Decision 2025/1547, which imposes sanctions in response to Iran’s military support for Russia’s war against Ukraine and for armed groups and entities in the Middle East and the Red Sea region. Council Decision 2025/1547 extended sanctions until July 27, 2026, and updated the listings of two individuals and one entity in the annex to Council Decision 2023/1532.
On August 7, the High Representative of the EU further announced that these countries, along with Norway, aligned themselves with Council Decision 2025/1558 concerning restrictive measures against Iran. As part of this decision, one individual was removed from Annex II of Decision 2010/413/CFSP, while restrictive measures against all other listed persons and entities were upheld, excluding those included in Annex VI.
In addition to these measures, Albania, Armenia, Bosnia and Herzegovina, Iceland, Liechtenstein, Montenegro, North Macedonia, Norway, Republic of Moldova, and Ukraine have aligned themselves with Council Implementing Decision 2025/1705, which implements the sanctions regime related to the situation in Libya. As part of this decision, the EU Council removed one individual from Annex II of Decision 2015/1333, while retaining restrictive measures against all other persons and entities listed in Annexes II and IV.
Lastly, on August 8, the High Representative of the EU announced that Albania, Armenia, Bosnia and Herzegovina, Iceland, Liechtenstein, Montenegro, North Macedonia, Norway, Republic of Moldova, Serbia, and Ukraine aligned themselves with Council Decision 2025/1481, which imposes restrictive measures in response to activities undermining the stability and political transition in Sudan. This Council Decision added two individuals and two entities to the list of those targeted by restrictive measures.
Asia Pacific Developments
Singaporean Shipping Company Terminates Charter Agreements for 16 Sanctioned Vessels
Singapore-based SeaLead Shipping announced the immediate termination of charter agreements for 16 container vessels following their designation by the US. The vessels, which were chartered from third-party owners, were identified as linked to Iranian shipping interests and added to the SDN List on July 30, 2025. In a public statement, SeaLead confirmed the termination of all charterparties and contracts related to the sanctioned vessels and entities, and reaffirmed its commitment to sanctions compliance.
North Korean Tankers Identified in Chinese Waters Despite UN Sanctions
Recent maritime tracking data have revealed that at least five North Korean oil tankers, including four vessels designated under United Nations sanctions, have been operating openly in Chinese territorial waters despite binding UN Security Council resolutions requiring their seizure and inspection. The vessels were observed transmitting location signals while maneuvering near southeastern China ports such as Zhoushan, Taizhou, and Fujian, reportedly for the purpose of fuel collection. These activities constitute a direct breach of UN sanctions targeting North Korea’s illicit energy procurement network, which includes a strict annual cap of 500,000 barrels of imported oil and mandates member states to report and interdict unauthorized transfers. Analysts note that the tankers have also frequented Russia’s Vostochny Port, a known hub for North Korean fuel runs, suggesting continued coordination between Pyongyang, Moscow, and Beijing. Experts have described this pattern as indicative of a “new normal” in which China and Russia provide diplomatic and operational cover for North Korea’s sanctions evasion, undermining the enforcement mechanisms of the UN sanctions regime.
