Overview
The Sanctions Update, compiled by attorneys from Steptoe’s award-winning International Regulatory Compliance team and the Stepwise: Risk Outlook editorial team, publishes every Monday. Guided by the knowledge of Steptoe’s industry-leading International Trade and Regulatory Compliance 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.
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The Lede
US targets cybercrime operations of the Karen National Army
Last week, the US Department of Treasury’s Office of Foreign Assets Control (OFAC) sanctioned the Karen National Army (KNA), its leader Saw Chit Thu, and his two sons, Saw Htoo Eh Moo and Saw Chit Chit. The KNA, previously known as the Karen Border Guard Force (BGF) until 2024, is an ethnic militia in southeastern Myanmar with close ties to the ruling military junta, the Tatmadaw. The US designated the KNA as a transnational criminal organization and sanctioned its leaders for their alleged involvement in facilitating cyber scams, human trafficking, and cross-border smuggling.
Myanmar has faced chronic political instability since gaining independence in 1948, spending much of its modern history under military rule and enduring widespread ethnic conflicts. The country is home to 135 ethnic groups, many of which have established ethnic armed organizations (EAOs) that have their own armed forces which fall into two main categories: pro-military forces, such as the Karen BGF, and resistance groups. Following the military coup in 2021, when the Tatmadaw overthrew the democratically elected National League for Democracy government, organized crime significantly expanded across Myanmar. Numerous actors operate within the country's illicit economies, including EAOs, BGFs, the Tatmadaw, and foreign entities. Many rely heavily on criminal enterprises to finance their activities.
The KNA controls significant territory along the Myanmar-Thai border, including the Shwe Kokko economic zone. Under Saw Chit Thu’s leadership, KNA-controlled territories were reportedly leased to criminal enterprises, allowing transnational crime to thrive. Formerly one of the poorest areas on Earth, Shwe Kokko has become a hub for criminal activity, including scams, human trafficking, and gambling operations. Among the most prominent illicit activities in this region are cyber scam operations. Individuals from around the world are lured with fake job offers to resorts and casinos in the area, where they are forcibly confined in heavily guarded compounds and coerced into committing online fraud, including scams known as “pig butchering.” These schemes involve manipulating victims—often by building fake relationships or encouraging fraudulent investments, particularly in cryptocurrency—before stealing their money and personal information. Saw Chit Thu and his sons allegedly hold shares in some of the criminal organizations facilitating these scams.
The US government has increasingly focused on combating cyber threats posed by criminal networks and state actors. In April 2015, former President Barack Obama issued an executive order establishing the first sanctions program specifically targeting cyber threats, declaring a national emergency in response to the growing prevalence of malicious cyber activities. Earlier this year, OFAC sanctioned a Chinese-linked company for conducting cyberattacks on U.S. telecommunications and internet service providers, allegedly as part of a cyber espionage campaign. During President Donald Trump’s first term, approximately 57 cyber-related sanctions were issued annually to counter rising threats from North Korea, China, Russia, and Iran.
In issuing last week’s sanctions, OFAC stated that many cyber scams targeting Americans primarily originate from Southeast Asia. Four days prior to sanctioning the KNA and its three affiliates, the Treasury’s Financial Crimes Enforcement Network identified a Cambodia-based financial group engaged in money laundering and proposed cutting its access to US financial systems. OFAC estimated that Americans lost over $3.5 billion to cyber scams originating from Myanmar and other Southeast Asian countries in 2023.
Since the 2021 coup, the US has imposed a series of sanctions targeting individuals and entities linked to the country’s military regime. These sanctions focus on current and former military officials, family members who have profited from connections to the coup, military-controlled companies, key industries financing the junta, and arms dealers supporting the regime. Several other countries and blocs—including the EU, the UK, Australia, New Zealand, and Canada—have also sanctioned Myanmar in response to the coup. Notably, Saw Chit Thu was sanctioned by the UK in 2023 and the EU in 2024 for his involvement in scam operations and ties to Myanmar’s military.
The latest sanctions reflect a growing US effort to disrupt the financial flows sustaining cybercrime operations and Myanmar’s military regime. While sanctions alone are unlikely to dismantle these networks, they represent a critical step toward pressuring Myanmar’s armed groups to sever ties with the Tatmadaw and reduce the financial incentives driving cyber exploitation. Sustained and coordinated international pressure will be essential to curb transnational cybercrime networks operating out of Myanmar and support the country’s transition toward democracy.
US Developments
OFAC Sanctions Chinese Entities for Alleged Purchases of Iranian Oil
The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has sanctioned Chinese “teapot” refinery Hebei Xinhai Chemical Group Co., Ltd., and three port terminal operators in Shandong Province for their alleged roles in purchasing or facilitating the delivery of hundreds of millions of dollars’ worth of Iranian oil. In announcing the sanctions, OFAC asserted that Chinese teapot refineries purchase the majority of Iranian crude oil exports. OFAC also designated multiple companies, including companies based in the United Kingdom and Hong Kong, and two Indian individuals for allegedly facilitating Iranian oil shipments as part of Iran’s “shadow fleet.”
This is OFAC’s third tranche of sanctions targeting, among others, Chinese teapot refineries since President Trump issued National Security Presidential Memorandum (NSPM-2) reimposing his “maximum pressure” campaign on Iran. Notably, the sanctions come just days after President Trump stated in a post on Truth Social that “[a]ny [c]ountry or person who buys ANY AMOUNT of OIL or PETROCHEMICALS from Iran will be subject to, immediately, Secondary Sanctions.” They also come as the US and Iran are scheduled for their next round of nuclear negotiations.
White House Expresses Frustration with Russia as Lawmakers Urge More Sanctions
During the Munich Leaders Meeting in Washington, DC, Vice President JD Vance reportedly told attendees that Russia is “asking for too much” to end its military campaign in Ukraine. The Vice President’s comments are the most recent expression of frustration from the White House regarding its negotiations with the Kremlin, following President Trump’s post to Truth Social in which he surmised that Russia may not “want to stop the war” and that the US should perhaps turn to a different playbook, including “banking” or “secondary sanctions.”
Ukraine, meanwhile, has signed and ratified a new minerals agreement with the US, which Secretary of the Treasury Scott Bessent has said “signals clearly to Russia that the Trump Administration is committed to a peace process centered on a free, sovereign, and prosperous Ukraine over the long term.”
It appears that some members of Congress see the White House’s increasing frustration as an opportunity to push for greater sanctions on Russia, which they advocate as a pathway to bring the Kremlin to the negotiating table on more favorable terms. On May 5, a group of Democratic senators led by Sen. Jeanne Shaheen (D-NH), the Ranking Member of the Senate Foreign Relations Committee, and Sen. Elizabeth Warren (D-MA), the Ranking Member of the Senate Banking, Housing, and Urban Affairs Committee, sent a letter to National Security Adviser and Secretary of State Marco Rubio urging him to, among other things, “make use of sanctions and export controls to continue raising the costs on Russia.” Their comments come as a sweeping Russia sanctions bill introduced by Sens. Lindsay Graham (R-SC) and Richard Blumenthal (D-CT) (S. 1241) has garnered around 70 co-sponsorships in the Upper Chamber, eclipsing both the threshold needed to overcome a Senate filibuster and to override a potential presidential veto in the Senate.
UK Developments
OFSI Imposes First-Ever Monetary Penalty for an Information Offence
On April 11, 2025, HM Treasury’s Office of Financial Sanctions Implementation (OFSI) announced its first civil monetary penalty for a breach of the information gathering powers under the UK’s Russia sanctions regime. This enforcement action follows swiftly on the heels of OFSI’s recent use of its naming and shaming powers to censure three charities for a similar type of breach and offers a salient reminder of the breadth of the obligations imposed under UK sanctions regulations.
The present enforcement action involved the imposition of a £5,000 civil monetary penalty by OFSI on Svarog Shipping & Trading Company Limited (Svarog) for its failure to comply with a statutory request for information (RFI) issued by OFSI within the specified timeframe during a complex investigation into transactions that Svarog had engaged in with a subsidiary of Sovcomflot, the Russian state-owned shipping company, and UK designated person. OFSI issued an RFI to Svarog on January 26, 2024, which Svarog failed to respond to timely, despite multiple reminders. In fact, Svarog only responded to the RFI after OFSI escalated the matter by contacting the company’s auditors and was unable to provide a reasonable excuse for not having complied with the RFI in time.
UK Targets Russia’s Shadow Fleet and its Enablers
The UK has sanctioned 100 oil tankers forming part of Russia’s so-called shadow fleet, as well as designating five individuals and four entities under the Russia sanctions regime for their role as enablers of that fleet. The designations were announced by Prime Minister Starmer and represent the largest package of UK sanctions to date targeting the “decrepit and dangerous shadow fleet carrying Russian oil” that is believed to be damaging critical subsea infrastructure across Europe. These latest sanctions reflect the UK government’s continued recent focus on sanctions impacting the Russian energy sector and its ability to generate revenue to fund the war in Ukraine.
EU Developments
European Commission Prepares 17th Sanctions Package
The European Commission is reportedly preparing its 17th sanctions package against Russia. As reported in our April 7 Sanctions Update, High Representative of the EU, Kaja Kallas, had confirmed that discussions were in their early stages. Several EU diplomats have signaled to public sources that the proposal is expected to move forward soon. The package is reported to target 149 oil tankers in Russia’s “shadow fleet,” companies from Vietnam, Turkey, and Serbia, as well as entities from China.
European Commission Unveils New Roadmap to End EU’s Energy Dependency on Russia
On 6 May 2025, the European Commission unveiled its new roadmap to phase out all imports of Russian gas, nuclear energy, and oil to the EU by the end of 2027. This initiative aims to address the remaining dependencies on Russian energy imports while contributing to the broader objectives of the Clean Industrial Deal and the Action Plan for Affordable Energy. As part of this effort, the Commission plans to present a legislative proposal by next month on rules for increased transparency, monitoring, and traceability of Russian gas. As part of the roadmap, the Commission also states that it will increase efforts to curb Russian circumvention of EU sanctions through illegal means.
The roadmap has reportedly faced pushback from Hungary and Slovakia, which have voiced opposition to sanctions targeting Russian gas.
Asia Pacific Developments
Chinese Plastic Makers Risk Losing Iran Supply on US Crackdown
Trump recently warned that buyers of Iranian oil and petrochemicals would face immediate sanctions, a move that could disrupt these trade flows. Iran's methanol exports to China, which account for 40% of China's imports and roughly 5.2 million tons last year, could face increased scrutiny if the US expands sanctions to target Iranian petrochemicals. The methanol is primarily used as feedstock for Methanol-to-Olefin (MTO) plants, which produce plastics essential to Chinese industry. Many of these plants, located along China's coast, are heavily reliant on imported methanol, with Iranian supplies offering a cost-effective option.
Despite potential sanctions, analysts suggest some Iranian methanol shipments may still reach China through intermediaries such as the UAE or Oman, echoing the resilience of Iranian crude flows to China despite years of US pressure. Should restrictions tighten, Chinese importers are expected to diversify procurement, bolstering ties with producers in Southeast Asia and South America. As methanol plays a critical role in the production of plastics, the potential disruption underscores the growing overlap between geopolitical tensions and global industrial supply chains.
CNC Equipment from South Korea found at Russian Factories Producing Iskander Missiles
South Korean-made computer numerical control (“CNC”) machines have been found at Russian factories producing Iskander short-range ballistic missiles, according to an investigation by Ukraine’s Economic Security Council. The equipment, along with machinery from Japan and Taiwan, was reportedly routed through China before being used in Russia for manufacturing missiles and drones. Ukrainian officials condemned DN Solutions, a leading South Korean CNC manufacturer, accusing the company of negligence in monitoring its distribution channels, which allowed its products to bypass international sanctions.
Ukrainian authorities emphasized the importance of compliance measures by both exporters and manufacturers, particularly in cases involving goods repeatedly ending up in sanctioned countries through intermediaries. Vladyslav Vlasiuk, Ukraine’s commissioner for sanctions policy, urged manufacturers like DN Solutions to conduct internal audits to address enforcement gaps. While stressing that DN Solutions may not have acted deliberately, Vlasiuk highlighted the need for greater regulatory oversight and accountability to prevent further breaches of sanctions.
DN Solutions responded by asserting its compliance with South Korea’s export laws and stating that it has not directly shipped products to Russia since February 2022. However, the company acknowledged the challenges of tracking resales on secondary markets. Despite previous commitments to export controls by DN Solutions’ CEO, Ukraine called on the South Korean government to tighten measures further and enhance its cooperation to prevent such violations and maintain the integrity of international sanctions.
Indonesia’s Karimun Terminal Becomes Key Russia Oil Hub
Indonesia's Karimun terminal has emerged as a pivotal transshipment hub for Russian oil products, with imports significantly increasing since October 2024, according to industry sources and ship-tracking data. Located in a free trade zone near Singapore, the terminal has facilitated the storage and rebranding of Russian-origin oil before re-exporting it to destinations like Malaysia, Singapore, and China. This surge aligns with Russia's pivot toward Asian markets following sanctions imposed by Western nations after the 2022 Ukraine invasion, which have made direct imports of Russian oil to some countries challenging. The volume of Russian fuel oil arriving at Karimun from Russia’s Ust-Luga terminal this year is already nearly five times higher than last year, indicating the terminal's growing role in redistributing Russian energy exports.
The network of traders, shippers, and transshipment points—including hubs like those in the Malacca Strait region and Fujairah, UAE—has been critical in sustaining the flow of Russian oil despite sanctions. Kpler data reveals that Russian products like diesel and naphtha are also seeing notable growth in imports to Karimun, with Russian diesel arrivals at the terminal hitting 217,000 tons this year versus zero in the previous year. The terminal recorded an all-time high export of 590,000 tons of oil products in March, which has contributed to a well-supplied Asian market and driven down the price of high-sulfur fuel oil in the region. However, questions about the transparency of these operations remain, as officials from Indonesia’s energy and coordinating ministries, along with terminal owner Dubai-based Novus Middle East DMCC, declined to comment on the terminal's activities.
Kpler data also shows that Russia's share of total oil imports at Karimun grew from a monthly range of zero to 26% in early 2024 to over 60% from October onward and even reached 100% in April. Some of the imports have arrived on tankers sanctioned by the European Union or Britain, with cargoes frequently blended and re-exported under rebranded origins, according to sources. These transactions are often managed by intermediaries, including little-known trading firms that frequently change their names, reflecting efforts to obscure the oil's origins. While sources have spoken under anonymity due to the sensitivity of the matter, the lack of oversight at Karimun, a free trade zone, adds another layer of complexity to monitoring these activities. This system has allowed Russia to maintain oil flows to Asia while bypassing sanctions, raising questions about enforcement and the region's regulatory frameworks.
