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
Western Trade Restrictions on Israeli Settlements Expand Amid West Bank Tensions
Twelve Western countries on Tuesday announced coordinated measures targeting trade with Israeli settlements in the West Bank, including new UK-led sanctions, marking a significant expansion of Western economic restrictions over Israel’s settlement policy. The joint statement — issued by the foreign ministers of Canada, Denmark, Finland, France, Iceland, Ireland, Norway, Poland, Portugal, Spain, Sweden, and the UK — confirmed plans to introduce national and EU-level restrictions on trade in goods originating from Israeli settlements, while some governments said they are actively considering additional measures. The announcement followed the UK government’s decision, coordinated with France and Canada, to bring forward national measures to ban trade in goods with the settlements. The move comes as EU member states fail to reach consensus on more far-reaching bloc-wide responses, prompting individual governments to explore national restrictions while continuing to push for EU-level action.
The restrictions reflect growing Western concerns that Israel’s settlement expansion and settler violence are making a two-state solution increasingly unviable. Canada, France and the UK said “systematic settlement expansion,” including Israel’s decision to advance the E1 settlement project, and a “dramatic increase in settler violence,” pose a “direct and urgent threat” to a two-state solution. The three governments said they would take further action, while reiterating their support for Israel’s security and a “close and productive partnership” with Israel. The statement comes almost one year after the three nations recognized the State of Palestine. Moreover, UK Foreign Secretary Ed Miliband on Tuesday said Britain now officially endorsed the 2024 International Court of Justice advisory opinion which concluded that Israel’s continued presence in the occupied Palestinian territory is unlawful. Miliband also accused “settler terrorists” of perpetrating “ethnic cleansing” against Palestinians in parts of the West Bank.
The Canada-France-UK package will ban imports of goods from Israeli settlements and impose targeted measures on settlements and entities or individuals that facilitate or profit from them. The UK is separately implementing a broader package that also includes restrictions on organizations and businesses involved in settlement construction, infrastructure, financing and real estate, a ban on UK advertising for properties in illegal settlements, and sanctions against “extremist settlers” who have supported or incited violence against Palestinians. London will also halt new export licenses for weapons and other goods that could “materially contribute to the occupation.” The ban on trade with illegal Israeli settlements is expected to go into effect six to nine months from now. The scope of the French and Canadian measures beyond the jointly announced import ban has yet to be fully defined.
The latest measures escalate earlier Western sanctions, which targeted named individuals and organizations, to cover (once implemented) all trade in settlement-origin goods. In June, Canada, France and the UK coordinated sanctions against settlers and their supporters in response to settler violence, building on earlier measures targeting specific individuals and organizations. Tuesday’s measures therefore represent a broader economic approach by restricting commerce linked to settlements themselves, joining several Western governments that have or are in the process of imposing restrictions on settlement goods, including Ireland, Spain, the Netherlands, Norway and Belgium.
The measures triggered an immediate diplomatic response from Israel against the UK, raising the risk of a broader deterioration in relations between Israel and its Western partners. Israeli Foreign Minister Gideon Sa’ar announced the closure of the British Consulate in Jerusalem, removal of British representatives from the International Gaza Support Center in Kiryat Gat, termination of British activities to train Palestinian Authority security forces under the British Support Team in Ramallah, and entry bans on 11 British members of parliament and Fahad Ansari, a London-based human rights lawyer and director of Riverway to the Sea, a Palestine legal rights and advocacy organization. Sa’ar described Miliband’s statements as “outrageous lies” and accused the UK government of “systematically acting against the state of Israel.” Israel has so far limited its announced countermeasures to the UK, although Sa’ar warned that other countries could face measures at Israel’s discretion.
The direct commercial impact is likely to be limited, but could increase compliance complexity and operating uncertainty for companies with exposure to Israel and the West Bank. The UK imported an estimated £38 million ($51.4 million) in goods from the occupied territories in 2025, a fraction of the £6 billion ($8.1 billion) in total UK-Israel trade. However, companies importing Israeli goods will face greater scrutiny over the origin of products and may need additional documentation to demonstrate that goods do not originate from restricted settlements. The UK has long tried to distinguish between goods produced within Israel’s pre-1967 borders and those originating in settlements, which do not receive preferential tariffs under the UK-Israel trade agreement. However, mislabeling concerns have persisted. The newly announced ban raises the stakes of an existing origin-verification challenge and may, in practice, require companies to establish that they are not importing goods prohibited from entering the UK.
More broadly, the coordinated announcement adds to the fragmentation of the Western sanctions environment, with national restrictions developing alongside existing EU rules and potential future EU-wide measures. Momentum has increased for EU member states to discuss bloc-wide trade restrictions on Israeli settlements during the European Council in October. If the EU ultimately reaches a qualified majority (55% of states representing 65% of population) on broader restrictions, Tuesday’s measures could serve as a foundation for a more unified European regime.
US Developments
Treasury Ratchets Up Its Pressure on Iran in Operation Economic Outcast
Last week, the Department of the Treasury announced several significant measures targeting Iran as part of Operation Economic Outcast, which is the Trump Administration’s ongoing campaign to impose greater economic pressure on the Iranian government. We previously reported on Operation Economic Outcast in a recent blog post. The measures announced last week include the following:
- On September 8, the Office of Foreign Assets Control (“OFAC”) indefinitely suspended three Iran-related aviation general licenses (“GL”), which authorized certain transactions related to overflights of Iranian airspace (31 CFR § 560.522), certain bunkering and emergency repairs for non-Iranian carriers (31 CFR § 560.529), and the reexportation of certain civil aircraft to Iran on temporary sojourn (Iran GL J-1). OFAC also suspended its licensing policy (31 CFR § 560.528) related to the exportation or reexportation of goods, services, and technology to ensure the safety of civil aviation and safe operation of US-origin commercial passenger aircraft. OFAC said it will consider aviation safety-related requests on a case-by-case basis. OFAC also issued Iran GL DD, which authorizes certain transactions that are ordinarily incident and necessary to the wind-down of any transaction previously authorized under 31 CFR § 560.522, 31 CFR § 560.529, or Iran GL J-1 through 12:01 a.m. eastern daylight time on September 23, 2026.
- On the same day, OFAC sanctioned 36 targets for supporting Iran’s aviation sector, including 27 Iranian commercial airlines. The sanctions were imposed pursuant to the April 24, 2026 determination under Executive Order (“E.O.”) 13902 that persons operating in the aviation sector of the Iranian economy are subject to sanctions. OFAC also sanctioned eight entities based outside of Iran, which allegedly provided support to Mahan Air, a sanctioned Iranian airline. These actions build on OFAC’s April and July 2026 sanctions actions against persons allegedly servicing Mahan Air’s domestic and international flights. OFAC also issued Counter Terrorism GL 37, which authorizes certain transactions that are ordinarily incident and necessary to the wind down of any transaction involving certain of the sanctioned entities through 12:01 a.m. Eastern Daylight Time on September 23, 2026.
- On September 10, OFAC published a new Statement of Licensing Policy for the Iranian Transactions and Sanctions Regulations (“ITSR”). OFAC stated that there is now a presumption of denial for specific license requests to engage in activities prohibited by the ITSR and other Iran-related authorities except as required by law or in certain exceptional and urgent circumstances, such as risks to life, limb, or environmental safety. OFAC said its Licensing Division immediately began denying most outstanding Iran-related specific license requests. OFAC stated that it will maintain this licensing policy until Iran stops obstructing the Strait of Hormuz, attacking US personnel and partners in the Gulf, and pursuing nuclear and conventional weapons.
- OFAC sanctioned 14 individuals and five entities for allegedly supporting Kata’ib Hizballah (“KH”) and Hizballah, which aid Iran in evading sanctions and collaborate with Iran’s Islamic Revolutionary Guard Corps-Qods Force. The action was taken pursuant to E.O. 13224, which targets terrorists and their supporters, and E.O. 13902.
- OFAC also announced a $1,427,230 settlement with an unnamed US individual, in which the individual agreed to settle their potential civil liability for providing management consulting and advisory services to one of Iran’s leading software solutions companies and receiving Iranian-origin dividends to their US bank accounts, and acquiring real property in Iran.
- The Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) also issued two publications alerting financial institutions and the public to Iranian sanctions evasion and facilitation networks. FinCEN issued an alert to assist financial institutions in identifying and reporting procurement networks supporting Iran’s aviation industry. FinCEN also issued a Whistleblower Bulletin encouraging the public to submit information about sanctions and anti-money laundering violations related to Iranian sanctions evasion and illicit finance schemes involving Iran’s terrorist proxies.
These new measures reflect the Treasury Department’s efforts to impose economic pressure on Iran at a faster pace. Meanwhile, the broader conflict involving Iran, the United States, and their respective allies continued to escalate throughout the Middle East. On September 11, the Houthis, an Iranian-backed militia in Yemen, seized an island in the Red Sea, threatening the flow of oil through the Bab al-Mandeb Strait. Saudi Arabia also announced it had shut down an important oil pipeline after it was attacked by drones launched from Iraq.
Treasury Targets Chinese Online Marketplace Over Cybercrime
On September 9, OFAC sanctioned Xinbi Guarantee, a Chinese-language platform that allegedly operates a large illicit online marketplace used to support cyber scams, fraud, money laundering, and other criminal activity targeting Americans. OFAC also designated two Southeast Asia-based entities for providing applications that support Xinbi Guarantee’s operations.
OFAC alleges that Xinbi Guarantee’s marketplace connects transnational criminal syndicates, including scam center operators, with vendors offering financial services, technology, and other goods for criminal operations. OFAC estimates that Xinbi Guarantee processed the equivalent of over $24 billion in digital assets and fiat currencies through its marketplace and platforms, with most transactions occurring in Southeast Asia. The designations were taken pursuant to E.O. 13581, which targets transnational criminal organizations (“TCOs”), as amended by E.O. 13863.
State Department Designates Los Tiguerones as a Foreign Terrorist Organization
On September 9, the US Department of State designated Ecuadorian crime syndicate Los Tiguerones as an FTO and a SDGT. The State Department alleged that Los Tiguerones is linked to narcotrafficking and other illicit activity, along with numerous attacks targeting civilians, law enforcement officers, and journalists, including the live takeover of an Ecuadorian television station in 2024. The action was taken pursuant to E.O. 13224, which targets terrorists and their supporters.
House May Soon Consider the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026
On September 11, the House of Representatives Committee on Rules (“Rules Committee”) scheduled a September 14 meeting to consider a rule governing consideration of the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026. Approval by the Rules Committee would clear the way for House floor consideration later in the week. The bill passed the Senate on August 7 by a bipartisan vote of 86-11. The bill faces opposition from many House Democrats.
Representatives Gregory W. Meeks (D-NY), Don Beyer (D-VA), and Richard Neal (D-Mass.) issued a joint statement arguing that the bill’s expanded tariff authorities and what they described as its “failing to mandate sanctions on Russia” were “unacceptable.” The three lawmakers, who serve as ranking Democrats on key congressional committees, have called for “bicameral, bipartisan negotiations.”
First introduced in April 2025, the legislation gained momentum after President Donald Trump signaled support last November, subject to him obtaining new tariff authorities and retaining flexibility over the imposition of sanctions. The bill underwent significant amendment earlier this year, which we covered in an update on July 20, 2026.
UK Developments
Illumina Cambridge Pays £7.4 Million Settlement for Russia Sanctions Breaches
Illumina Cambridge Limited has paid HM Revenue & Customs a £7,438,840.13 compound settlement for breaches of the Russia (Sanctions) (EU Exit) Regulations 2019. Between July 2022 and January 2023, the company transferred sanctioned goods between two overseas companies within its corporate group for export to Russia, in breach of Regulation 25(1), which prohibits making certain military, maritime and restricted goods available to persons connected with Russia or for use in Russia. Illumina Cambridge voluntarily disclosed the breaches to HMRC. The substantial settlement highlights the enforcement risk arising from intra-group transactions and overseas supply chains, and reinforces the importance of ensuring that sanctions controls capture transfers between affiliated entities where goods are ultimately destined for sanctioned jurisdictions.
UK Reintroduces Wide-ranging Sectoral Sanctions on Iran and Issues Shah Deniz General Licence
The UK has published the Iran (Sanctions) (Amendment) Regulations 2026, which will enter into force on September 29, 2026, and reintroduce a range of sectoral sanctions previously lifted as part of the Joint Comprehensive Plan of Action (JCPOA). The measures significantly expand trade restrictions covering sectors including energy, oil and petroleum products, petrochemicals, natural gas, precious metals and diamonds, maritime goods and sectoral software and technology. They also introduce financial restrictions on certain loans, investments and joint ventures involving persons connected with Iran, relationships with Iranian financial institutions, insurance and reinsurance, and certain Iranian sovereign bonds. Further measures include restrictions on Iranian aircraft entering the UK and expanded powers to specify and restrict vessels connected with Iran’s nuclear programme or malign or destabilising activity. Alongside the new restrictions, the UK has issued a General Licence supporting the continued operation of the Shah Deniz gas field, authorising certain energy-related goods, technology, brokering and associated financial services that would otherwise be prohibited, and has amended existing General Licence INT/2025/7363752 to permit certain financial services necessary for the project. Both the new licence and amendments are scheduled to take effect alongside the new sanctions on September 29, 2026.
OFSI Updates Guidance on Permitted Travel Expenses for Licence Applications
OFSI has updated its guidance on permitted travel expenses for sanctions licence applications, clarifying both its scope and the evidence expected from applicants. The guidance now confirms that it applies not only to travel by UK designated persons, but also to travel by legal representatives and other individuals where an OFSI licence is required to make the relevant payments. It emphasises that applicants should provide sufficient supporting evidence at the outset, with OFSI able to return incomplete applications for resubmission or refuse applications where adequate evidence is not provided. The revised guidance also confirms that OFSI may, in exceptional circumstances, license flights in a higher class than would ordinarily be permitted and, where higher-cost travel or accommodation is insufficiently justified, may instead license a lower amount equivalent to the permitted rates. Applications will continue to be assessed on their individual merits, while outdated mileage rates have been removed and links to related OFSI guidance updated.
EU Developments
EU Faces Deadlock on Renewal of Russia Asset Freeze Sanctions Regime
According to early reports, EU ambassadors of the Council failed to reach unanimous agreement on the renewal of the EU's Russia asset freeze sanctions regime during a September 14 meeting, just one day before the restrictive measures are due to expire. The sanctions regime, which provides for the individual designations of over 3,000 individuals and entities, requires the unanimous approval of the 27 Member States for its renewal.
Slovakia continued to oppose the rollover unless certain listed individuals, including Russian businessmen Alisher Usmanov and Mikhail Fridman, were removed from the sanctions list. France has reportedly attempted to create a compromise by proposing the delisting of Usmanov only. Discussions also focused on whether the regime should be extended for six months, in line with previous practice, or for a longer 12‑month period.
EU ambassadors are expected to reconvene for further negotiations ahead of the expiry deadline.
General Court Judgment Upholds the Designation of Roman Abramovich under EU Russia Asset Freeze Sanctions
The General Court of the European Union delivered its judgment in Case T‑358/25, dismissing an action brought by Russian businessperson Roman Abramovich seeking the annulment of Council acts adopted in March and September 2025 that maintained his designation under the Russia asset freeze sanctions regime.
The General Court upheld the legality of the Council's decision to maintain Abramovich on the EU sanctions list and confirmed the validity of the listing criterion set out in Article 3(1)(g) of Council Regulation (EU) 269/2014, which targets leading businesspersons operating in Russia and persons active in economic sectors generating substantial revenue for the Russian Government.
With regard to the application of the listing criterion, the Court noted that Abramovich remains one of the main shareholders of Evraz, one of Russia's largest steel and mining groups, and also holds a shareholding in Norilsk Nickel, a major palladium and refined nickel producer. In addition, the Court found that the steel and mining industries represent a substantial source of revenue for the Russian Government.
Asia-Pacific Developments
China-Iran Trade Network Bypasses Sanctions
A reported barter-style trade mechanism has enabled Iran to circumvent Western sanctions by exchanging oil exports for credits that can be used to purchase billions of dollars’ worth of Chinese goods and services, including medicines, vehicles, communications equipment, infrastructure projects, and reportedly some military-related items. The arrangement relies on intermediaries and a special purpose vehicle (SPV) that operates largely outside traditional international banking channels, helping shield participants from sanctions exposure while allowing China to secure discounted Iranian oil. Sources cited in the report estimate that $2 billion to $2.5 billion moved through the mechanism in the past year, with much of the funding directed toward infrastructure development in Iran. The system has reportedly been in place since 2021 and reflects the broader strategic partnership between China and Iran.
China and Russia Oppose Reimposition of UN Iran Sanctions
China and Russia jointly challenged Western efforts to restore UN sanctions on Iran during a contentious UN Security Council meeting, arguing that the legal basis for the 2015 nuclear deal’s “snapback” mechanism expired when UN Security Council Resolution 2231 lapsed in 2025. Both countries maintained that there are no valid legal grounds to revive the previous sanctions regime and warned that unilateral attempts to do so undermine the Council’s authority and prospects for a diplomatic resolution. In contrast, the United States, United Kingdom, and France argued that the snapback process was lawfully triggered due to Iran’s non-compliance with its nuclear commitments and that the sanctions remain in force.
Australia Weighs Targeted Israel Sanctions
Australia is considering a new round of targeted sanctions aimed at deterring violence by Israeli settlers and the expansion of settlements in the West Bank, but has ruled out joining the United Kingdom's proposed ban on trade with Israeli settlements. Penny Wong, Australia’s foreign affairs minister, said the government is coordinating with international partners on targeted measures but has concerns that a blanket trade ban could have unintended consequences for Australian businesses, Palestinians, and Israelis. While criticizing settlement expansion and settler violence as undermining the prospects of a two-state solution, Australia has opted for a more limited approach than the UK, which, alongside several European partners and Canada, is pursuing broader restrictions on settlement-related trade and other measures.
Vietnam Considers Aircraft Leasing Deal as Russia Grapples with Sanctions
Vietnam is reviewing a Russian proposal for a “wet lease” arrangement under which Vietnamese airlines would provide aircraft, crews, and maintenance services to Russian carriers, highlighting Vietnam’s potential role in helping Russia address aviation challenges caused by Western sanctions. According to Russian Transport Minister Andrei Nikitin, discussions are ongoing following bilateral talks in Moscow. Russia has sought similar agreements with several countries as sanctions have cut its airlines off from new Boeing and Airbus aircraft, spare parts, and maintenance services, contributing to the grounding of a significant portion of its civilian fleet.
