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 ITRC 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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Lede
The Trump administration sanctions China-based chemicals company for fentanyl trafficking
On September 3rd, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Guangzhou Tengyue Chemical Co., Ltd., a China based chemicals company that allegedly manufactures and sells synthetic opioids in the US. OFAC also listed Huang Xiaojun, the bitcoin wallet holder of the company, and Huang Zhanpeng, the executive director and 50% shareholder. The decision was made pursuant to the Biden-era Executive Order 14059, which declares that the trafficking of illicit drugs—particularly fentanyl and other synthetic opioids—constitutes a national security threat and authorizes OFAC, pursuant to the International Emergency Economic Powers Act (IEEPA), to designate individuals and entities involved in such trafficking.
The September 3rd action follows a joint investigation from the Federal Bureau of Investigation (FBI) and Drug Enforcement Administration (DEA). Guangzhou Tengyue was previously indicted in November 2024 when it allegedly arranged the transshipment of protonitazene—a Schedule 1 controlled substance since 2022 and a synthetic often mixed with fentanyl with no approved medical use—to an undercover DEA agent around August 2023. The unsealed indictment includes a text exchange, in which Guangzhou Tengyue allegedly assured its small parcels would pass customs authorities, boasting it sent a collective 20 kilograms to the US, Canada, and African countries on a monthly basis. According to OFAC, Guangzhou Tengyue also advertised, even after its November 2024 indictment, its sale of other legal drugs of concern, including xylazine (also known as “Tranq”) and nitazenes. The company was dissolved in July 2025.
The action against Guangzhou Tengyue is hardly exceptional in context. There are more than 65 listed individuals and 26 listed entities, all based in China, sanctioned under EO 14059. Many of those entities are relatively new, established within the past 15 years, likely having formed during China’s rise as a major supplier of active pharmaceutical ingredients. The proliferation of small cottage industry producers—small-scale manufacturing businesses typically operated from home—has created an obscure network of suppliers that evade oversight and leverage lucrative contracts with criminal organizations.
China placed class-wide controls on all fentanyl-related substances in 2019 in an effort to tackle illicit trafficking to the US. However, continued demand for these substances have shifted criminals’ trafficking patterns, and chemical producers create new variants of fentanyl that are uncontrolled, creating a regulatory “whack-a-mole” game. To circumvent China’s controls, drug traffickers have increasingly procured fentanyl precursors and associated equipment and manufactured them into synthetic opioids in downstream areas of the supply chain in other jurisdictions. The scale of such trafficking is difficult to predict, but InSight Crime estimated in mid-2024 that synthetic drug manufacturers in Mexico alone create 4.5 tons, or 4,082 kilograms, of pure fentanyl per year through procuring $9 million worth of fentanyl precursors and analogues, most of which from China.
The Biden administration favored diplomacy to counter global fentanyl trafficking and manage the US-China bilateral relationship, including the establishment of the US-PRC Bilateral Counternarcotics Working Group in November 2023 to facilitate high-level meetings on this issue. The Trump administration has opted for more forceful action, first tariffing China and Mexico in February 2024 under IEEPA (before the April “Liberation Day” tariffs) in an effort to force both countries to take additional measures in countering the illicit fentanyl supply chain. In a bid to remove these tariffs, China added two precursors to its list of controlled chemicals—4-piperidone and 1-boc-4-piperidone—in June 2025, indicating it is willing to continue cooperating on counternarcotics action with the US, at least to an extent (China maintains that that the US must take more measures to curb its domestic demand for illicit fentanyl rather than issue blanket tariffs). Between January and May of 2025, China prosecuted 1,300 people and arrested over 700 nationwide for drug-related money laundering offenses.
A more aggressive stance toward tackling China’s role in the fentanyl supply chain—in favor of sticks over carrots—has garnered bipartisan appeal in the US. Upon returning from its August recess, the US House of Representatives passed the Stop Chinese Fentanyl Act with over 400 votes. The legislation, which still needs to pass the Senate before arriving on President Trump’s desk, would create a legislative authority to impose sanctions on Chinese distributors and manufacturers of fentanyl and its precursors if they fail to take “credible steps” to prevent opioid trafficking. Similar to the tariff strategy, this broad authority may be intended to push China to enhance it’s law enforcement efforts. With that said, the President already has broad authority under IEEPA to target such actors and, therefore, Congressional action is likely not necessary and may serve more as a signal to China. Similarly, Guangzhou Tengyue’s listing is largely symbolic, given the firm was already indicted and dissolved.
At the same time, additional pressure on China may add complexity to ongoing trade negotiations, in which the US aims to close a deal by November 10. The Trump administration has utilized trade tools to achieve political ends, meaning counternarcotics efforts could be interlinked in a grand bargain. At the same time, the more aggressive tone taken by the Trump administration and by Congress may irk China, who (perhaps unrelatedly) imposed anti-dumping tariffs on American fiber-optic firms just hours after OFAC announced Guangzhou Tengyue’s listing.
US Developments
State Department Designates Ecuadorian Groups as FTOs and SDGTs
The US Department of State has designated Los Choneros and Los Lobos as Foreign Terrorist Organizations (FTOs) and Specially Designated Global Terrorists (SDGTs). The State Department alleges that these groups have attacked and threatened public officials, security personnel, judges, prosecutors, and journalists in Ecuador. According to the State Department, both groups are linked to FTOs and SDGTs Cártel de Sinaloa and Cártel de Jalisco Nueva Generación.
The designations are another example of the Trump administration’s use of sanctions to target cartels and transnational criminal organizations (TCOs) following the President Trump’s Directive from January 20, 2025, which called for, among other things, the “total elimination” of cartels and TCOs. In addition to these designations, OFAC has sanctioned numerous alleged members of cartels and TCOs in recent weeks.
Freight Forwarder Settles with OFAC
Fracht FWO Inc. (“Fracht”), a Houston-based international freight forwarder, has agreed to pay OFAC $1,610,775 to settle its potential civil liability for apparent violations of multiple OFAC sanctions programs, including the Venezuela and Iran programs. According to the Enforcement Release and Settlement Agreement, in May 2022, Fracht contracted with a blocked Venezuelan cargo airline to transport car parts from Mexico to a customer in Argentina. In order to fulfill the contract, the Venezuelan airline used an aircraft separately blocked by OFAC for being operated by Iran’s Mahan Air and crewed the aircraft with Iranian nationals.
The penalty amount reflects OFAC’s determination that the apparent violations were egregious and not voluntarily self-disclosed. It also reflects Fracht’s “substantial cooperation” with OFAC’s investigation and remedial efforts that the company has put into place. OFAC noted that this enforcement action “emphasizes the importance for international trade service providers, such as freight forwarders, to know their counterparties and recognize the risks of prioritizing urgent business demands at the expense of compliance.” Notably, this settlement agreement is the fifth such agreement that OFAC has announced over the past few months, following those entered into with Harman International Industries, Inc, Key Holding, LLC, Unicat Catalyst Technologies, and Interactive Brokers LLC.
Treasury Department Reportedly Inquiring with Brazilian Banks about Sanctions Compliance
Last Wednesday, Reuters reported that the US Treasury Department is asking Brazilian banks about measures they have taken or are taking to ensure compliance with US sanctions imposed under the Global Magnitsky Act. The reported inquiries follow US sanctions on Brazilian Supreme Court Justice Alexandre de Moraes on July 30 pursuant to the Global Magnitsky Act for his alleged participation in serious human rights abuses, including the prosecution of former Brazilian President Jair Bolsonaro. Moraes oversees the case in which Bolsonaro is accused of plotting a coup after losing the 2022 election. Following the sanctions designations, the Brazilian Supreme Court ruled that foreign laws, including executive orders, are not automatically enforceable in Brazil. After that decision, Moraes told reporters that courts could punish Brazilian financial institutions for seizing or blocking domestic assets in response to US orders.
The Trump administration has progressively ratcheted up the pressure on Brazil’s government in response to the prosecution of Bolsonaro, including through the use of tariffs in addition to sanctions. The final stage of Bolsonaro’s trial began last week, with a verdict expected by this Friday.
UK Developments
UK Publishes Updated Sanctions Statistics in Economic Crime Plan Progress Report
The UK Government has released the second progress report on the Economic Crime Plan 2 (“ECP2”), which tracks delivery against key outcomes, including efforts to combat kleptocracy and sanctions evasion. The ECP2 progress report highlights the scale of UK sanctions enforcement, with 396 recorded sanctions breaches in the financial year ending 2024 (down 16% on the previous year) and 242 closed cases, more than triple the previous year. As of that year, 4,331 individuals and entities were subject to an asset freeze (up 12%), while OFSI reported £24.4 billion in frozen funds in 2023, a 13% increase. Since Russia’s 2022 invasion of Ukraine, 2,287 individuals and entities have been sanctioned, and by 2025 the cumulative value of assets confiscated under the UK Action Against Corruption programme had reached £286.8 million. These figures reflect the UK’s sustained focus on sanctions enforcement, asset recovery, and tackling kleptocracy.
Lowered Oil Price Cap on Russian Crude Enters into Force
The UK and EU’s decision to lower the Oil Price Cap on seaborne Russian crude oil from $60 to $47.60 per barrel came into effect on September 2, 2025, at 23:01 BST. The measure is aimed at further reducing Russia’s revenue streams and restricting its ability to fund the war in Ukraine. A 45-day wind-down period has been introduced for trades agreed before the new cap took effect, provided they comply with the previous $60 limit, with the wind-down period ending at 23:01 BST on October 17, 2025. The new $47.60 cap will apply immediately to new contracts. To assist market participants, OFSI has updated its Oil Price Cap guidance page and also has published updated FAQs (154–161) clarifying how the revised cap and wind-down period will operate. Businesses must continue to comply with existing reporting and attestation obligations under the Oil Price Cap General Licence.
OFSI Revokes Evraz North America General Licence
OFSI has revoked General Licence INT/2022/1710676 (Continuation of Business of Evraz Plc’s North American Subsidiaries) (the “GL”). The GL was originally made under Regulation 64 of the Russia (Sanctions) (EU Exit) Regulations 2019 and allowed for the continuation of business operations of Evraz Plc’s North American subsidiaries. The GL has been revoked because of Evraz North America’s recent acquisition by US private equity business, Atlas Holdings. The GL initially took effect from May 5, 2022, and was due to expire on September 30, 2025.
UK Sanctions Actors Involved in Indoctrination of Ukrainian Children
The UK has designated 11 persons involved in the deportation, indoctrination, and militarisation of Ukrainian children under the Russia sanctions regime. According to a UK Government press release, the measures include the designation of eight individuals and three organisations, including leading Russian officials and state-linked youth organisations that are aiding Russia’s pursuit of a long-standing Russification policy in illegally temporarily occupied territories of Ukraine, seeking to eradicate Ukrainian culture, identity and statehood. These newly designated entities will now be subject to an asset freeze and, in the case of individuals, a UK travel ban.
EU Developments
EU Council Amends EU Global Human Rights Sanctions Regime
The EU Council has amended two legal instruments under the EU Global Human Rights Sanctions regime. Regulation 2020/1998 and Decision 2020/1999 were revised to include two individuals to the list of those subject to restrictive measures outlined in the Annex to Decision 2020/1999. The update is based on their responsibility for serious human rights violations committed in detention centers located in Crimea.
Since the illegal annexation of Crimea and Sevastopol by Russian in 2014, the human rights situation in the region has significantly deteriorated. The two newly listed Russian officials lead the Federal Penal Enforcement Service for the Republic of Crimea and the City of Sevastopol. Under their leadership, detention centers have become sites of systematic abuse, including torture, denial of medical care, and other forms of cruel and degrading treatment. Both individuals are now subject to restrictive measures, including asset freezes, travel bans within the EU, and prohibitions on the provision of funds or economic resources.
Third Countries Align with EU Sanctions Targeting Russia
The High Representative of the EU has announced that Albania, Bosnia and Herzegovina, Iceland, Montenegro, North Macedonia, Norway, the Republic of Moldova, and Ukraine have aligned themselves with several Council decisions adopted in recent months. Specifically, these countries have aligned with Decision 2025/1443, which added nine individuals and six entities to the list of those subject to restrictive measures under Annex I to Decision 2024/2643. These individuals and entities were sanctioned for their roles in orchestrating or facilitating disinformation, propaganda, and information manipulation aimed at destabilizing Ukraine. The same group of countries also aligned with Decision 2025/1279, which added a Swiss-Cameroonian social media influencer to the sanctions list in Annex I to Decision 2024/2643. The individual has been identified as a vocal supporter of Russia’s geopolitical agenda since participating in the 2019 Sochi Summit.
Albania, Bosnia and Herzegovina, Iceland, Liechtenstein, Montenegro, North Macedonia, Norway, the Republic of Moldova, and Ukraine have aligned themselves with two further Council decisions. The first alignment pertains to Decision 2025/1425, which added five Russian judges to the sanctions list in the Annex to Decision 2024/1484, due to their involvement in politically motivated prosecutions and suppression of dissent within the Russian judicial system. The second alignment concerns Decision 2025/1070, which extended existing restrictive measures in view of the situation in Russia for another year, until 28 May 2026.
Asia Developments
China and Russia Oppose European Effort to Reinstate UN Sanctions on Iran Under JCPOA Snapback Mechanism
In a Joint Letter to the UN leadership, China and Russia have opposed a European initiative to reinstate United Nations sanctions on Iran, following the E3’s (France, Germany, and the UK) activation of the JCPOA’s snapback mechanism. The European countries argue that Iran’s continued non-compliance with its nuclear obligations warrants the reimposition of sanctions previously lifted under the 2015 nuclear deal. In response, China and Russia issued statements rejecting the legitimacy of the snapback process, citing the US withdrawal from the JCPOA in 2018 as grounds for its inapplicability. Iran has also dismissed the move, calling it legally baseless and politically driven.
The European effort seeks to restore a range of UN sanctions, including restrictions on arms transfers, ballistic missile activities, and financial dealings linked to Iran’s nuclear and military programs. If implemented, the snapback would reintroduce measures that had been lifted under Security Council Resolution 2231, effectively nullifying the remaining benefits of the JCPOA for Iran. China and Russia’s rejection of the process signals a lack of consensus among Security Council members, complicating enforcement and raising procedural questions about the viability of multilateral sanctions mechanisms in the current geopolitical climate.
Vietnam Reaffirms Support for Ending Unilateral Sanctions and Embargoes Against Cuba
During a summit in Hanoi on September 1, General Secretary of the Communist Party of Vietnam, To Lam, reaffirmed Vietnam’s longstanding position advocating for the termination of unilateral embargoes and sanctions against Cuba. In his meeting with Cuban President Miguel Díaz-Canel Bermúdez, General Secretary Lam emphasized the importance of international solidarity and mutual respect for sovereignty, reiterating Vietnam’s commitment to supporting Cuba’s socio-economic development and foreign policy objectives. The leaders also discussed deepening bilateral cooperation across strategic sectors and enhancing coordination in multilateral forums, underscoring their shared stance against restrictive measures that hinder national progress.
Australia Imposes Sanctions on 14 Russian Officials Over Civil Society Repression
On September 3, 2025, Australia announced targeted sanctions against 14 Russian individuals in response to their involvement in the repression of civil society and democratic institutions. The designations were made under Australia’s autonomous sanctions framework and are part of its ongoing efforts to address serious human rights violations. The listed individuals are accused of contributing to systemic crackdowns on freedoms of expression, assembly, and association within Russia. The sanctioned individuals are now subject to asset freezes and travel bans, effectively barring them from financial dealings and entry into Australia. The move aligns with actions taken by other jurisdictions and reflects Australia’s implementation of measures addressing international human rights concerns.
