Sanctions Screening – How to Check for Circumvention of EU Sanctions in Practice

Since February 2022, companies operating in the European Union have been required to comply with a comprehensive sanctions regime imposed on Russia and Belarus. Despite the passage of several years and the introduction of subsequent rounds of sanctions, many companies still limit themselves to a one-time check of their business partners against the sanctions list, considering this step sufficient. Currently, however, the greatest risk does not stem from direct cooperation with a sanctioned entity, but from unwitting participation in a supply chain that enables sanctions to be circumvented.

The extent of liability—this is not a theoretical risk

A violation of the Polish sanctions law results in a fine of up to 20 million zlotys and imprisonment for a term of no less than 3 years for the person responsible for entering into a prohibited commercial transaction. The scale of enforcement is steadily increasing; The National Revenue Administration is conducting an increasing number of administrative proceedings and imposing fines totaling tens of millions of zlotys. Furthermore, Directive (EU) 2024/1226 requires Member States to criminalize sanctions violations involving dual-use goods not only in cases of intentional conduct but also as a result of gross negligence. This requires companies to maintain a particularly high level of due diligence.

Why the sanctions list alone is not enough

Sanctions regimes are defined by many independent institutions, such as the European Union, the United Nations, individual countries (e.g., OFAC in the United States, the U.K. Consolidated List), and others. There is no single global repository of legal acts governing this matter. Checking a counterparty against only one list—for example, the Ministry of the Interior and Administration’s national sanctions list—can lead to a false sense of security, especially when conducting international business. Each market in which a company operates requires separate verification.

The greatest risk: re-export and intermediaries

Exporting goods to a third country that is not formally subject to sanctions does not exempt a company from the obligation to verify the end user and the actual destination of the goods. Practice shows that re-export is the most common method of circumventing sanctions. Goods are formally shipped to a non-sanctioned country but are in fact redirected to Russia or Belarus, often with falsified shipping documents. Customs inspections have uncovered cases where documents listed different destination countries, while the goods were actually shipped across the eastern border. In other instances, sanctioned companies exported products through intermediaries posing as manufacturers outside of Belarus.

In high-risk situations, customs authorities may contact the manufacturer of the goods directly to request proof of the end-user’s identity, even if the transaction was formally carried out by an intermediary. A company’s liability is therefore not limited solely to the first link in the supply chain.

What Should a Practical Sanctions Verification Procedure Include?

• Multi-level verification—checking a counterparty against several independent sanctions lists (the EU, the UN, the national list maintained by the Ministry of the Interior and Administration, and, for international transactions, also OFAC and other relevant registries), rather than just one.
• Analysis of ownership structure—identifying the counterparty’s actual beneficiaries, since sanctions apply not only to entities explicitly listed but also to those controlled by them.
• End-user verification—particularly important for dual-use goods and for transactions with third countries that may serve as transit points.
• Due Diligence Documentation and Archiving– Thorough documentation and analysis prior to a planned transaction are crucial in the event of an audit, as the burden of proof regarding due diligence rests with the company.
• Regular updates to procedures—sanctions lists and regulatory packages change frequently and require ongoing monitoring, not a one-time implementation.

Who in the company should be responsible for this area?

In large financial institutions, the sanctions screening function is carried out by dedicated teams that simultaneously analyze clients for KYC, AML, UBO, and sanctions compliance, given the close links between these areas. In smaller companies, particularly those engaged in international trade or the export of goods with potential dual-use applications, it is essential to designate a person responsible for sanctions screening and to implement a clear escalation protocol in case of doubts regarding a counterparty or a delivery route.

FAQ

Is checking a business partner against a single sanctions list sufficient?No—sanctions regimes are defined independently by various organizations and countries, so a thorough verification requires checking several independent sources tailored to the markets in which the company actually operates.

Does exporting through a third country protect against liability for violating sanctions?No. Verification of the end user and the actual destination of the goods is required regardless of the formal country of destination indicated in the documents.

Is an unintentional violation of sanctions also subject to liability?In the case of dual-use goods, the EU directive requires that violations resulting even from gross negligence—not just intentional acts—be subject to penalties.

Sources

1. EY Poland,EU's 16th Sanctions Package: New Restrictions, New Challenges–ey.com
2. Rzeczpospolita,EU Sanctions Are a Gamble for Freight Forwarding Companies–logistyka.rp.pl
3. Dudkowiak & Putyra,Sanctions Against Russia and Belarus and Export Controls in Poland–dudkowiak.pl
4. EY Poland,Sanctions Imposed on Russia from the Perspective of Polish Companies–ey.com
5. RPMS Law Firm,Customer Due Diligence, AML, and International Sanctions –rpms.pl

← All Analyses