Sanctions Risk in Global Trade: Why “We Don’t Do Business There” Is No Longer Enough
Many U.S. SMEs operating internationally take comfort in the fact that they do not directly trade with sanctioned countries. In today’s enforcement environment, that assumption is increasingly unreliable. Expanding U.S., EU, and UK sanctions regimes—particularly those related to Russia, Belarus, and associated actors—now reach far beyond direct counterparties, creating compliance exposure throughout global supply chains, logistics networks, and financial arrangements.
From a legal standpoint, the complexity lies in how sanctions are structured and enforced. Restrictions are no longer limited to named entities or obvious jurisdictions. They extend to indirect ownership, control thresholds, sector-based prohibitions, and facilitation risks. A company may unknowingly engage a distributor, supplier, or freight forwarder that is partially owned by a sanctioned party, or that operates in a way that triggers secondary sanctions concerns. These issues rarely surface until a transaction is delayed, flagged, or investigated.
I often encounter SMEs that rely on legacy screening processes or one-time due diligence performed years ago. In a sanctions environment that changes frequently and sometimes with little notice, static compliance measures are insufficient. Counterparties that were permissible at the start of a relationship may become restricted later, particularly where ownership structures shift or new designations are issued. Without ongoing monitoring and contractual safeguards, companies may have limited ability to suspend performance or exit relationships without breaching their own agreements.
Contracts are a frequent weak point. Many commercial agreements still contain sanctions clauses that are generic, outdated, or narrowly drafted. They may reference only U.S. law, fail to address indirect exposure, or lack clear termination and indemnification rights. When a sanctions issue arises mid-contract, SMEs can find themselves forced to choose between regulatory compliance and contractual liability—an unenviable position that is often avoidable with more precise drafting.
Sanctions risk also intersects with logistics and payments in ways that are not always obvious. Shipping routes, ports, insurers, and banks may all trigger sanctions concerns, even where goods and counterparties appear compliant. Payment delays caused by banks conducting enhanced due diligence are increasingly common and can disrupt cash flow, trigger default provisions, or strain commercial relationships. These are operational problems with legal consequences.
From a compliance perspective, enforcement agencies have made it clear that size is not a shield. SMEs are subject to the same legal standards as larger companies, and regulators expect sanctions compliance programs to be risk-based, documented, and actively maintained. Penalties, voluntary disclosures, and remediation costs can be significant, particularly when violations stem from inadequate oversight rather than deliberate misconduct.
As trade compliance and corporate counsel, our focus is often on helping companies integrate sanctions awareness into ordinary business processes. This includes reviewing counterparties and supply chains, updating sanctions and force majeure clauses, aligning internal escalation procedures, and ensuring that commercial teams understand when to pause and seek guidance. The goal is not to halt trade, but to ensure that it can continue without creating avoidable legal exposure.
Given the current sanctions landscape, internationally operating SMEs should consider whether their contracts, compliance procedures, and counterparties still align with regulatory reality. A targeted review can identify gaps before they become enforcement issues or commercial disputes. If you would like assistance reviewing sanctions exposure, contractual protections, or compliance frameworks, you can schedule a consultation using the link below.