As President Trump’s second term reshapes global diplomacy through unilateral sanctions and economic coercion, wealth managers and DFMs must reassess how they manage geopolitical risk. With enforcement growing more fragmented and unpredictable, traditional compliance measures are no longer enough. In this article, Andrew Davies, Global Head of Financial Crime Compliance Strategy at ComplyAdvantage, explores how financial institutions can future-proof their risk frameworks and stay ahead of evolving global sanctions regimes.
Whilst the world watches President Donald Trump’s tariff war unfold, a quieter, more complex battle is escalating – one driven by sanctions.
From shadowy oil trading to rising US-China tensions, the global sanctions landscape is becoming harder to navigate. Governments around the world are stepping up enforcement in response to escalating global conflict, with new sanctions emerging across financial hubs worldwide. These developments are shaping a fractured enforcement landscape, stretching from Washington to Westminster and beyond.
This marks a new era of compliance risk and volatility that international organizations cannot afford to ignore. As sanctions evolve into dynamic and fast-moving networks of risk, organizations must move beyond ticking boxes to adopt proactive approaches to identifying sanctions risk exposure, strengthening compliance frameworks, and staying ahead of shifting expectations.
The return of unilateralism
Trump’s return to the White House has brought a renewed focus on economic coercion at the center of US foreign policy. But unlike the globally coordinated approach seen early in the Russia-Ukraine conflict, Trump’s second term has focused on unilateralism, taking independent action against adversaries including Iran, Venezuela, and, most significantly, China.
While tariffs have proven Trump’s primary tool for addressing perceived economic imbalances, sanctions offer a complementary unilateral instrument that can be deployed quickly without the immediate domestic economic impacts of tariffs. This is particularly significant given sanctions use has been rising consistently under administrations of both parties, and Trump has repeatedly floated stronger measures, including expanded secondary sanctions that would penalize third countries for breaching primary sanctions.
Sanctions are being used not only to isolate hostile regimes, but to pressure strategic rivals. Chinese businesses and financial institutions are already in the crosshairs, with US policymakers considering secondary sanctions on Chinese banks tied to Russia’s war economy. For multinational organizations, these political moves raise difficult questions on navigating diverging regulatory frameworks without compromising access to key markets.
Yet, the US is not acting alone. China has responded with high retaliatory tariffs, sanctions on US defense and tech firms, and blacklists, signaling a confrontational economic relationship on both sides. In this environment, sanctions are becoming a default tool of diplomacy.
For compliance teams, the challenge lies in navigating a fragmented and politically volatile landscape, where enforcement is unpredictable and guidance is limited. As sanctions extend beyond primary targets to third-country intermediaries and indirect enablers such as shipping firms, businesses far removed from the geopolitical frontlines are finding themselves unexpectedly exposed.
Widening the sanctions perimeter
The Trump administration has threatened, but not yet introduced, new sanctions on Russia. It does, however, continue to enforce the measures inherited from Biden’s presidency, including designations on over 180 vessels and numerous companies associated with Russia’s oil trade.
With Trump oscillating between threatening tougher sanctions and suggesting potential settlements to ease restrictions, the one constant is volatility. This uncertainty is making it increasingly difficult for businesses to assess and prepare for their potential exposure to future sanctions.
To evade such restrictions, the Iranian and Russian energy sectors have built extensive networks of old, frequently reflagged ships, known as ‘shadow fleets’, that disable global tracking systems and obscure origin ports to continue selling oil under the radar. These tactics have mitigated the full impact of Western sanctions, prompting regulators to target the logistics and transportation networks behind them, raising the risks and cost of participation in these supply chains.
On land, sanctions evasion continues through third countries, exploited as ‘backdoors’ to the global market. Russia’s war economy, for example, has imported critical components despite Western controls, often diverting them through neighboring countries such as Kazakhstan and the UAE. As a result, global firms are under increasing pressure to scrutinise entire supply chains rather than just direct clients, including partners and intermediaries in neutral jurisdictions. This challenge is further complicated by Trump’s tariff policies, which create additional incentives for opaque supply chain restructuring and trade diversion.
Rising exposure in high-risk corridors
Rather than signaling a clear escalation in sanctions enforcement, the Trump administration has introduced a new layer of unpredictability in its approach to high-risk regions.
Trump has publicly stated his eagerness to negotiate a new nuclear deal with Iran, which could lead to significant sanctions relief—upending compliance frameworks that financial institutions have built over years. Yet simultaneously, should negotiations fail, the administration could just as easily impose more severe restrictions. This policy oscillation creates a compliance landscape where firms must prepare for multiple divergent scenarios simultaneously.
Similarly, with North Korea’s military support for Russia continuing, the existing sanctions framework remains in place. However, the administration’s hardline stance toward China means that enforcement focus could rapidly shift toward targeting Chinese entities facilitating North Korean sanctions evasion, creating new compliance trip wires for international banks.
For financial institutions, particularly payment service providers operating in or with exposure to these corridors, this unpredictability demands a more agile approach. Rather than simply following established compliance protocols, firms must develop rapid-response capabilities and maintain continuous scenario planning. This includes monitoring not just transactions but also diplomatic signals that might presage sudden policy shifts, particularly regarding Iran and the broader Middle East.
Staying ahead through innovation
These trends have significantly raised the stakes. It’s no longer sufficient to avoid direct business with known sanctioned entities, as regulators increasingly expect firms to proactively prevent indirect exposure. Maintaining static sanctions lists alone is not enough – compliance teams must adopt dynamic monitoring strategies to track indirect trade routes and clients operating in high-risk regions in real-time, employing enhanced due diligence when and where vulnerabilities arise.
To navigate this complex sanctions environment effectively, financial institutions need access to real-time data that goes beyond traditional sanctions lists. Compliance teams should check both customers and supply chain partners against automatically refreshed data, while ensuring their transaction monitoring systems can adapt to evolving typologies.
Identifying third-country risks has become essential, requiring financial institutions to take a proactive approach to due diligence, particularly with clients operating near sanctioned jurisdictions. The most effective compliance programmes incorporate real-time monitoring with customized rulesets that can be flexibly applied based on risk exposure. This flexibility is particularly valuable in the current climate of policy unpredictability, where the ability to quickly adjust to sudden sanctions changes is critical.
Preparing for volatility
As sanctions evolve from static lists to dynamic networks of risk, financial institutions must adopt more sophisticated approaches to compliance. Real-time data access, enhanced due diligence for third-country intermediaries, and transaction monitoring calibrated to emerging typologies will be essential.
The companies that thrive in this environment will be those that view sanctions not as a box-ticking exercise, but as a core component of risk management requiring continuous vigilance. As geopolitical tensions drive further fragmentation of the global sanctions landscape, financial institutions and organizations must invest in adaptive compliance infrastructure capable of responding to fast-changing regimes.
Trump’s deal-making approach to foreign policy – characterized by unpredictability and sudden shifts – only reinforces the need for this adaptability. His administration could just as easily announce a comprehensive peace deal with Russia (easing sanctions) as it could impose sweeping new measures against China or Iran. Financial institutions must therefore develop contingency plans for multiple scenarios, ensuring they can respond quickly to either the tightening or loosening of sanctions regimes.
In 2025’s increasingly divided world, staying ahead of sanctions risk means more than avoiding penalties – it means protecting your firm’s ability to operate effectively across increasingly complex jurisdictional boundaries.
