In today’s sanctions environment, the biggest threat to compliance could hide in the associations between counterparties rather than the names on a published list.
Institutions, including those across banking, investments, logistics, and manufacturing, are increasingly scrutinized on how they can detect and mitigate risk across a network of beneficial owners, shell companies, subcontractors, and transactional counterparts who might form the connective tissue of illicit finance.
This evolving risk picture is sharpened by recent OFAC enforcement actions and FinCEN administered ‘special measures’ authorities, including Section 311 of the USA PATRIOT Act and Section 2313a of the FEND Off Fentanyl Act, both of which can restrict access to the US financial system without adding a party to an OFAC list.
AI and other technological changes have made it easier for bad actors to establish multiple shell companies across the globe. This means bad actors can create networks of entities that may not appear on a published list yet can still be treated as blocked (or otherwise prohibited) where a blocked person has a property interest, e.g., through ownership thresholds, proxies, or opaque structures.
Section 311 of the USA PATRIOT Act authorizes the US Treasury Secretary to determine that a foreign financial institution, jurisdiction, class of transactions, or type of account is of “primary money laundering concern” and to impose special measures in response.
Similarly, Section 2313a of the FEND Off Fentanyl Act grants the Secretary of the Treasury the authority to make a finding that reasonable grounds exist for concluding that accounts, transactions, or institutions are of primary money laundering concern in connection with illicit opioid trafficking and impose special measures.
These measures can range from additional reporting and record keeping to restrictions on correspondent banking and, in some cases, cutting off certain transactions, actions that can significantly constrain counterparties’ access to US financial channels.
A recurring theme in recent enforcement narratives is that entities at the edge of illicit activity may not themselves be listed, yet their ownership, transaction patterns, directorship, or service providers could be strongly associated with sanctioned individuals or entities. A purely list‑based approach to compliance could miss these exposures.
Recent enforcement actions and public statements suggest increased regulatory attention on risks arising from indirect relationships and behavioral signals which may indicate proximity to illicit finance, particularly where US authorities have highlighted money laundering concerns, or indeed where they have already deployed Section 311 measures.
In practice, organizations may encounter challenges in maintaining visibility into counterparty risk, including:
In a June 2025 publicly reported OFAC enforcement action, a venture capital firm was fined $216m after the agency cited risks associated with reliance on formal ownership structures. The enforcement action highlighted “the risk that US persons face when relying on formalistic ownership arrangements that obscure the true parties in interest behind an entity or investment, without sufficiently considering factors such as control or influence over that investment.”
A private equity firm late last year was fined $11.5m by OFAC for not considering who actually controls a given shell company. The action highlighted that appropriate “controls should reflect that OFAC authorities incorporate broad definitions of “interest” and “property interest” that look beyond legal formalities to underlying practical and economic realities.”
When the US Treasury designates an institution or transaction class as a primary money laundering concern, the resulting measures can direct US financial institutions to limit or sever particular activities or relationships. This can create a pronounced effect for counterparties worldwide, even without an OFAC blocking action. For compliance teams, this highlights that a counterparty may not be listed, yet still present material risk that could impact market access if a connection is found to a network that’s targeted under Section 311 or Section 2313a.
Recent examples have shown targeted use of Section 2313a in the context of trade in illicit opioids and related money laundering activity. US Treasury actions illustrate the use of these authorities to disrupt financial activity associated with trafficking networks, reinforcing the idea that associations and flows matter as much as named parties.
While banks remain central to the discussion, these issues and compliance expectations increasingly touch non‑financial corporates — particularly where cross‑border supply chains run across high‑risk jurisdictions, include logistics operators, or involve a number of intermediaries. For example:
A 2025 OFAC enforcement action recommends that firms consider “risks posed by customers with which companies maintain an ongoing relationship, including through the provision of after-sale services, […] to sustain a product’s continued operation.”
Another 2025 OFAC enforcement action identified that “companies should be informed of the sanctions risks presented by dealing, directly or indirectly, with blocked counterparties and their assets—including aircraft, vessels, and other property. Such property may be blocked by virtue of their ownership by blocked persons, whether or not they are identified on OFAC’s SDN List.”
Manufacturers, pharmaceutical companies, commodity traders, and private market investors can all be exposed if their contractors or funding sources are associated with networks flagged by US authorities. In practice, that means a shipping subcontractor’s aircraft registration, a chemical supplier’s trading affiliates, or a limited partner’s upstream ownership can become key factors for risk-based decisions.
The following considerations are illustrative of how organizations may be thinking about network-related sanctions risk.
Map the network, not just the name.
Some organizations are exploring approaches that look beyond list-based checks to better understand relationships, for example, with beneficial owners, former directors, potential shell companies. The goal is to surface associative risk: who interacts with whom, how often, and through what intermediaries. Mapping these relationships depends on having a trustworthy and comprehensive set of firmographic data.
Screen counterparties and their associations against high‑risk typologies.
Monitor for sanctions-by-extension typologies including those linked to Section 311/2313a‑type actions (e.g., proxy banking, nested correspondents, suspicious trade flows). Revisit screening functionality to see if compliance tools are up to the task of addressing this emerging regulatory risk.
Build escalation pathways for the “grey area.”
Organizations may define internal thresholds to help determine when counterparties with higher-risk associations warrant additional review. Decisions may also be documented, including context and applicable regulations.
Tighten third‑party and subcontractor oversight.
Extend checks to logistics providers, customs brokers, carriers, and specialist suppliers. Focus on ownership, operating history, fleet/asset background, and jurisdictions linked to special measures risks. In some enforcement actions, regulators have highlighted the importance of making use of available third party data when conducting sanctions screening.
Refresh training and governance.
Training and governance frameworks may be updated to reflect network-related sanctions risks, including updating policies to reference “sanctions by extension” and Section 311‑related risks and clarifying roles for monitoring, escalation, and board reporting.
Review third-party risk management tools so functionality matches risk exposure.
Some sanctions screening approaches focus on direct matches and may not address situations where sanctions exposure arises through ownership, control, or other linked relationships. For organizations managing complex networks of customers, counterparties, or third parties, this can create challenges when assessing sanctions risk across interconnected entities. Moody’s Shell Company Indicator and Sanctions 360 are designed to support analysis of entity relationships and sanctions exposure, providing additional context for risk assessment across complex corporate structures.
Even in the absence of a formal listing, counterparties with networks linked to sanctioned entities or under Section 311/2313a scrutiny can face rapid de‑risking by US and non‑US institutions seeking to reduce exposure. This affects correspondent relationships, supplier on‑boarding, and investor appetite. Proactive communication, grounded in documented network analysis, can help explain risk‑based decisions to clients, partners, and internal stakeholders.
Sanctions risk today is defined as much by who your counterparties are connected to as by whether they appear on a list. Recent OFAC actions and the US Treasury Department’s use of Section 311/2313a underscore regulators’ willingness to act against entities and transaction types that present primary money laundering concerns, reshaping market access even without formal blocking sanctions.
Organizations who invest in holistic due diligence, robust escalation frameworks, and third-party oversight may be better equipped to navigate this evolving risk landscape.
For more information about Moody’s sanctions screening solutions, please get in touch with the team any time.
*Disclaimer: This content is for informational purposes only and does not constitute legal, financial, compliance or other professional advice. Please consult with a qualified professional for specific legal, financial, compliance, or other professional advice. For more terms and conditions pertaining to Moody’s products and services, refer to the disclaimer on Moody’s website.
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