Article 14: How to get Sanctions Compliant, Part 3: Where are you trading?

Always keep in mind the four ‘Keys to Compliance’: Who, What, Where, and What for

Welcome to the third article in our deep dive into the four Keys to Compliance: Who, What, Where and What for. The question of ‘Where’ might vie with ‘Who’ as far as what comes to mind immediately when considering sanctions compliance, since measures are often targeted at a specific country. Nevertheless, there are some essential factors to keep in mind when assessing the situation. This article focuses on where goods, services and funds are going, where they are used, and where they may end up in practice.

In sanctions compliance, the question “Where?” focuses on the flow of goods, services, technology and money, and on the countries or territories to which they are supplied, in which they are used, or through which they pass. 

Most EU sanctions measures are framed in geographical terms. Entire categories of activity may be prohibited depending on destination, end use or economic benefit, irrespective of who the customer is. A robust compliance framework therefore needs to map where things are going, not just who is involved. 

Not just delivery: Considering destination, transit, and use 

EU sanctions frequently prohibit the supply of certain goods or services to, or for use in, a particular country or territory. This distinction matters. Goods may be delivered to a distributor in one jurisdiction but intended for onward transfer or use elsewhere. Similarly, services may be provided remotely yet be connected to an activity taking place in a sanctioned location. For certain goods, the transit through a particular country or territory will also be prohibited. 

Analysis must therefore look beyond the immediate delivery destination and consignee. Put simply, a lawful customer does not make an unlawful transit or destination acceptable. 

Indirect routes and multi‑stage transactions 

The “Where?” question extends to indirect supply chains as well. Sanctions prohibitions apply not only to direct exports or transfers, but also to knowingly participating in arrangements that result in prohibited outcomes. 

This requires attention to the full commercial lifecycle, including: 

• The origin of goods or components;
• Transhipment points, logistics hubs and free zones;
• Re‑export, resale or incorporation into other products;
• Contractual arrangements that enable onward transfer or prohibited post-sales service.

Intentional circumvention and knowing participation in schemes designed to conceal the true destination or use of goods is illegal. Compliance, therefore, cannot stop at the first invoice or shipping document. You must follow the transaction through, identify onward risks, and reassess when routes, destinations or parties change. 

What are high‑risk jurisdictions and diversion risks? 

Not all geographic risk is confined to jurisdictions subject to sanctions. The EU increasingly highlights the role of diversion and circumvention hubs: countries through which goods, technology or funds may be routed to bypass restrictions. 

Indicators of elevated geographic risk include: 

• Unusual or commercially illogical routing;
• Sudden changes in destination mid‑transaction;
• Trade flows inconsistent with the size or needs of the local market;
• New intermediaries with limited operating history.

In response, the EU has intensified its focus on preventive measures, including contractual controls, no‑re‑export clauses, and enhanced due diligence for transactions involving higher-risk routes. 

Services, technology and funds count, too 

The “Where?” analysis is not limited to physical goods. For services, the relevant location may be where an asset is repaired or maintained, where technical assistance is used, or where an activity benefiting from the service takes place. 

For technology, transfers may occur digitally: through emails, downloads, cloud access or remote support. The location of the user or the controlled activity can be decisive, even if no physical shipment takes place. 

For funds, geographic risk may arise from: 

• Where payments are ultimately received;
• Where accounts are held;
• Which jurisdictions benefit economically from the transaction.

What are some red flags linked to ‘Where’? 

Geographic red flags often emerge at the operational level rather than in formal ownership or screening checks. Common examples include: 

• Reluctance to provide end‑use or end‑user information;
• Requests to split shipments or alter delivery terms late in the process (for example, changes to Incoterms, International Commercial Terms, that reduce your visibility over where the goods will go next);
• Inconsistent explanations of destination or onward sale;
• Pressure to avoid written assurances on re‑export.

You should treat such signals as triggers for further investigation, not as proof of wrongdoing. You should continue to ask questions and should not proceed with the transaction until your concerns have been resolved and documented. 

Why “Where?” matters 

Many enforcement cases ultimately turn on where goods or funds ended up, rather than on who initially started the transaction. The “Where?” question determines whether a licence is required, whether an activity is prohibited outright, and what level of due diligence is expected. 

A sanctions compliance programme must be capable of tracking and assessing geographic flows, identifying diversion risk, and responding to changes in routing or use. For sanctions compliance, it is helpful to treat geography as a risk indicator, not just a country label. In practice, “Where?” is less about drawing borders on a map and more about following the movement of value, understanding where it finally comes to rest. 

How to get help 

If you are unsure whether a destination, route or transaction presents a sanctions risk, seek guidance early. European SMEs may not always have the time or resources to conduct full sanctions due diligence independently. To support them, the EU has established and funds the EU Sanctions Helpdesk, a free service to help EU SMEs comply with EU Sanctions.   

The Helpdesk can:   

• Answer your questions on the applicability of EU sanctions;
• Offer you guidance on performing sanctions due diligence;
• Undertake sanctions due diligence for you, free of charge, if you encounter red flags or you simply need the support.

If you have a question on a transaction, find out how to get support here.

Author

The EU Sanctions Helpdesk Team