Companies operating in the maritime, shipping, and oil trade sectors must conduct thorough due diligence to ensure compliance with the EU’s 16th package of economic sanctions related to Russia’s invasion of Ukraine, especially in light of the newly introduced criterion potentially targeting entities that facilitate the activities of unsafe oil tankers. With the EU’s expanded sanctions regime, businesses are now under heightened scrutiny to ensure they are not directly or indirectly supporting Russia’s shadow fleet operations or circumventing Russian oil export sanctions.

New Criterion on Unsafe Oil Tanker Operations

The EU’s 16th Sanctions Package includes criterion targeting entities and networks supporting Russia’s shadow fleet, consisting of oil tankers that support the Kremlin in evading oil sanctions. The key innovation in this criterion is its extension beyond direct operators of these tankers to include secondary actors who facilitate their operations. Providing financial support, insurance, logistical services, or port facilities to these vessels all fall under this criterion as these activities enable the shadow fleet to continue operations despite sanctions.

By targeting these support networks, the EU seeks to prevent the circumvention of both the oil price cap, implemented by G7 nations in December 2022, and other sanctions measures related to Russian oil exports.

Key Entities Affected by the Criterion

The new criterion’s broadened scope means that businesses in the maritime, financial, and oil trading sectors must be cautious about any connection to Russia’s shadow fleet to avoid being penalized for sanctions evasion. Shipping companies, financial institutions, insurers, port operators, and oil traders must exercise particularly high caution due to their activities having high exposure to Russian energy trade.

Compliance Challenges and Implications for Businesses

Even an indirect connection to Russia’s shadow fleet could lead to EU penalties for sanctions evasion. Shadow fleet vessels often operate under the radar, which adds another layer of difficulty and complexity to tracking their sanctions exposure and ensuring compliance with the EU’s new criterion.

Though compliance with the new criterion is complex, implications for non-compliance could be severe.  Because the criterion includes any actor facilitating unsafe oil tankers with any EU-linked vessel, it introduces increased risks of regulatory action for businesses linked to entities involved in shadow fleet facilitation. Companies that facilitate unsafe oil tanker operations risk penalties including asset freezes, trade restrictions, and reputational damage—regardless of whether the company had knowledge of a shadow fleet connection.

Case Study: UK Enforcement

The EU has just introduced this new criterion, so it remains to be seen how it will respond in practice. The UK’s recent actions, however, provide a clear example of how penalties on shadow fleet facilitators can be enforced and the potential consequences companies may face for indirect involvement in sanctions evasion:

In December 2024, the UK government sanctioned Dubai-based commodities trader 2Rivers, formerly known as Coral Energy, for facilitating Russian oil trade. The UK found that 2Rivers indirectly enabled Russian oil exports through a network of intermediaries and shell companies, circumventing Western sanctions. 2Rivers denied any connection to Russia’s shadow fleet, asserting that it fully exited Russian trading activities in 2023 and has implemented enhanced compliance measures under new leadership. Despite 2Rivers’ assertions, the UK maintained its sanctions on 2Rivers, which included asset freezes and restrictions on the company’s access to UK financial systems. These penalties highlight the significant consequences that can arise from indirect involvement with sanctioned entities. FiveBy expects similar action from the EU as it strengthens enforcement under the new criterion.

Best Practices for Due Diligence and Compliance

As the EU strengthens its enforcement, companies must strengthen their due diligence practices by implementing more advanced screening, continuous monitoring, and thorough risk assessments that go beyond basic checks to ensure compliance with the EU’s expanded sanctions regime and minimize the risks of indirect involvement with sanctioned parties.

These practices include:

• Implementing enhanced automated and manual screening procedures to vet potential partners, clients, and suppliers against relevant sanctions lists and vessel tracking systems. Screening procedures should include ongoing monitoring of changes in relationships or operations.

• Using Automatic Identification System (AIS) data and maritime intelligence platforms to monitor vessel movements to identify any connections to unsafe oil tankers and/or Russia’s shadow fleet. In the case of a connection, ending the relationship with the connected entity.

• Conducting regular audits and compliance checks on business operations to identify potential risks early.

Strong internal controls are also essential to avoiding penalties. These controls should include clear policies on what constitutes risky business relationships, regular sanctions compliance training across the organization, and well-defined procedures for reporting suspicious activities.

To implement these practices, businesses must work with legal and regulatory experts, who can help an organization stay informed about evolving sanctions regulations. Collaboration with these experts mitigates the risk of inadvertent sanctions evasion and safeguards against financial, reputational, and legal consequences.

At FiveBy, we provide expert support to help businesses stay on top of regulatory changes and maintain compliance. We proactively monitor emerging risks and regulations, such as the EU’s new criterion on unsafe oil tankers, and help adjust screening and compliance procedures accordingly. Our practical solutions help businesses manage risks, improve monitoring, and ensure that internal controls are effective.