Monthly Sanctions Update (May 2026)

///Monthly Sanctions Update — May 2026

KEY DEVELOPMENTS

· Major US, UK and EU designations: UK Russia-related sanctions targeting crypto exchanges, illicit finance networks, the A7 network, a Kyrgyz bank and Georgian exchange operators alleged to facilitate sanctions evasion; UK designations targeting Russia’s drone supply chain and alleged exploitation of vulnerable migrants; U.S. Iran-related designations targeting petroleum and petrochemical export networks.

· Sanctions litigation and enforcement developments: OFSI imposed a £165,000 penalty on Deutsche Bank AG London Branch for breaches of the UK Russia financial sanctions regime. The English High Court dismissed RUSAL’s sanctions-related public policy challenge to enforcement of a London-seated LCIA award, while the Court of Appeal in Tonzip Maritime clarified when shipowners may refuse performance based on sanctions risk.

· Regulatory and guidance updates: The FCA signed a Memorandum of Understanding with OTSI and published findings from its review of sanctions systems and controls, identifying weaknesses in due diligence, screening, alert management, frozen-asset controls and licence compliance. OFSI also added FAQ 186 on Huobi Global S.A. and HTX, while OFAC removed 76 legacy entries from the SDN List.

· General licences: OFAC issued or amended general licences across the Iran, Cuba, Russia and Venezuela regimes, including wind-down authorisations for Qingdao Haiye Oil Terminal Co., Ltd., Cuba-related authorisations preserving existing CACR permissions, Russia-related licences concerning pre-existing oil shipments and Lukoil International GmbH, and Venezuela-related licences concerning PDVSA debt and debt-restructuring advisory services.

· Trade controls and export licensing: The EU expanded its Iran sanctions framework to address conduct undermining freedom of navigation through international straits, particularly the Strait of Hormuz. The UK also reportedly introduced temporary trade licences delaying certain Russian-origin oil and LNG restrictions, and targeted third-country actors alleged to support Russia’s military supply chains or sanctions circumvention.

GLOBAL SANCTIONS

China

· On 2 May 2026, it was reported that China’s Ministry of Commerce issued a prohibition order under its Blocking Rules following recent U.S. sanctions targeting five Chinese oil refineries alleged to have purchased Iranian oil. According to reporting, the measure marked the first known use of China’s Blocking Rules since their introduction in 2021 and prohibits compliance in China with the relevant U.S. sanctions measures. The development followed OFAC action against a number of Chinese “teapot” refineries and has been viewed as a notable escalation in the use of China’s anti-sanctions framework in response to U.S. secondary sanctions.

Cuba

· On 7 May 2026, OFAC issued General License No. 1 under Executive Order 14404, authorising transactions otherwise prohibited by the new Cuba-related sanctions measures where such transactions are already authorised or exempt under the Cuban Assets Control Regulations (“CACR”). The general licence preserves the continued availability of existing CACR authorisations despite the introduction of Executive Order 14404, which targets persons deemed responsible for repression in Cuba and threats to U.S. national security and foreign policy. OFAC clarified, however, that the authorisation does not extend to transactions otherwise prohibited under 31 CFR Chapter V.

Iran

· On 1 May 2026, OFAC issued General License W under Executive Order 13846, authorising the wind-down of transactions involving Qingdao Haiye Oil Terminal Co., Ltd. and entities in which it has, directly or indirectly, a 50 percent or greater ownership interest. The authorisation permits transactions ordinarily incident and necessary to wind down dealings with the designated entity through 31 May 2026, provided that any payments to blocked persons are made into blocked, interest-bearing accounts located in the United States. OFAC clarified that the licence does not authorise transactions involving other persons blocked pursuant to Executive Order 13846 unless separately authorised.

· On 22 May 2026, the Council of the European Union expanded the scope of its Iran sanctions framework to target individuals and entities involved in actions undermining freedom of navigation and the rights of transit and innocent passage through international straits, particularly the Strait of Hormuz. The amendments enable the EU to impose travel bans and asset freezes on persons linked to conduct interfering with maritime traffic, while also prohibiting EU persons and companies from making funds or economic resources available to designated parties. The measures follow growing international concern regarding Iranian actions affecting commercial shipping in the Strait of Hormuz and build on political agreement reached by EU foreign ministers in April 2026. The Council stated that interference with vessel transit through the Strait contravenes international law and reaffirmed the EU’s commitment to maritime security and freedom of navigation in accordance with United Nations Security Council Resolution 2817 (2026).

· On 28 May 2026, OFAC announced further Iran-related designations aimed at disrupting networks supporting Iran’s petroleum and petrochemical exports. The action targeted companies, vessels and individuals alleged to have facilitated the sale, shipment or management of Iranian-origin oil and petrochemical products, including through shipping and trading structures outside Iran. The designations reflect continued U.S. efforts to restrict revenue streams connected to Iran’s energy sector and to increase sanctions exposure for intermediaries involved in Iranian oil trade.

Russia

· On 5 May 2026, the UK announced a new package of sanctions targeting Russia’s drone production networks and the alleged exploitation of vulnerable migrants in support of the war in Ukraine. The measures designate 35 individuals and entities linked to Russia’s military drone supply chain, including actors involved in procuring components from third countries and recruiting foreign nationals for deployment or labour in Russian weapons facilities. The sanctions, imposed under both the Russia sanctions regime and the UK’s Global Irregular Migration and Trafficking in Persons framework, mark the first use of the latter in response to state-backed military activity. The UK government stated that the measures are intended to disrupt Russia’s expanding drone capabilities and combat the use of coercive migrant recruitment practices connected to the conflict in Ukraine.

· On 18 May 2026, OFAC issued General License No. 134C authorising, through 17 June 2026, transactions ordinarily incident and necessary to the sale, delivery, or offloading of Russian-origin crude oil and petroleum products loaded onto vessels on or before 17 April 2026, including cargo carried on blocked vessels. The authorisation extends to related maritime services such as docking, bunkering, insurance, classification, and salvage, but excludes transactions involving persons connected to Iran, North Korea, Cuba, certain occupied regions of Ukraine, or other prohibited dealings under U.S. sanctions regulations. General License 134C replaces and supersedes General License 134B in its entirety.

· On 20 May 2026, it was reported that the UK Government introduced temporary trade licences delaying the implementation of certain restrictions relating to Russian-origin oil and LNG in response to energy market disruption linked to the conflict in the Middle East. One licence permits the import of jet fuel and diesel refined from Russian crude in third countries, while another waives restrictions relating to the shipping of LNG from two Russian terminals. The Government described the measures as short-term and part of a phased implementation of tighter sanctions measures against Russia, citing concerns over fuel prices and energy supply stability.

· On 26 May 2026, the UK announced 18 new Russia-related sanctions targeting cryptocurrency exchanges and illicit finance networks alleged to have helped Russia circumvent existing sanctions. The measures focus on the Kremlin-backed A7 network, which the UK says has used Kyrgyzstan’s financial system and crypto-related channels to move funds into Russia’s war economy, including proceeds connected to oil sales and military procurement. The package also targets A7-linked individuals, a Kyrgyz bank suspected of facilitating payments for the network, a major cryptocurrency exchange, and three Georgian companies operating Russia-focused exchanges. The UK Government said the measures are intended to disrupt payment routes and shadow financial infrastructure used to sustain Russia’s war in Ukraine.

· On 28 May 2026, OFAC issued General License No. 131F, extending certain Russia-related authorisations concerning Lukoil International GmbH. The licence permits, through 27 June 2026, transactions ordinarily incident and necessary to the negotiation and entry into contingent contracts for the sale, disposition or transfer of Lukoil International GmbH, as well as related maintenance activities. OFAC also amended Russia-related FAQs 1224 and 1225 to reflect the updated authorisation.

Venezuela

· On 4 May 2026, OFAC issued General License No. 5W under the Venezuela Sanctions Regulations, authorising, effective 19 June 2026, transactions related to, financing for, and other dealings in the Petróleos de Venezuela, S.A. (“PDVSA”) 2020 8.5 Percent Bond that would otherwise be prohibited under Executive Order 13835, as amended. OFAC clarified that the authorisation does not extend to transactions otherwise prohibited under the Venezuela Sanctions Regulations or other provisions of 31 CFR Chapter V. General License 5W replaces and supersedes General License 5V in its entirety as of 4 May 2026.

· On 5 May 2026, OFAC issued General License No. 58 under the Venezuela Sanctions Regulations, authorising legal, financial advisory, and consulting services to the Government of Venezuela and Petróleos de Venezuela, S.A. in connection with potential debt restructuring. The authorisation covers activities ordinarily incident and necessary to assessing and preparing restructuring options, but expressly excludes the restructuring, transfer, or settlement of debt itself, as well as direct negotiations with creditors. The licence also excludes transactions involving certain jurisdictions, including Russia, Iran, North Korea, Cuba, and China, and requires parties relying on the authorisation to submit executed service contracts to the U.S. Department of State and Department of Energy within 10 business days.

Case Law

· On 1 May 2026, the English High Court dismissed an application by United Company RUSAL to set aside enforcement of a London-seated LCIA award worth approximately €214 million obtained by OWH SE in liquidation, a former European subsidiary of VTB Bank. RUSAL argued that enforcement would be contrary to English public policy because RTI, its co-defendant, reasonably believed payment obligations under the underlying ISDA transactions could breach Jersey sanctions relating to VTB Russia. The Court rejected the application, reaffirming the strong public interest in enforcing arbitral awards and concluding that the Jersey sanctions immunity issues raised did not justify refusing enforcement of the award in England.

· On 22 May 2026, the Court of Appeal in Tonzip Maritime (Singapore) PTE Ltd v 2 Rivers PTE Ltd clarified the operation of sanctions clauses in maritime contracts, holding that shipowners may refuse performance where they reasonably determine that compliance gives rise to a real risk of sanctions exposure, even absent a definitive finding that sanctions would in fact be breached. Reversing the first instance decision, the Court held that the relevant charterparty clause did not require owners to establish on the balance of probabilities that sanctions applied, but only that there was a reasonable basis to conclude that performance exposed them to sanctions risk. The dispute arose from a refusal to transport Russian oil cargo linked to Neftisa and alleged sanctioned interests connected to Mikhail Gutseriev, despite legal opinions provided to support the transaction’s permissibility.

GLOBAL REGULATIONS/ TOOLS UPDATE

· On 30 April 2026, OFSI imposed a £165,000 monetary penalty on Deutsche Bank AG London Branch for breaches of Regulation 12 of the Russia (Sanctions) (EU Exit) Regulations 2019 arising from two payments processed in June and July 2022 totalling £635,618.75 to Okko LLC, an entity wholly owned by designated person JSC New Opportunities. The same payments had previously resulted in a £390,000 penalty against Apple Distribution International, an Irish Apple subsidiary, which had instructed payments to Okko in connection with App Store-related revenue. The Deutsche Bank decision addressed the bank’s role in processing those transactions and highlights that both the party instructing a prohibited payment and the financial institution processing it may face enforcement action. OFSI found that Deutsche Bank had made funds available to an entity owned or controlled by a designated person and identified deficiencies in sanctions screening and customer risk management, including reliance on third-party ownership and control data that did not identify the relevant links. The matter was resolved under OFSI’s new settlement framework, with the final penalty reflecting a discount for voluntary disclosure and settlement.

· On 30 April 2026, the House of Commons Library published a research briefing titled Sanctions against Russia: What has changed since January 2025? examining developments across UK, EU and US sanctions policy since the start of 2025. The paper reviews measures targeting Russia’s energy, financial and defence sectors, sanctions evasion through third countries, and the expansion of restrictions relating to Russia’s shadow fleet, while also noting increasing divergence between US sanctions policy and the approach taken by the UK and EU.

· On 28 May 2026, the FCA signed a Memorandum of Understanding with the Office of Trade Sanctions Implementation (“OTSI”) to support cooperation and information-sharing on sanctions compliance and enforcement. The MoU provides for the FCA and OTSI to share information on suspected or actual sanctions breaches, weaknesses in firms’ systems and controls, and trade sanctions issues where joint work may assist enforcement. On the same date, the FCA published findings from its latest review of sanctions controls across UK financial services firms. While the FCA found that firms had made progress, it identified continuing weaknesses in due diligence, alert management, screening, frozen-asset controls, and licence compliance.

· On 28 May 2026, OFAC removed 76 individuals, entities and vessels from the SDN List as part of a wider review of legacy sanctions entries. Treasury stated that the removals covered, among other things, deceased individuals, vessels no longer in service, persons linked to inactive illicit finance networks, and older entries that lacked sufficient identifying information or no longer reflected an active sanctions priority.

· On 29 May 2026, OFSI added FAQ 186 to its UK Financial Sanctions FAQs, clarifying that the UK designation of Huobi Global S.A. applies to the HTX cryptocurrency exchange. OFSI stated that Huobi, which was designated on 26 May 2026 under the Russia sanctions regime, is subject to UK financial sanctions, as are entities owned or controlled by it. OFSI considers HTX to be subject to UK financial sanctions on the basis that it is owned by Huobi within the meaning of regulation 7(2)(a) of the Russia (Sanctions) (EU Exit) Regulations 2019.

CONCLUSION