Manufacturing Amid Conflict:

Sanctions have grown more aggressive, targeted, and extraterritorial. The global response to Russia’s actions in Ukraine, the persistent Israel-Hamas conflict, and the worsening humanitarian crisis in Sudan have triggered fresh waves of sanctions from Western authorities.

1. Trade Sanctions

These include embargos, tariffs, or outright bans on goods or services from specific countries or entities. The U.S., EU, and UK have continued to tighten restrictions on sectors such as defense, energy, mining, and dual-use technologies.

• Recent example (2025): The EU imposed a total ban on Russian-origin rare earth metals used in electronic and automotive components—causing major disruption to manufacturers in Germany and Italy.
  
  
• Historical fallout: Even before 2022, companies like Elf Cosmetics incurred steep penalties for failing to detect that components sourced from China, had North Korean origins—leading to nearly $1 million in fines despite their unintentional involvement.

Trade sanctions today go beyond classic embargoes. They now intersect with strategic tariffs and retaliatory trade measures—tools increasingly used by major powers to assert geopolitical influence.

• U.S.–China Trade War 2.0: The renewed U.S. focus on “reshoring” supply chains, combined with national security concerns around semiconductors, has led to steep tariffs on Chinese tech (before they were put on hold for 90 days to allow for negotiations), EVs, and clean energy components. China has responded with tariff barriers on Western agri-tech and strategic metals—further straining global supply chains.
  
  
• EU–U.S. Carbon Border Adjustments: In parallel, the EU’s Green Deal has introduced Carbon Border Adjustment Mechanisms (CBAMs) that effectively penalise imports with a high carbon footprint, creating friction with the U.S. and developing economies.

These mechanisms—though not traditional sanctions—are functionally disruptive to trade and equally damaging for manufacturers. Whether dealing with sanctioned goods or tariff-stricken categories, the result is the same: volatile pricing, sourcing delays, and legal exposure.

2. Sanctions on Specially Designated Nationals (SDNs)

This increasingly includes individuals and entities with indirect ties to sanctioned regimes. Shell companies and multi-layered ownership structures are common tactics used to mask connections.

• OFAC’s 50% Rule, now adopted in various forms by the EU and UK, requires firms to identify whether any sanctioned individuals hold a 50% or greater interest in a business—directly or indirectly.
• Headline example: Roman Abramovich’s forced sale of Chelsea Football Club was driven by his SDN designation, marking a turning point in enforcement against high-profile oligarchs.

Whether you're a global conglomerate, an SME with cross-border suppliers or a PEP, you are now operating under a compliance microscope, something that must remain top of mind as you navigate today’s regulatory landscape. Indeed, the consequences of association—intentional or accidental—with a sanctioned entity can range from heavy fines to supply chain paralysis, contract voids, and global brand damage.

The complexity of compliance is further compounded by:

• Layered ownership structures designed to obscure beneficial ownership
• Politically exposed persons (PEPs) in supply networks
• Fragmented global data sources and outdated verification processes

Drawing on insights from compliance veteran Nileema Ali, Creditsafe’s Head of Product, here’s a pragmatic framework for risk mitigation:

1. Start With a Sanctions-Aware Risk Audit

• Assess all active suppliers, customers, and potential partners for links to sanctioned jurisdictions or SDNs.
• Map out future expansion plans or sourcing shifts and examine whether they risk exposure.
• Screen not just Tier 1, but also Tier 2 and Tier 3 suppliers—indirect risks are often the most overlooked.

2. Develop & Embed Sanctions Policies

• Create a tailored sanctions policy aligned with your market footprint, risk appetite, and product categories.
• Assign ownership—whether through a dedicated compliance officer or a senior executive in finance or procurement.
• Ensure clear documentation, escalation paths, and employee training are in place to operationalise these policies.

3. Leverage Modern Due Diligence Platforms

Manual due diligence is no longer viable in the 2025 sanctions landscape. Manufacturers must automate to keep pace with geopolitical volatility.

This end-to-end platform helps you:

• Verify identities of customers, suppliers, and beneficial owners
• Screen against sanctions, PEPs, enforcements, and adverse media in real time
• Monitor ongoing changes to risk profiles with minimal manual effort

Whether you’re onboarding a new supplier or auditing an existing customer base, KYC Protect accelerates investigation while ensuring compliance across jurisdictions.

In 2025, manufacturers must not only produce at scale—but also operate with surgical precision across regulatory environments. The businesses that will thrive are those that treat compliance as a proactive advantage, not just a checkbox.

As trade wars intensify and carbon tariffs take effect, even previously “safe” trade relationships now come with caveats. Manufacturers must treat tariffs and retaliatory duties as de facto sanctions—building them into compliance frameworks and scenario planning. This further reinforces the need for automated due diligence, geopolitical awareness, and data-driven supplier screening.

With the right tools, clear policies, and timely data, manufacturers can and must protect their operations, reputations, and future growth—even in the most turbulent geopolitical climates.

Creditsafe’s KYC Protect  is built to help manufacturers focus on what they do best—while we handle the complexity of risk and compliance.