In recent years, the United States has intensified its efforts to crack down on sanctions evasion, placing particular scrutiny on the financial and commercial activities flowing through the Gulf region—especially the United Arab Emirates. Whether the focus of US foreign policy is on disrupting Russia’s war financing efforts or confronting Iran’s shadow banking network, the UAE remains a consistent “country of focus” for the US Treasury Department.
In 2023, a senior Treasury official publicly identified the UAE as a key jurisdiction in the fight against terrorist financing and other forms of financial crime. (See our prior article: US Sanctions Focus on the United Arab Emirates.) At the time, the Biden administration was targeting countries and individuals helping Russia evade sanctions to finance its invasion of Ukraine. US authorities continued to aggressively enforce Russia-related sanctions through President Biden’s last month in office. Now, in the second Trump administration, the emphasis has shifted: in February 2025, the administration announced a renewed campaign of “maximum pressure” on Iran. Despite these changing priorities, the UAE continues to feature prominently in sanctions enforcement actions—especially in cases involving third-country transshipment and deceptive financial practices.
OFAC enforcement actions in 2025 highlight UAE links
Recent enforcement actions by the Treasury’s Office of Foreign Assets Control (OFAC) underscore this point. Between February 2025 and July 2025, OFAC added dozens of UAE-based entities, individuals, and vessels to the Specially Designed Nationals (“SDN”) List under the Iran sanctions program, and two multinational companies with distributors in the UAE were hit with substantial monetary penalties, as discussed below.
Many of these actions cite UAE-based entities as critical links in networks designed to evade US sanctions on Iran. In particular, OFAC has highlighted how Iranian actors have leveraged Gulf-based trading companies, shipping intermediaries, and front entities to move sanctioned goods and obfuscate the true origin or destination of payments. An April 2025 sanctions advisory identified the UAE as a “jurisdiction[] known for obfuscating Iranian origin.”
Running afoul of US sanctions, even unwittingly, can be costly. In June 2025, a Texas-based company agreed to a $3.88 million settlement for supplying catalyst products and consulting services to customers in Iran and selling goods to a blocked entity via distributor in the UAE. And the risk is not limited to the petrochemical industry. In July 2025, a multinational audio electronics company agreed to pay $1.45 million after the company’s subsidiary enabled diversion of its products from its UAE distributor to Iran.
For businesses operating in or through the UAE or elsewhere in the Gulf, this presents a clear compliance imperative. Companies that engage in cross-border trade, logistics, or financial services must ensure they have robust internal controls to detect and prevent involvement in prohibited transactions.
Red flags and best practices
In its April 2025 sanctions advisory, OFAC provided examples of the types of tactics used to obfuscate the origin and destination of Iranian petroleum, petroleum products, and petrochemical products, such as ship-to-ship transfers, falsifying cargo and vessel documents, manipulating vessel location and identification data, complex vessel ownership and management structures, and obscure oil brokering networks.
It is also worth revisiting OFAC’s March 2023 sanctions compliance note outlining common red flags associated with third-party intermediary risk. While that note was focused on Russia-related sanctions, many of the red flags remain applicable in the current enforcement climate.
While not every red flag signals a violation, ignoring them can expose firms to significant legal and reputational risk, as well as substantial monetary penalties.
Given the persistent scrutiny of the Gulf region and the global reach of US sanctions enforcement, companies should not treat compliance as a box-checking exercise. Instead, they should take a proactive approach by:
- Conducting regular risk assessments tailored to their business sectors;
- Updating screening tools to capture the latest additions to OFAC’s sanctions lists;
- Training staff on recognizing and escalating red flags;
- Reviewing relationships with high-risk counterparties, particularly those with links to Iran; and
- Voluntarily reporting violations to OFAC when applicable.
US authorities have made clear that they will continue to aggressively pursue enforcement actions involving entities and individuals in the Gulf. For regional firms seeking to navigate this complex environment, expert guidance can be invaluable.
LBKM has an experienced team of former law enforcement officials and senior in-house compliance professionals. We regularly advise clients on US sanctions compliance, internal investigations, and interactions with OFAC. For entities operating in or through the UAE, the stakes have never been higher.
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About LBKM
Lewis Baach Kaufmann Middlemiss PLLC is a boutique law firm focusing on international financial disputes, financial compliance, white collar defense and investigations, insurance and reinsurance, and cross-border commercial litigation and arbitration. The firm has offices in Washington, New York, and London.