The KLEPTOTRACE 2025 report on improving the effectiveness of sanctions and high-level transnational corruption schemes

The KLEPTOTRACE 2025 report

• Is a comprehensive study focused on strengthening the European Union's efforts in asset recovery and sanction tracing against high-level transnational corruption.
• Presents several key findings regarding the circumvention of sanctions and asset recovery in the EU:

This report is part of the KLEPTOTRACE project, funded by the Internal Security Fund program

The KLEPTOTRACE 2025 report offers a sobering analysis of how restrictive measures within the EU are undermined by sanction evasion schemes. Designed as part of an EU-funded initiative, the report investigates 97 real-world cases to unpack the complexities of how sanctioned actors circumvent enforcement — using offshore entities, shell companies, and facilitators operating across fragmented jurisdictions.

Main Findings:

1. Sanction Evasion Tactics:
• Corporate Vehicles: The use of complex corporate structures to hide assets and evade sanctions[1].
• Crypto-assets: Increasing use of cryptocurrencies to transfer and conceal funds[1].
• Asset Transfers: Sophisticated methods of transferring assets across borders to avoid detection[1].
2. Challenges in Enforcement:
• Compliance Failings: Issues with ensuring compliance among entities subject to sanctions[1].
• International Contexts: Difficulties in enforcing sanctions across different jurisdictions[1].
3. Policy Recommendations:
• Improved Monitoring: Enhanced monitoring and data analysis to detect sanction evasion[2].
• Training Programs: Development of training programs for public authorities and private sector entities[2].
• Legal Frameworks: Strengthening legal frameworks to support asset recovery and sanction enforcement[2].

SOME DETAILS

1. The report makes clear that sanction violations aren’t outliers but part of broader, well-organized schemes. Over 82% of identified violations were breaches of sectoral sanctions, particularly in sensitive industries such as finance, energy, and technology. These systemic breaches often involve multiple actors, jurisdictions, and enablers, making them difficult to trace through conventional AML /CTF controls.
2. Shell companies, front entities, and offshore structures are instrumental in disguising beneficial ownership and transaction paths. In 81% of the cases studied, corporate vehicles were involved. Fis—especially branches of larger global banks—are also noted as either complicit or inadequately prepared to detect these risks.
3. On average, each case involved at least three intermediaries, such as brokers, lawyers, or agents. These facilitators leverage their knowledge of regulatory blind spots to orchestrate evasive strategies. Their networks often span jurisdictions such as CYPRUS,HONG KONG,TURKEY,UAE, and British Overseas Territories, all of which are repeatedly identified as transit hubs or secrecy jurisdictions.
4. Most evasion cases rely on traditional banking channels, not crypto as often assumed. Wire transfers and offshore accounts were the primary tools. Although crypto was involved in only a few cases, the report highlights a growing need to expand regulatory oversight over DeFi platforms, tokenized assets, and anonymous wallets, given the rapid digitalization of cross-border finance.
5. Despite the sophistication of EU sanctions legislation, enforcement remains fragmented. With over 160 competent authorities across the EU, interpretation and implementation vary significantly by member state. The recent 2024 EU directive criminalizing sanctions violations and the EBA’s supervisory guidelines are positive steps, but practical enforcement still lags. The report calls for dedicated financial intelligence units, standardized reporting, and enhanced data-sharing to strengthen effectiveness.

The report reinforces the urgent need to:

• Strengthen UBO screening and KYCC controls across high-risk jurisdictions.
• Embed sanctions risk assessments into broader financial crime frameworks.
• Expand oversight of facilitators and professional enablers—including legal, corporate service providers, and wealth managers.
• Monitor for red flags such as sudden ownership changes, offshore transfers, or luxury asset acquisitions inconsistent with known customer profiles.

These findings aim to bolster the EU's capabilities in tackling high-level transnational corruption and improving the effectiveness of sanctions.

References

https://www.kleptotrace.com/

https://www.transcrime.it/wp-content/uploads/2025/03/KLEPTOTRACE-report_sanctions-circumvention.pdf

https://www.kleptotrace.com/activities/

https://www.kleptotrace.com/handbook-on-high-level-transnational-corruption/