Closing the Gap: Why Name-Based Sanctions Fail the Russian Defence Sector

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How Sanctioned Russian Drone Manufacturers Keep Producing

International sanctions against Russian drone manufacturers were intended to degrade production capacity. In practice, Supercam, a key Russian UAV manufacturer, achieved a tenfold increase in production after its designation. The objective of this investigation was to identify the specific mechanism enabling this evasion, map the corporate structures exploiting it, and formulate concrete recommendations for closing the gap.

How Molfar Traced the Sanctions Evasion Mechanism

This investigation utilised a structured effectiveness framework to identify systemic flaws in current sanctions design by cross-referencing corporate registries with official designation lists. By mapping the supply chain of subsidiaries like KazUAV, the analysis traced active evasion vectors and pinpointed how name-based designations fail to capture the underlying legal entities. These findings highlight the specific regulatory gaps that allow sanctioned organisations to maintain international market access through restructuring.

Identifiers Over Names

Current sanctions focus on company trading names rather than permanent identifiers like tax IDs or legal registration numbers.
This design flaw allows sanctioned entities to bypass restrictions by simply renaming or restructuring into "new" organisations.
The successor companies remain absent from watchlists, allowing them to maintain uninterrupted global operation.

Operational Persistence of Supercam

Despite being officially designated, Supercam managed to increase production tenfold, proving the current sanctions are largely symbolic.
The reliance on name-only designations resulted in zero meaningful impact on the company's internal manufacturing capacity.
The lack of a "legal anchor" in the designation process allowed the firm to thrive under minimal operational pressure.

The KazUAV Procurement Channel

The Kazakhstan-based subsidiary, KazUAV, was identified as a primary legal loophole for the sanctioned Russian parent company.
This entity provides a guaranteed gateway to international markets and high-tech components that would otherwise be restricted.
Authorities must transition to entity-based anchoring to prevent subsidiaries from acting as proxy procurement hubs.

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Why Sanctions Screening Must Go Beyond Company Names

The investigation exposed a systemic flaw undermining the effectiveness of sanctions across the Russian defence sector — not just in the Supercam case, but wherever designations rely solely on names. The findings carry direct policy implications for OFSI, the EU sanctions framework, and allied export control authorities: transitioning to entity-identifier-based designations would materially close the evasion channel currently enabling continued drone production. For compliance teams and sanctions screening providers, the name-vs-entity analysis framework, developed here, offers a replicable methodology for auditing whether existing designations are achieving their intended operational impact.

Need to Know Whether Sanctions Are Actually Working?

Close sanctions gaps before restricted entities exploit them. Molfar conducts sanctions-evasion intelligence reviews to test whether screening, supplier checks or controls miss hidden legal structures.

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