The rising number of sanctions is creating a “difficult environment” for private credit managers, putting increasing strain on dealmaking.

Over the past five to seven years, the number of sanctioned individuals, countries, organisations and entities has increased, with restrictions becoming a “defining issue for private credit dealmaking”, said Leigh Hansson, a partner in the global regulatory enforcement group at Reed Smith.

Sanctions have become particularly burdensome following the restrictions imposed on Russia in response to its invasion of Ukraine, which created a “dramatic shift” in the sanctions regimes parties must consider. Overall, the EU and UK becoming increasingly important alongside the US, said Hansson.

According to the London Stock Exchange Group’s (LSEG’s) global sanctions index, around 82,000 individuals were sanctioned as of March 2025, with the number of impacted entities increasing by 17.1 per cent annually. The global sanctions index has risen to more than four times its 2017 level, the LSEG said.

The increase in sanctions, geopolitical instability and divergence between major sanctions lists, including those maintained by the Office of Foreign Assets Control (OFAC), the United Nations, the EU and the UK, are adding cost, complexity and risk to private credit deals, said Robin Cotterill, head of governance, compliance and financial crime at Carne Group.

“If you are a private credit manager, who is looking to originate loans, it is a very difficult environment to get your arms around,” he told Alternative Credit Investor.

“Deal teams are not going to want important commercial deals tied up and slowed down by increasingly complex sanctions and anti-money laundering,” he added.

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The increase in sanctions could potentially impact the commercial viability of some deals, with due diligence processes taking longer, becoming more expensive and, in worst-case scenarios, resulting in opportunities being lost.

Asked whether these issues would only affect major sanctioned regions, Cotterill explained that the problem is much broader, with increasingly specific groups and organisations becoming subject to restrictions.

“In between those great big blocks of sanctions, there is all sorts of little microbubbles of sanctions activity taking place, which may not be clear, obvious or big news items, but you have to dig deep to ensure you are not running foul of them,” he said.

Hansson explained that even companies outside the UK, EU and US often follow those countries’ sanctions rules to avoid losing access to global markets.

“As a result, deals are taking longer, and due diligence is becoming more expensive,” she told ACI. “Parties need to ensure that ultimate beneficial owners and beneficiaries of deals are clear of sanctions in all jurisdictions that may potentially ‘touch’ the transaction.”

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Another noticeable trend alongside the increase in sanctions activity is the rise in enforcement action.

For example, OFAC fined San Francisco-based venture capital firm GVA Capital nearly $216m (£160.7m) in 2025. Alongside this, private equity firm IPI Partners received an $11.5m penalty from OFAC for engaging in sanctionable conduct, after receiving investments from Russian oligarch Suleiman Kerimov through a series of trust structures and continuing to maintain those investments following his designation.

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