What if the EU sanctioned Elon Musk and his companies?

Elon Musk is one of the most influential figures in technology, finance, and space exploration, with a growing presence in international politics. His business empire, which includes Tesla, SpaceX, X Corp. (formerly Twitter), xAI, Neuralink, and The Boring Company, operates at the intersection of global markets, government interests, and military infrastructure.

As a compliance officer, you’d probably only come across him through adverse media results or, in rare cases, as a potential client or counterparty. Since anti-money laundering regulations do not mandate adverse media monitoring, many firms might not consider him a relevant risk at all.

What if the landscape shifted overnight? Imagine the European Union suddenly imposing sanctions on Musk and his companies. Whether driven by politics, allegations of financial misconduct, or framed as national security concerns, these sanctions would send shockwaves through finance, technology, and compliance. The idea isn’t far-fetched. One former European Parliament member has already floated sanctions as a way to “rein in” Musk.

Your role is to ensure your firm remains compliant while managing legal, operational, and reputational risks. But what if your firm still wanted to work with Musk’s companies? How would you go about applying for a sanctions licence?

Let’s break it down.

Strategic and ethical considerations for this *hypothetical* scenario

If sanctions were imposed on Musk, the implications would extend far beyond a simple adjustment in compliance processes. It could trigger significant financial, operational, and reputational consequences for your firm.

1. Economic and financial impact

a. If Tesla or SpaceX were sanctioned, it could have a ripple effect on your clients, particularly those who work directly with these companies or are part of their supply chains. Sanctions could result in a loss or reduction of business for these clients, which in turn might impact your firm’s client base and revenue. Clients in related industries, such as electric vehicles (EV) or technology, could also face challenges that harm their bottom lines, ultimately affecting your firm’s profits.

b. Could banks or payment providers cut off Musk’s businesses, making it harder to move money? Even if a direct provider agrees to process transactions, could correspondent banks upstream refuse to handle them? Would your business face payment delays, market access restrictions, or legal challenges as they navigate these new sanctions?

c. If X (Twitter) posts and transactions were blocked, how would it impact your firm’s advertising, marketing, and client engagement? Beyond business concerns, there are also broader implications for free speech.

2. Reputational and ethical dilemmas

a. Could working with Musk’s companies damage your firm’s reputation or attract increased scrutiny from clients, regulators, or your internal team?

b. Your firm may have ESG policies with clients, suppliers, and partners that require compliance. What are the potential costs of failing to adhere to these?

c. Should compliance teams take additional steps, such as conducting Enhanced Due Diligence (EDD) on Musk’s companies, even if it’s not legally required? How feasible would this be operationally for your firm?

3. Regulatory precedent and escalation risk

a. Could this set a precedent for more sanctions on high-profile business leaders, making future regulations more difficult to predict? Is your compliance system adaptable enough to manage potential shifts in the sanctions landscape?

b. If the US chooses not to sanction Musk but the EU does, how would your firm navigate this conflict? For global organisations, how would you manage the transfer of work from the US to the European Economic Area (EEA), e.g. passporting, or from non-sanctioned jurisdictions to regulated ones? Do you have the appropriate policies, controls, procedures, and training in place to support this?

c. Could additional sanctions disrupt your firm’s ability to operate internationally, potentially impacting contracts, licensing agreements, or cross-border transactions?

The step-by-step tactical response

The key priority is ensuring your firm stays compliant while adapting to the evolving sanctions landscape.

1. Verify the change and scope of the sanctions

A. Before making any internal decisions, verify the legitimacy of the update.

a. Verify this change with the official EU consolidated sanctions list. Since EU sanctions often influence UK, US and global sanctions policies, also check the UK Office of Financial Sanctions Implementation (OFSI) list, the Office of Foreign Assets Control (OFAC) list and UN Security Council Sanctions. Determine if this is a unilateral action by the EU or a coordinated effort across multiple jurisdictions.

b. Understand who is sanctioned:

i. Is it Elon Musk personally?
ii. Are all his companies affected or only specific ones?
iii. What type of sanctions apply? These could include comprehensive asset freezes, sector-specific restrictions, trade bans, technology restrictions, or other measures.

c. Are there any exemptions built into the sanctions, such as allowances for humanitarian use of Starlink or scientific collaboration with SpaceX?

B. Look for official EU statements and any supporting regulatory guidance to confirm this is not a temporary or mistaken update.

C. Seek clarification from regulatory contacts, industry peers, compliance groups, and specialised sanctions legal teams (if available) to fully understand the broader implications for your firm.

2. Identify and assess exposure and impact

A. Client and supplier risk:

a. Does your firm work directly with Musk’s companies or provide services to Tesla, SpaceX, Starlink, X (formerly Twitter) or any associated entities?

b. Are key suppliers, vendors, or partners in your firm’s network connected to these businesses?

B. Financial exposure:

a. Does your firm or any of the funds it manages (e.g. ETFs, pension funds, mutual funds, or client-managed portfolios) have direct investments in Tesla, SpaceX, or related entities? Do your clients hold positions that could impact your business

b. Would client divestment be required, and how quickly could your firm adjust to this?

C. Technology and services:

a. Does your firm advertise on X (formerly Twitter) or use its platform for communications (thought leadership, updates, etc.)?

b. Are any AI, self-driving technology, or lithium supply chains connected to Tesla part of your firm’s operations, such as industries that your clients operate in?

Applying for a sanctions licence: Can your firm keep working with Musk? 

If your firm’s clients wish to continue doing business with Musk’s companies, it must apply for a sanctions licence (exemption) through the relevant EU regulatory bodies.

1. Identify a Valid Exemption

A. Sanctions licences are only granted for specific, justifiable reasons, such as:

a. Humanitarian needs – Does Starlink provide critical internet services in conflict zones for your client?

b. Essential goods and services – Does Tesla supply energy storage, climate solutions, or AI technology critical for your client’s infrastructure?

c. Pre-existing contracts – Do your clients have legal agreements that cannot be lawfully terminated without causing undue harm?

d. Government-related exemptions – Does SpaceX collaborate with EU governments or defence agencies on permitted projects that your client is involved in?

2. Build a Strong Legal Case

A. To apply, the firm must submit:

a. Contracts and financial records proving a legitimate business relationship.

b. A compliance plan outlining how it will prevent financial crime and sanctions evasion.

c. Documentation of regulatory engagement to show the firm is acting in good faith.

3. Implement and strengthen compliance safeguards

A. If approved, the firm must:

a. Conduct Enhanced Due Diligence (EDD) on all transactions with Musk’s businesses.

b. Maintain strict financial oversight to ensure funds are only used for approved purposes.

c. Submit regular compliance reports to regulators.

4. Weigh the Reputational Risks

A. Even with a licence, is it worth it? Consider if working with Musk’s companies could:

a. Damage investor confidence and impact share prices.

b. Trigger banking restrictions if financial institutions refuse to process payments.

c. Increase regulatory scrutiny if the EU expands sanctions later.

Ultimately, compliance is not just about following the rules; it’s about understanding when and why the rules change and what your firm should do next. While laws can change overnight, your responsibility to assess risk and act with integrity remains constant.

 

Photo credit: Joshua Lott / Getty Images