TRW & Co · Sanctions and export controls
UK Sanctions Compliance: A Guide for Businesses
UK sanctions compliance means not dealing with designated persons' assets, not making funds available to them and not trading in restricted goods, technology or services without a licence. Civil penalties are largely strict liability, and freezes reach companies a designated person owns or controls. This guide covers OFSI, OTSI, ownership, licensing, disclosure and building a proportionate programme.
Key pointName screening is not enough: a counterparty that is not on the UK Sanctions List can still be frozen if a designated person controls it, and the control limb can apply even where the designated shareholding is below 50%.
At a glance
Single list
Since 28 January 2026 the FCDO's UK Sanctions List is the only official list of UK designations; OFSI's Consolidated List is no longer updated.
Ownership and control
Freezes extend to entities in which a designated person holds over 50% of shares or votes, can appoint the board, or otherwise controls.
Civil penalties
OFSI and OTSI can impose penalties up to the greater of £1 million or 50% of the breach value, generally on a strict liability basis.
Disclosure discounts
OFSI's February 2026 guidance offers up to 30% for voluntary disclosure and co-operation, plus Early Account and Settlement Scheme reductions.
OTSI since 2024
OTSI has enforced certain trade sanctions, especially services and offshore trade, under civil enforcement regulations in force since 10 October 2024.
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The short answer: what UK sanctions compliance requires
UK sanctions compliance means making sure your business does not deal with designated persons' funds or economic resources, does not make funds or resources available to them or for their benefit, and does not trade in goods, technology or services that sanctions prohibit, unless an exception or licence applies. It applies to everyone in the UK and to UK nationals and UK-incorporated businesses wherever they operate.
The rules are made under the Sanctions and Anti-Money Laundering Act 2018 (SAMLA), through separate regulations for each regime, such as Russia, Iran or counter-terrorism. Three bodies do most of the enforcement work: the Office of Financial Sanctions Implementation (OFSI) in HM Treasury for financial sanctions, the Office of Trade Sanctions Implementation (OTSI) in the Department for Business and Trade for many trade sanctions, and HMRC for customs-related trade breaches and criminal enforcement of trade sanctions.
Two features make UK sanctions compliance demanding. Civil penalties for many breaches are imposed on a strict liability basis, so a business can be penalised without knowing it breached the rules. And sanctions bite on entities owned or controlled by designated persons even when those entities are not themselves listed.
The legal framework and the enforcement bodies
SAMLA gives ministers power to make sanctions regulations. Each regime sets out its own prohibitions, exceptions, licensing grounds and reporting duties, so the first compliance question is always which regime applies. The table below shows who does what.
| Body | Role | Key powers |
|---|---|---|
| Foreign, Commonwealth and Development Office | Policy lead; makes most designations | Publishes the UK Sanctions List |
| OFSI (HM Treasury) | Implements and enforces financial sanctions | Licensing, information requests, civil monetary penalties, publicising breaches |
| OTSI (Department for Business and Trade) | Civil enforcement of certain trade sanctions, especially services and offshore trade | Civil monetary penalties, referral to HMRC, publicising breaches |
| HMRC | Enforces customs-related trade sanctions and export controls | Compound penalties, seizure, criminal investigation and referral for prosecution |
| National Crime Agency | Investigates criminal breaches of financial sanctions | Criminal investigation |
| Export Control Joint Unit | Licensing for strategic exports and many trade sanctions activities | Issues trade licences |
One list since January 2026
Since 28 January 2026, the UK Sanctions List published by the FCDO has been the only official list of UK designations. OFSI's Consolidated List of Asset Freeze Targets is no longer updated, and firms whose screening tools relied on it were told to switch to the UK Sanctions List and its unique identifiers. The government guidance on moving to a single list explains the data changes.
Asset freezes and the ownership and control test
An asset freeze prohibits dealing with funds or economic resources owned, held or controlled by a designated person, and making funds or economic resources available to them or for their benefit. The OFSI general guidance explains that if you know, or have reasonable cause to suspect, that you hold or control a designated person's assets, you must freeze them, not deal with them except under an exception or licence, and report to OFSI.
Freezes extend to entities owned or controlled, directly or indirectly, by a designated person. OFSI's guidance treats an entity as owned or controlled where the designated person:
- holds more than 50% of the shares or voting rights, directly or indirectly;
- has the right to appoint or remove a majority of the board; or
- can reasonably be expected to ensure the entity's affairs are conducted in accordance with their wishes.
OFSI would not simply add together the holdings of different designated persons unless, for example, they hold their interests under a joint arrangement or one controls the other's rights. The control limb is the hardest to apply, because it can catch nominee structures, informal influence and family arrangements where shareholdings look clean on paper. That is why UK sanctions compliance requires beneficial ownership analysis, not just name screening.
A counterparty that does not appear on the UK Sanctions List can still be subject to an asset freeze if a designated person owns or controls it. Ask for ownership charts, check beneficial ownership through more than one source and record your conclusion, especially where shareholdings sit just under 50% or ownership changed shortly after a designation.
Trade sanctions: goods, technology and services
Trade sanctions restrict exporting, importing, supplying, delivering and making available specified goods and technology, and providing specified services such as brokering, financing, technical assistance, professional and business services. The Russia regime is the most extensive, but others contain significant trade measures.
Trade sanctions are not limited to physical exports from the UK. A UK person who arranges the movement of sanctioned goods between two other countries, or provides services to a non-UK company in a restricted sector, can breach them. The OTSI regime, in force since 10 October 2024 under the Trade, Aircraft and Shipping Sanctions (Civil Enforcement) Regulations 2024, targets exactly that kind of activity: sanctioned services and offshore movements of goods and technology. Our guide to UK export controls covers the strategic export licensing side.
Enforcement, penalties and voluntary disclosure
Breaching a prohibition can be a criminal offence. OFSI's general guidance states that offences relating to the principal financial sanctions prohibitions carry up to 7 years' imprisonment on indictment. Most corporate cases, however, are resolved through civil penalties.
Under section 146 of the Policing and Crime Act 2017, OFSI can impose a monetary penalty up to the greater of £1 million or 50% of the estimated value of the funds or resources involved. Amendments made in 2022 removed the need for OFSI to prove knowledge or reasonable cause to suspect for civil penalties. OTSI's maximum for trade sanctions follows the same formula, and its case assessment guidance says most trade breaches will be treated as strict liability.
OFSI updated its enforcement and monetary penalties guidance in February 2026 following the government's 2025 consultation. The revised framework introduces an Early Account Scheme with a reduction of up to 20% for an early factual account, a voluntary disclosure and co-operation discount of up to 30%, and a Settlement Scheme discount of 20%. It also explains fixed monetary penalties for lower-level information, reporting and licensing failures. The message is clear: prompt, complete disclosure materially changes outcomes.
Reporting obligations
"Relevant firms", a defined category that includes banks and other financial institutions, cryptoasset businesses and certain professional service providers such as auditors, accountants and legal advisers, must report to OFSI as soon as practicable if they know or reasonably suspect that a person is designated or has breached financial sanctions, where the information comes to them in the course of business. They must also report frozen assets they hold. Failing to report is itself an offence.
Licensing: when you can deal lawfully
Licences allow activity that would otherwise be prohibited. OFSI issues general licences, which anyone can use if they meet the conditions, and specific licences, which a person applies for. Specific licences can only be granted on the licensing grounds set out in the relevant regulations, such as basic needs, legal fees, prior obligations or the wind-down of positions. Trade sanctions licences are generally handled through the Export Control Joint Unit.
Licensing takes time, and applications must be complete and evidenced. Using a general licence usually comes with record-keeping and reporting conditions, and breaching those conditions can itself be an offence. Never assume a licence will be granted, and never act before it is issued.
Building a UK sanctions compliance programme
A proportionate programme follows a recognisable sequence. The depth of each stage depends on your exposure: a bank or commodities trader needs much more than a domestic retailer.
- Assess exposure. Map products, customers, counterparties, payment routes, jurisdictions and supply chains against the regimes that could apply.
- Screen properly. Screen customers, counterparties, beneficial owners, vessels and banks against the UK Sanctions List, with fuzzy matching tuned to your risk and a process to resolve alerts.
- Analyse ownership and control. Look beyond the list to who owns and controls counterparties, and document conclusions on borderline cases.
- Classify goods and services. For trade, identify commodity codes and control status, and check whether services you provide are restricted for the destination or sector.
- Build contractual protection. Include sanctions warranties, information rights, suspension and termination rights and end-use undertakings.
- Escalate and report. Define who decides on potential matches, when to freeze, when to apply for a licence and when to report to OFSI or OTSI.
- Train, audit and update. Designations change frequently; monitor updates, retrain high-risk teams and test controls periodically.
Governance: who owns UK sanctions compliance?
Effective UK sanctions compliance needs a clear owner with enough seniority to stop a transaction. In regulated firms that is usually the compliance or financial crime function, reporting to the board. In trading and industrial businesses, responsibility is often split between trade compliance, legal, finance and sales, which creates gaps. Write down who decides on potential matches, who can approve a licence application and who signs off a report to OFSI or OTSI.
Boards should receive periodic reporting on exposure, alerts, near misses, licences held and changes in the regimes that affect the business. When a major new designation package or trade measure is announced, someone should be responsible for assessing its impact within days rather than weeks, because designations generally take effect immediately.
Finally, test the programme. Sample-check screening alerts, review a handful of ownership conclusions, and walk through a mock breach to see whether escalation, freezing and reporting would work in practice. A UK sanctions compliance framework that has never been tested is likely to fail at the moment it is needed.
Illustrative scenario: a shareholding just below 50%
This scenario is illustrative only and does not describe any real client or case.
A UK logistics company is asked to provide warehousing services to a trading company incorporated in a third country. Name screening returns no match. Due diligence shows that a designated individual holds 45% of the shares, and that the chair and two directors are long-standing associates who previously worked for that individual's businesses.
The shareholding alone is below the ownership threshold. But the control limb asks whether it is reasonable to expect the designated person to be able to ensure the company's affairs follow their wishes. Board composition, history and any side agreements point towards control. The prudent course is to pause, gather more information, take advice on whether an asset freeze applies and whether a report is required, and consider whether a licence is available. Proceeding on the basis of the shareholding figure alone would be a significant UK sanctions compliance risk.
Risks and common mistakes
Relying on name screening alone
List screening catches designated persons but not entities they own or control, and it does not tell you whether goods or services are restricted. Many enforcement cases involve payments to or for the benefit of companies that were not themselves listed. Combine screening with ownership analysis, trade classification and transaction monitoring. Keep records showing how each alert and ownership question was resolved, because OFSI considers the quality of a firm's systems when assessing seriousness.
Assuming UK sanctions mirror EU or US sanctions
The UK, EU and US often act together, but their lists, ownership rules, licensing grounds and trade measures differ. A transaction permitted under one regime may be prohibited under another. International groups should map which regimes apply to each entity and person, and resolve conflicts deliberately rather than applying one regime as a proxy for all. The sanctions and export controls team can help map overlaps.
Delaying a voluntary disclosure
Under the revised OFSI framework, the size of the reduction depends on how early and how complete the disclosure is, and on co-operation afterwards. Businesses that investigate internally for months before telling OFSI may lose some of the available credit. The right approach is usually to notify promptly, explain what is known, and follow up with a fuller account once the facts are established. Privilege and data issues need managing from the start; see our guide to internal investigations.
Overlooking the services restrictions
Professional and business services, technical assistance, brokering and financing are restricted under several regimes, often by reference to the recipient's location or sector rather than a designation. Consultants, IT providers, law firms, accountants and insurers can breach sanctions without moving any goods. OTSI's civil powers mean these breaches can now be penalised on a strict liability basis.
Cross-border angle: groups operating from Asia and the Gulf
UK sanctions apply to UK nationals and UK-incorporated entities wherever they are, and to anyone in the UK. A Bangladesh- or UAE-headquartered group with a UK subsidiary must ensure the subsidiary does not facilitate prohibited activity by the wider group, including by approving, financing or providing services for it. Group policies should identify where UK persons sit in decision-making chains.
Trade routes through South Asia, the Gulf and Central Asia receive close attention for circumvention risk. Our work across the UK–Bangladesh trade and finance corridor combines UK sanctions advice with local knowledge from TRW & Co's offices in Dhaka, Dubai, Singapore and China. For related anti-money laundering duties, see our guide to the Money Laundering Regulations.
For advice on screening, licensing, a potential breach or a disclosure to OFSI or OTSI, contact our London office at Holborn Gate, 330 High Holborn, London WC1V 7QH, or email info@trw.co.
Frequently asked questions
01Who has to comply with UK sanctions?
UK sanctions apply to all individuals and legal entities in the UK, including its territorial sea, and to all UK nationals and UK-incorporated bodies wherever they are in the world. A foreign company is not directly bound unless it acts within the UK, but its UK subsidiaries and UK national staff are. UK persons must not facilitate prohibited activity by others, so group structures and decision-making chains matter. Some sectors, such as financial services and legal and accounting firms, also have specific reporting obligations to OFSI.
02What is the difference between OFSI and OTSI?
OFSI, part of HM Treasury, implements and enforces financial sanctions such as asset freezes and restrictions on financial services, including licensing and civil monetary penalties. OTSI, part of the Department for Business and Trade, has civil enforcement powers over certain trade sanctions, particularly the provision of sanctioned services and the movement of sanctioned goods and technology outside the UK. HMRC remains responsible for customs-related trade sanctions and criminal enforcement of trade breaches. A single transaction can engage more than one body.
03What is the ownership and control test in UK sanctions?
An entity is treated as owned or controlled by a designated person if that person holds, directly or indirectly, more than 50% of its shares or voting rights, has the right to appoint or remove a majority of its board, or it is reasonable to expect that they could ensure its affairs are conducted in accordance with their wishes. If so, the entity's assets are subject to the freeze even though it is not listed. OFSI does not simply aggregate separate designated persons' holdings unless there is a joint arrangement.
04What are the penalties for breaching UK sanctions?
Breaches of the main financial sanctions prohibitions can be criminal offences carrying up to seven years' imprisonment on indictment. Civil monetary penalties are more common for businesses. OFSI can impose a penalty up to the greater of £1 million or 50% of the estimated value of the breach, and OTSI can do the same for certain trade sanctions breaches. Civil penalties are generally imposed on a strict liability basis. Both bodies can also publicise breaches, which carries reputational consequences.
05Should we voluntarily disclose a sanctions breach?
In most cases, prompt disclosure is advisable and, for relevant firms, reporting may be mandatory. OFSI's revised enforcement guidance, updated in February 2026, offers a reduction of up to 30% for voluntary disclosure and co-operation, a separate Early Account Scheme reduction and a Settlement Scheme discount. OTSI also treats timely voluntary disclosure as a significant mitigating factor. Take advice quickly on the content and timing of the disclosure, and protect privilege in any internal investigation.
06How do I get a licence to deal with a sanctioned person?
First check whether an OFSI general licence covers the activity, since anyone meeting its conditions can rely on it. If not, apply to OFSI for a specific licence, which can only be granted on the licensing grounds in the relevant regulations, such as basic needs, legal fees or prior obligations. Trade sanctions licences are generally handled through the Export Control Joint Unit. Applications need full supporting evidence, and you must not proceed until the licence is issued and its conditions are understood.
Sources and official materials
- Sanctions and Anti-Money Laundering Act 2018 — Framework legislation for UK sanctions
- OFSI: Financial sanctions general guidance — Asset freezes, ownership and control, reporting, licensing
- OFSI: Financial sanctions enforcement and monetary penalties guidance — Penalty methodology and 2026 discounts
- Moving to a single list for UK sanctions designations — Move to the UK Sanctions List on 28 January 2026
- The UK Sanctions List — Official list of UK designations
- OTSI: How suspected breaches of trade sanctions are assessed — Trade sanctions civil enforcement
- Policing and Crime Act 2017, section 146 — OFSI's power to impose monetary penalties
General information only, current as at 21 October 2026. It is not legal advice and does not create a solicitor–client relationship. It reflects the law of England and Wales unless stated otherwise; Scotland and Northern Ireland have separate legal systems, and the law changes frequently. Check current official sources and take advice on the facts of your matter.