Sanctions: A UK-wide Overview

UK Sanctions: Evolving Landscape and Strategic Adaptation

The UK’s sanctions regime is evolving rapidly, shaped by shifting geopolitical priorities and an increasingly interconnected global economy. Since the introduction of the Sanctions and Anti-Money Laundering Act 2018 (SAMLA), the UK has pursued an autonomous and effective approach to sanctions policy, with implementation and enforcement activity intensifying recently.

While remaining aligned with key partners such as the USA and EU, the UK has demonstrated a readiness to act independently in response to international developments. For businesses, this has created a challenging compliance environment, particularly in sectors such as financial services, energy and professional services, where cross-border transactions are subject to heightened scrutiny and due diligence.

The UK’s sanctions framework operates through two principal mechanisms: the establishment of regimes and the designation of persons or entities to which those regimes apply. The parliamentary process differs depending on whether the regime is implemented autonomously by the UK or derived from a United Nations Security Council resolution.

The strategic role of sanctions in the UK’s global policy

The UK has emerged as one of the world’s most active sanctions jurisdictions since gaining autonomy from the EU framework following Brexit. Sanctions play a central role in advancing the UK’s foreign policy and national security objectives. They are restrictive measures imposed by the UK government on individuals, entities, organisations or vessels as a matter of policy, subsequently given legal effect under domestic legislation. The purpose of sanctions in the UK includes advancing diplomatic objectives and supporting international governance frameworks, reflecting its commitment to peace, security and the rule of law.

Responsibility for UK sanctions policy lays primarily with the Foreign, Commonwealth and Development Office (FCDO), which determines the objectives and scope of each regime. Sanctions may be imposed on a geographic basis, targeting a particular country or region, or on a thematic basis, focusing on issues such as terrorism, cyber-activity or the proliferation of weapons of mass destruction. This structure enables flexibility allowing the government to respond swiftly to global developments while maintaining coherence across related measures.

Economic conditions and business impact

The past year has underscored the increasing economic interdependence between sanctions policy and global financial markets. As sanctions continue to restrict access to capital, trade routes and investment flows, UK-based financial institutions and multinational clients face growing challenges in ensuring compliance without unduly constraining legitimate business.

In particular, the enforcement of ownership and control tests has proven especially demanding. Determining whether an entity is indirectly owned or controlled by a designated person can be an intricate exercise involving corporate transparency assessments, cross-border investigations and evolving guidance from the Treasury’s Office of Financial Sanctions Implementation (OFSI).

Professional service firms including lawyers, accountants and trust administrators, have also been drawn into this compliance ecosystem, often serving as the first line of defence in identifying and reporting potential sanctions breaches. For clients, this means the cost of compliance has risen sharply; for firms, it demands a high level of technical expertise and governance discipline.

OFSI enforcement and the rise of accountability

OFSI deals with the implementation and civil enforcement of financial sanctions regulations and has significantly expanded its enforcement capabilities. Its recent enforcement actions demonstrate an increasing willingness to issue civil penalties and public enforcement notices, even where breaches are unintentional but reflect insufficient systems and controls. OFSI works closely with international counterparts to align sanctions frameworks, improve compliance outcomes, and promote the exchange of best practices across jurisdictions.

The regulator has repeatedly emphasised that ignorance of sanctions obligations will not be accepted as a defence. Firms are expected to maintain proportionate, risk-based systems capable of identifying and preventing breaches, supported by regular internal training and independent compliance audits.

Legislative developments and the digital frontier

The UK’s legal framework for sanctions is primarily governed by SAMLA. This act gives ministers the authority to establish new sanctions regimes, either to fulfil international obligations from sources like the UN Security Council or to create a UK-led sanctions regime.

Recent legislative reforms continue to enhance the reach and sophistication of the UK sanctions regime. Amendments to The Russia (Sanctions) (EU Exit) Regulations 2019, new reporting duties for designated persons, and the Economic Crime and Corporate Transparency Act 2023 collectively signal a tightening of compliance expectations and a drive toward transparency.

The 2023 Act introduced far-reaching measures aimed at improving the integrity of corporate structures, requiring greater disclosure of beneficial ownership and expanding liability for misstatements. This has had a direct effect on sanctions enforcement by closing loopholes that previously enabled concealment of control or ownership by designated persons.

At the same time, policymakers have begun to confront the digital dimension of sanctions evasion. The rapid growth of cryptocurrencies, blockchain-based transactions and digital assets has created new avenues for sanctions circumvention. OFSI’s guidance increasingly addresses the responsibilities of crypto-asset service providers and financial technology firms – signalling that the digital economy is now firmly within the enforcement perimeter.

Challenges for clients

Sanctions compliance has evolved from a technical legal function into a strategic governance issue at the highest levels of corporate leadership. Boards are increasingly aware that sanctions breaches can carry not just financial penalties, but also reputational, political and criminal consequences.

For UK and multinational clients, the main challenges include:

• understanding rapidly changing designations and sectoral restrictions;
• ensuring group-wide compliance consistency across subsidiaries;
• managing third-party risks within supply chains; and
• interpreting overlapping guidance from OFSI, the US Treasury Department’s Office of Foreign Assets Control and EU authorities.

Clients also face uncertainty when legitimate transactions are delayed or blocked by financial institutions pending sanctions checks. In such instances, legal intervention becomes critical – both to clarify the regulatory position and to facilitate licensing or exemptions where appropriate.

Looking forward: a new era of sanctions governance

The UK’s sanctions landscape is expected to undergo further transformation in 2026 and beyond. The government has signalled its intention to consolidate enforcement mechanisms, streamline licensing processes, and expand the use of technology, including artificial intelligence for risk profiling and data analytics, to enhance monitoring and detection.

We anticipate greater alignment between sanctions and other regulatory regimes, particularly export controls, anti-money laundering and foreign investment screening. These areas are increasingly interlinked, forming a unified framework of economic statecraft designed to protect the UK’s national interests.