What is OFSI and what powers does it have over businesses operating in the UK?

OFSI – the Office of Financial Sanctions Implementation, part of HM Treasury – is the primary UK authority for administering and enforcing financial sanctions. It maintains the UK consolidated list of designated persons, issues licences permitting otherwise prohibited transactions, and can impose civil monetary penalties on a strict-liability basis, meaning that a penalty may be imposed even where there was no intent to breach. OFSI also makes referrals to law enforcement where criminal conduct is suspected.

How does the EU's 21st sanctions package affect UK-based businesses that are no longer subject to EU law?

Although the UK is no longer an EU member state, businesses incorporated or operating in the UK may still have direct EU obligations if they have subsidiaries, branches or counterparties within the EU, transact in euros or are subject to EU-law contracts. The 21st package, adopted on 23 July 2026 under Regulation (EU) 2026/1848, and the anti-suit protection framework introduced by Regulation (EU) 2026/506 on 23 April 2026 are directly applicable to EU-connected entities and can affect UK-seated arbitration and High Court proceedings involving EU parties. A careful jurisdictional analysis is needed for any group with cross-border exposure.

What should a company do if it discovers a potential sanctions breach internally before OFSI becomes aware of it?

A prompt and carefully managed response is essential. The first step is to preserve all relevant records and seek legal advice before any disclosure is made or any statement is provided to a regulator. Voluntary disclosure to OFSI is a recognised mitigating factor in enforcement decisions, but the form, timing and content of any disclosure require precise handling to ensure that cooperation credit is not inadvertently forfeited. Ferraz & Whitmore can advise on the disclosure assessment, the preparation of any voluntary report and, if necessary, engagement with OFSI throughout the process.

Sanctions Compliance in the UK

Sanctions compliance in the United Kingdom requires businesses to navigate a layered framework of UK autonomous sanctions, residual EU obligations, OFSI enforcement and export control regimes – all of which have become materially more complex since Russia's full-scale invasion of Ukraine. A failure to screen counterparties, identify designated persons or report a potential breach can expose a company to civil penalties, criminal prosecution and reputational harm. Ferraz & Whitmore advises international businesses on building and stress-testing compliance programmes, responding to OFSI inquiries and managing cross-border exposure across multiple jurisdictions simultaneously.

Why Sanctions Compliance Has Become a Board-Level Issue in the UK

The United Kingdom operates its own autonomous sanctions regime under the Sanctions and Anti-Money Laundering Act 2018, administered primarily by the Office of Financial Sanctions Implementation (OFSI) within HM Treasury and, for export controls, by the Export Control Joint Unit (ECJU). Since 2022, the pace of designations and thematic packages has accelerated considerably. The EU's 21st sanctions package, adopted on 23 July 2026 under Regulation (EU) 2026/1848, and the 20th package of 23 April 2026 have each introduced measures that affect UK-based entities with EU subsidiaries, EU-currency transactions or EU-based counterparties. Although the UK no longer applies EU regulations directly, any business operating across both jurisdictions must map its exposure under both regimes.

A key development from 23 April 2026 is Council Regulation (EU) 2026/506, which introduced anti-suit protection for EU persons facing proceedings brought by sanctioned Russian persons in Russian courts in breach of agreed jurisdiction or arbitration clauses. UK-seated arbitration frequently involves EU-domiciled claimants or respondents, meaning that High Court anti-suit injunction applications and the new EU instrument can run in parallel – creating both opportunity and procedural complexity for clients managing Russia-related disputes.

From 24 May 2026, a ban on the digital rouble (RUBx) came into effect under the EU framework. Businesses that process rouble-denominated transactions or hold digital assets linked to Russian monetary infrastructure should review their treasury arrangements and correspondent banking relationships without delay.

Core Legal Instruments and Regulatory Actors

Understanding which authority has jurisdiction over a given transaction is the first step in any compliance analysis. The principal actors in the UK sanctions landscape are:

OFSI (Office of Financial Sanctions Implementation) – administers financial sanctions, issues licences for otherwise prohibited activity, and imposes monetary penalties under a strict-liability civil standard.
ECJU (Export Control Joint Unit) – oversees export controls and strategic goods licensing; relevant for dual-use items, technology transfers and certain services to sanctioned destinations.
FCA (Financial Conduct Authority) – expects regulated firms to embed sanctions screening into AML/KYC frameworks and can take regulatory action where systems are found deficient.
Companies House – increased its obligations for beneficial ownership transparency; understanding the ultimate beneficial owner of a counterparty is now integral to sanctions screening for corporate transactions.
High Court – the forum for anti-suit injunctions, asset freezing orders and Norwich Pharmacal applications in sanctions-related disputes; procedure is governed by the Civil Procedure Rules (CPR).

Where a client is also subject to EU sanctions – because it has EU subsidiaries, transacts in EUR or operates in an EU member state – our team works alongside our network to address both regimes. Our colleagues advising on sanctions and trade compliance in the Netherlands are regularly involved in multi-jurisdictional matters of this kind.

Common Pitfalls That Trigger Enforcement Risk

Most sanctions breaches investigated by OFSI do not arise from deliberate evasion. They arise from process failures, inadequate screening tools or misunderstanding of the asset freeze and circumvention prohibitions. The most common issues we see include:

Relying on outdated consolidated lists rather than current OFSI, UN and EU designations.
Failing to screen at the ultimate beneficial owner level, not just the named counterparty – a critical gap when dealing with complex group structures or nominee arrangements.
Treating the best-efforts obligation loosely: UK law requires active steps to avoid facilitating prohibited acts, not merely passive non-participation.
Overlooking export controls on technology, software and professional services that sit alongside financial sanctions but are administered separately.
Assuming that a transaction processed in a third country or non-USD/EUR currency falls outside the UK regime – jurisdictional nexus is determined by connection to UK persons, UK territory or UK currency, not solely by the currency of settlement.
Inadequate record-keeping: OFSI expects documented evidence of screening decisions, not merely a system log.

How Our Compliance Work Is Structured

At the decision stage, clients typically come to us in one of three situations: they are building or updating a compliance programme before entering a new market or counterparty relationship; they have received an OFSI or ECJU inquiry; or they have identified a potential breach internally and need to assess self-disclosure risk and strategy.

Our approach in each scenario follows a structured methodology: mapping the regulatory perimeter, assessing the specific transaction or programme against current designations, identifying any licence pathways, and – where a breach may have occurred – advising on voluntary disclosure, cooperation credit and remediation. For businesses operating across the UK and EU, we coordinate legal positions to avoid a scenario where compliance with one regime inadvertently creates exposure under another.

For a detailed, step-by-step account of how sanctions compliance procedures work in practice in the UK – including timelines, OFSI licence categories and disclosure mechanics – please refer to our Sanctions Compliance Guide for the United Kingdom, which we keep updated to reflect the current state of the law.

If your business is facing a sanctions-related question – whether a new counterparty review, a group restructuring with cross-border elements or a potential enforcement matter – we are available to discuss the situation. Contact us at info@ferrazwhitmore.com or visit our contacts page.

Cross-Border Dimension: UK, EU and Beyond

One of the defining features of the current sanctions environment is that legal exposure rarely respects a single jurisdiction's boundary. A UK-incorporated holding company with a Dutch operating subsidiary, a USD correspondent bank and a Swiss trading counterparty may face obligations under UK, EU, US and Swiss law simultaneously. Switzerland's adoption of a parallel provision to EU Regulation (EU) 2026/506 – through its own article 29d – is one illustration of how national frameworks are converging around common structural principles even where the legal instruments differ.

Ferraz & Whitmore is structured to advise on these overlapping obligations. Our UK corporate and sanctions practice works in close coordination with our wider European network, and our UK corporate law team is routinely involved in structuring transactions so that sanctions risk is assessed at the design stage rather than retrospectively.

Self-Assessment Checklist: Is Your Business Adequately Protected?

The following questions are a starting point for internal review. They do not constitute a legal opinion, but they reflect the areas most commonly raised in OFSI and FCA reviews:

Are your sanctions lists updated in real time, and does your screening tool cover OFSI, the UN consolidated list and, where relevant, EU and OFAC lists?
Does your screening process extend to ultimate beneficial owners, not only named parties?
Do your contracts include appropriate sanctions representations, termination rights and audit clauses?
Is there a documented escalation path when a potential match is identified?
Have staff with transaction approval authority received sanctions training in the past 12 months?
Do you have a written policy on voluntary disclosure and the conditions under which it would be considered?
Have you assessed your exposure to the digital rouble/RUBx prohibition and to the anti-suit protection framework under Regulation (EU) 2026/506, where EU counterparties are involved?

If any of these areas are uncertain or partially addressed, a targeted legal review is advisable before a new transaction cycle begins or before a regulatory inquiry arises.

Working With Ferraz & Whitmore on Sanctions Matters

Our sanctions and trade practice in the United Kingdom focuses on practical outcomes: identifying real risk, providing actionable guidance and, where enforcement contact has occurred, managing the process with OFSI or the ECJU in a manner that demonstrates good faith and competence. We do not offer generic compliance templates as a substitute for analysis of the specific facts. Every engagement begins with an assessment of the client's actual exposure before recommendations are made.

We work with international businesses, investment funds, financial institutions and trading companies. For cross-border mandates, we coordinate positions across offices and referral relationships to ensure consistency of advice across jurisdictions – reducing the risk that a solution in one country creates a problem in another.

To discuss your sanctions compliance position or a specific transaction, please reach out to our team at info@ferrazwhitmore.com or through our contacts page. We are happy to arrange an initial discussion to scope the matter before any engagement is formalised.

Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.

Reviewed by

Mikhail Volkov

Legal Analyst · CIS & Sanctions