Bigger Stick, Sweeter Carrot?: Consulting on Enhanced Enforcement for Sanctions Breaches
October 2025Economic or financial sanctions are punitive measures imposed by governments against foreign nations considered to be engaged in conduct which violates international law. These may include asset freezes on individuals or organisations connected to the targeted foreign regime, or import or export bans on certain goods or services of strategic importance.
Following Brexit, the Office of Financial Sanctions Implementation (OFSI) has been the principal governmental body responsible for overseeing the UK’s independent financial sanctions regime. The Sanctions and Anti-Money Laundering Act 2018 (SAMLA) gives the UK autonomous powers to impose, implement, enforce and lift sanctions whilst upholding its international obligations under UN sanctions. OFSI notes that the UK currently has 36 live sanctions ‘regimes’ created through regulations under SAMLA.
Although independent, the UK’s sanctions framework largely remains aligned to that of the European Union. OFSI maintains the list of sanctioned individuals and organisations subject to sanctions, enforces asset freeze rules, and handles licence applications for permitted specific transactions.
In July, OFSI opened a consultation (closing on 13 October 2025) to enhance its enforcement powers and streamline its investigative and penalisation functions. As part of the proposals, OFSI would be empowered to impose higher fines against companies that break the rules.
Penalties for breaching sanctions rules
The effectiveness of the UK sanctions rules depends upon full compliance from UK companies. For that reason, OFSI is able (and willing) to impose serious penalties for non-compliance.
Breaking sanctions rules carries serious penalties for non-compliant firms. In a case where the breach or failure relates to particular funds or economic resources and it is possible to estimate the value of the funds or economic resources; the permitted maximum is the greater of:
(a) £1,000,000; or
(b) 50% of the estimated value of the funds or resources.
In any other case, the permitted maximum is £1,000,000.
As at October 2025, the three highest penalties imposed by OFSI to date are as follows:
| Organisation | Date | Sector | Penalty | Reason |
| Standard Chartered Bank | 18 February 2020 | Banking | £20.47m (£7.69m & £12.77m) | Making funds available to a designated person, without a licence |
| Herbert Smith Freehills CIS LLP (HSF Moscow) | 20 March 2025 | Legal | £465,000 | Making funds available for the benefit of a designated person without a licence |
| Markom Management Limited (MML) | 31 July 2025 | Management | £300,000 | Making funds available to a designated person without a licence |
Consultation: OFSI’s reform package
OFSI recently released a consultation paper, “OFSI’s enforcement processes”, which outlined a number of proposals to increase the maximum penalties available for breaking sanctions rules.
The paper also identified possible reforms to make enforcement processes more efficient and transparent, reducing burdens on OFSI and defendants. A number of factors had precipitated these proposals, including:
- a growth in caseload following the Russian invasion of Ukraine and proliferation of associated sanctions measures;
- the legal test for imposing penalties for breaches of financial sanctions being changed to one of strict liability in 2022; and
- the time-consuming nature of sanctions investigations.
OFSI has made the following proposals to address these challenges:
- an increase in the maximum penalties available for a breach;
- changes to OFSI’s public case assessment guidance and penalty discounts for voluntary disclosure and co-operation;
- the introduction of a settlement scheme for monetary penalty cases;
- the introduction of an Early Account Scheme (EAS) that would enable subjects of an OFSI enforcement investigation to provide a complete factual account of the matters under investigation to OFSI; and
- the introduction of a streamlined process with indicative penalties for appropriate cases involving information, reporting and licensing offences.
We have considered below the most significant proposals in greater detail.
Changes in penalty amounts and approach to setting penalty amounts
OFSI has proposed increasing the maximum fines for breaches of sanctions. In a case where the breach or failure relates to particular funds or economic resources and it is possible to estimate the value of the funds or economic resources, OFSI considers the permitted maximum should be the greater of:
(a) £2,000,000; or
(b) 100% of the estimated value of the funds or resources.
In any other case, the permitted maximum is £1,000,000.
Changing the maximum permitted penalties would, in OFSI’s view, enable it to enforce breaches of financial sanctions or the Oil Price Cap in a more impactful way. It would strengthen the deterrent effect of civil enforcement for cases that have been assessed as “Serious” or “Most Serious” within OFSI’s classification system.
Key changes proposed to OFSI’s processes
The settlement scheme would be a means of resolving investigations more quickly. In appropriate cases, OFSI would propose a penalty in principle to the Defendant, and an opportunity to enter settlement discussions. These would be conducted on a without prejudice basis over 30 days, aiming to reach agreement on an appropriate penalty and outcome. In cases where agreement is reached, a discount of 20% may be secured, in addition to any further discount applied for Voluntary Disclosure and Co-operation with OFSI’s inquiry.
OFSI also proposes to introduce an Early Account Scheme (EAS). Where agreed, the subject of an investigation would provide a detailed factual account of the potential breaches together with all relevant materials and evidence. This structured approach is intended to encourage early and comprehensive disclosure. This could significantly expedite the investigation stage of a case. A similar scheme was introduced by the Prudential Regulation Authority, part of the Bank of England, in 2024.
Where a defendant both enters settlement discussions and provides a satisfactory account under EAS, the size of the discount could be increased from 20% to 30%.
Conclusion
If introduced, OFSI’s proposed changes would further incentivise firms to comply with the UK’s financial sanctions rules. While OFSI has only once levied a penalty above £1 million, it is necessary to raise the maximum levels of fines as even the theoretical risk of such a penalty will raise the incentive for compliance.
The proposals for settlement and early account mechanisms may look like softness on the regulator’s part. In reality, this has the potential to curtail the time spent by OFSI on individual investigations and thereby to look at a wider array of cases. That in turn, raises the probability that breaches will be apprehended and firms punished. However, where discounts are secured against penalties, defendants will still face reputational damage and the risk of contractual fall-out if they have provided warranties to comply with the rules. For that reason, firms would be well advised to review their compliance systems and ensure these remain fit for purpose.
Firms should monitor the outcome of the consultation closely and prepare for a more assertive enforcement landscape. To help firms navigate it, stay tuned for our upcoming guide to UK sanctions law, which will be released later this autumn.
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