The Financial Conduct Authority (FCA) has highlighted both progress and ongoing weaknesses in how UK financial firms manage sanctions compliance, noting that £37bn worth of assets were frozen in the UK as of last year. While firms have strengthened their systems, the regulator warned that significant gaps remain in the detection and prevention of sanctions breaches.
Financial sanctions and trade sanctions in the UK are implemented respectively by the Office of Financial Sanctions Implementation (OFSI) and the Office of Trade Sanctions Implementation (OTSI). The FCA supports these bodies through its supervisory role over firms in the financial services sector, including assessments of whether firms have adequate sanctions systems and controls in place.
Since February 2022, the FCA has proactively assessed the sanctions systems and controls of more than 150 firms across a range of financial services sectors. In its latest review, the regulator observed repeated examples of strong controls, with firms identifying potential sanctions breaches before they occurred. However, it also identified common root causes behind reported breaches.
Identified weaknesses in sanctions controls
According to the FCA, the most frequent causes of reported sanctions breaches were weaknesses in due diligence, alert management, and transaction and name screening. Deficiencies were also identified in the management of frozen assets and in ensuring compliance with licences.
Firms were found to face particular challenges in detecting and preventing specific breaches of trade sanctions. The FCA noted that the range of controls used for trade sanctions compliance was broader than those applied to financial sanctions. To address these issues, the regulator is sharing examples of good and poor practice identified in its work, with the aim of helping firms further strengthen their sanctions controls.
Reports submitted by firms to the FCA continue to relate primarily to the Russian sanctions regime. The regulator also received reports concerning Libya and, with increasing frequency, Iran and North Korea.
New cooperation agreement with OTSI
On 28 May 2026, the FCA signed a Memorandum of Understanding (MoU) with the Office of Trade Sanctions Implementation. The agreement sets out arrangements for cooperation and the sharing of intelligence between the two organisations in relation to trade sanctions.
The FCA already has an MoU in place with the Office of Financial Sanctions Implementation. The new agreement with OTSI is intended to complement existing arrangements and support more effective oversight of firms’ adherence to both financial and trade sanctions requirements.
