Summary

On 5 June 2026, the UK’s Financial Conduct Authority (FCA) and HM Treasury’s Office of Financial Sanctions Implementation (OFSI) published a renewed Memorandum of Understanding (the MoU) setting out their arrangements for co-operation and information sharing in relation to UK sanctions.¹  This followed another recent Memorandum of Understanding, which the FCA entered into with the newly created Office of Trade Sanctions Implementation (OTSI), dated 28 May 2026.²

The renewed MoU comes against a backdrop of significantly heightened regulatory activity and enforcement in the UK sanctions space:

• The value of frozen assets reported in the United Kingdom increased from £24.4 billion in 2023/2024 to £37 billion in 2024/2025.³
• The announcement at the 2026 G7 summit of 70 new UK sanctions targeting the Russian shadow fleet, military supply chains and finance networks.⁴
• On 28 May 2026, the FCA published a detailed report on its findings from a multi-year review of good and poor practices in firms’ sanctions systems and controls (FCA Report).⁵
• OFSI undertook 57 enforcement actions in the 2024/2025 reporting period, with 240 active cases as of April 2025 (of which 151 were proactively identified rather than arising from self-reports).⁶ Most recently, Sabre Global Technologies Limited (Sabre), was fined over £1 million.⁷

The FCA’s Report identified significant weaknesses across the firms assessed, including in: client and transaction due diligence, transaction and name screening, management of frozen assets and licence compliance, and outsourcing to third-party sanctions screening providers without adequate oversight.⁸

Taken together, these developments underscore the importance of robust sanctions systems and controls for all FCA-supervised firms and the increasing risk of dual regulatory scrutiny from both the FCA and OFSI.

The MoU

The MoU replaces (with minimal updates) the previous agreement dated 21 November 2023 and reaffirms the co-operation and the parties’ intention to share relevant information. The categories includes information relating to:

• Suspected or actual sanctions breaches identified by OFSI that suggest weaknesses in an FCA-supervised firm’s systems and controls.
• Suspected or actual sanctions breaches identified by the FCA that fall within OFSI’s competencies.
• Suspected or actual breaches where joint investigations would be beneficial.

Both the FCA and OFSI have wide powers to utilise the information shared in executing their regulatory duties including but not limited to investigations, enforcement action and supervision of firms.

FCA Reinforces Its Expectations on Sanctions Systems and Controls in Firms

The FCA Report reviewed the sanctions systems and controls of more than 150 supervised firms between the period of 2022 to 2026. It was noted that during this period, the UK sanctions regimes have grown significantly both in scale and complexity.⁹

The regulator’s focus was specifically how firms prevent, detect and respond to potential sanctions breaches. The FCA identifies examples of both good and poor practices; on the one hand, it highlighted the following good practices:

• Policies and Training: Maintaining up-to-date sanctions policies and annual training sessions with clear guidance on prohibited activities; formal sanctions screening policies which include controls for reviewing potential exclusions and those cases flagged for review.
• Governance: Formal governance processes and policies for screening; and money laundering reporting officer (MLRO) reports that assess relevant sanctions developments and impacts on firm risk assessments.

On the other hand, the FCA drew attention to a number of poor practices, including:

• Third-Party Delegation: Firms delegated due diligence or sanctions screening to third parties without adequate oversight or arrangements in place to test the controls and procedures of the third party.
• Due Diligence: Firms failed to utilise enhanced due diligence when assessing high-risk or politically exposed person (PEP) matters. Weaknesses were evident where ownership structures were multilayered, with firms struggling to identify beneficial ownership, upstream ownership and indirect sanctions exposure with procedures lacking to confirm this information.
• Management of Frozen Assets and Licence Compliance: Major causes of suspected sanctions breaches were firms’ failures to properly freeze assets and keep them frozen, and firms and their clients failing to meet the requirements of sanctions licensing.
• Screening Policies: Firms had weak screening frameworks with outdated sanctions lists and gaps in ownership screening. Systems were not embedded into operational practice and were unable to flag variant spellings, or minor similarities during the screening.
• Scope of Policies and Group Policies: Policies that do not address or keep updated sanctions measures beyond asset freezes (e.g., investment bans, sectoral or trade restrictions). Firms lacked sufficient information sharing with overseas branches to verify UK sanctions compliance and firms had inadequate oversight of group-wide sanctions policies and procedure implementation at branch level.

This comes against a backdrop of a heavy focus from the FCA on firms’ governance and operations. As readers will be aware, the FCA has broad reach to impose fines, operational restrictions and take enforcement action against firms—even where no actual sanctions breach has occurred—if it considers that a firm’s sanctions controls are inadequate. In late 2024, the FCA imposed a fine of approximately £29 million on Starling Bank for financial crime failings, including serious weaknesses in its sanctions screening framework.¹⁰  The FCA Report could signal an increase in FCA enforcement action in this area.

In addition, on 16 February 2026, the FCA published new guidance specifically relating to how to report sanctions evasions – an area that OFSI has increasingly focused on.¹¹

Recent Developments at OFSI

As OFSI marks the 10-year anniversary of its establishment, it has evolved from a screening body into a sophisticated sanctions enforcement agency with an expanding reach and capability.¹²  It is increasingly identifying cases proactively through intelligence rather than relying solely on self-reports, and although OFSI continues to encourage voluntary disclosure, there appears to be a growing willingness to launch its own investigations into suspected UK sanctions breaches.

Only a few months ago it issued an updated enforcement framework, which introduced several significant changes to its penalty and discount regime.¹³  One of the key updates was the proposed doubling of the statutory maximum penalty from £1 million or 50% of the breach value (whichever is greater) to £2 million or 100% of the breach value.¹⁴  For further details, please see this Akin alert.

Notably, OFSI’s enforcement activity is on the rise. As of April 2025, OFSI had 240 active cases under investigation (with a growing proportion identified through non-self-reported sources), and in 2024-25 it brought 57 enforcement actions,¹⁵ compared with nine in 2022-23.¹⁶

There have been 11 monetary penalties levied between September 2024 and May 2026, which totalled £2.6m. OFSI’s latest penalty, imposed on Sabre for in excess of £1 million, was one of its largest fines in the past few years and a significant increase from other recent actions which have tended to be in the tens or low hundreds of thousands.¹⁷

The Sabre penalty, in particular, is the first penalty issued by OFSI for sanctions evasion, demonstrating its increased enforcement focus in this area, aligning with the FCA’s call for reports of sanctions evasion. In addition, the penalty reinforces the FCA’s remarks on poor practices around screening and policies and procedures, emphasising that “firms should maintain up-to-date policies, procedures, and training, supported by competent senior oversight and clear accountability. Sanctions policies for firms operating in the UK must be tailored to the UK’s sanctions regime. Firms should test that sanctions screening systems are working as intended and have clear and robust escalation of potential sanctions concerns. Firms must take appropriate action in response to sanctions red flags such as blocked payments or notification of sanction concerns from financial institutions.”¹⁸

Practical Considerations for Clients

The renewed MoU, together with the FCA’s Report and OFSI’s recent fines, signals an increasingly active enforcement landscape. In terms of practical considerations and ways in which firms and their senior management can help to mitigate risk, the following should be borne in mind.

• Risk Assessment: Firms should understand the risks posed to (and by) their business and have in place appropriate systems and controls. Customer and transaction journeys should be reviewed and assessed to ensure that the control environment is commensurate with the level of risk.
• Third-Party Providers: Firms cannot outsource responsibility and liability for sanctions compliance. Where third-party screening providers are used, firms must maintain adequate governance, oversight and responsibility. 
• Due Diligence: Firm’s due diligence should include sanctions-specific questions, with enhanced questions and review frequencies for high-risk customers, trades, transactions and complicated corporate structures.
• Screening Systems: Firms should ensure their screening systems cover beneficial ownership structures and not just direct name matches. Fuzzy matching logic that remains effective even where titles or additional name elements are present is recommended.
• Sanctions Coverage: Policies and controls should address, and be kept updated to reflect, the full range of UK sanctions measures (not only asset freezes, but including sectoral sanctions, investment bans and maritime services restrictions).
• Alert Monitoring: Firms should undertake periodic testing and quality assurance of alert investigations. There should also be clearly defined escalation policies.
• Group/Global Policies: Firms operating within international groups should ensure that UK-specific requirements are understood and followed across all global entities with training extended to local offices. Such policies should also clearly map out escalation and reporting processes. 
• Sanctions Evasion: Firms should ensure that training, policies and procedures clearly address the risks of sanctions evasion including attempts to manipulate payment channels which may constitute circumvention.

1 FCA and OFSI, “Memorandum of Understanding” (5 June 2026), available at: https://www.fca.org.uk/publication/mou/mou-fca-ofsi.pdf.

2 https://www.fca.org.uk/publication/mou/mou-fca-otsi.pdf.

3 OFSI, “Effective Sanctions: OFSI Annual Review 2024-25” (October 2025), available at: https://assets.publishing.service.gov.uk/media/69ce735f826d774e7b263dcc/OFSI_Annual_Review_2024-25.pdf.

4 Foreign, Commonwealth & Development Office, “UK clamps down on shady networks supplying Putin’s illegal war with new sanctions package” (16 June 2026), available at: https://www.gov.uk/government/news/uk-clamps-down-on-shady-networks-supplying-putins-illegal-war-with-new-sanctions-package.

5 FCA, “Sanctions systems and controls: our firms, our findings” (28 May 2026), available at: https://www.fca.org.uk/publications/good-and-poor-practice/sanctions-systems-and-controls-our-firms-our-findings.

6 OFSI, “Effective Sanctions: OFSI Annual Review 2024-25” (October 2025), available at: https://assets.publishing.service.gov.uk/media/69ce735f826d774e7b263dcc/OFSI_Annual_Review_2024-25.pdf.

7 This is the largest penalty imposed since the Russian invasion of Ukraine in 2022.

OFSI, “DB Penalty Notice: Imposition of Monetary Penalty – Sabre Global Technologies Limited (SGTL)” (17 June 2026), available at: https://www.gov.uk/government/publications/imposition-of-monetary-penalty-sabre-global-technologies-limited-sgtl.

8 FCA, “Sanctions systems and controls: our firms, our findings” (28 May 2026), available at: https://www.fca.org.uk/publications/good-and-poor-practice/sanctions-systems-and-controls-our-firms-our-findings.

9 FCA, “Sanctions systems and controls: firms’ response to increased sanctions due to Russia’s invasion of Ukraine” (20 March 2024), available at: https://www.fca.org.uk/publications/good-and-poor-practice/sanctions-systems-and-controls-firms-response-increased-sanctions-due-russias-invasion-ukraine.

10 FCA, “FCA fines Starling Bank for failings in its financial crime systems and controls” (2 October 2024), available at: https://www.fca.org.uk/news/press-releases/fca-fines-starling-bank-failings-financial-crime-systems-and-controls.

11 FCA, “Reporting Sanctions Evasions” (12 February 2026), available at: https://www.fca.org.uk/firms/financial-crime/financial-sanctions/reporting-sanctions-evasions.

12 OFSI, “Marking 10 years of OFSI: partnership, progress and the future of financial sanctions” (11 May 2026), available at: https://ofsi.blog.gov.uk/2026/05/11/marking-10-years-of-ofsi-partnership-progress-and-the-future-of-financial-sanctions/.

13 OFSI, “Financial sanctions enforcement and monetary penalties guidance” (9 February 2026), available at: https://www.gov.uk/government/publications/financial-sanctions-enforcement-and-monetary-penalties-guidance/financial-sanctions-enforcement-and-monetary-penalties-guidance.

14 OFSI, “New and updated enforcement framework – a message from Giles Thomson, Director of OFSI” (29 January 2026), available at: https://ofsi.blog.gov.uk/2026/01/29/new-and-updated-enforcement-framework-a-message-from-giles-thomson-director-of-ofsi/.

15 OFSI, “OFSI Annual Report 2024-2025: Effective Sanctions” (2 April 2026), available at: https://www.gov.uk/government/publications/ofsi-annual-review-2024-25-effective-sanctions/ofsi-annual-review-2024-25-effective-sanctions.

16 https://www.gov.uk/government/publications/ofsi-annual-review-2022-to-2023-strengthening-our-sanctions/ofsi-annual-review-2022-to-2023-strengthening-our-sanctions.

17 OFSI, “DB Penalty Notice: Imposition of Monetary Penalty – Sabre Global Technologies Limited (SGTL)” (17 June 2026), available at: https://www.gov.uk/government/publications/imposition-of-monetary-penalty-sabre-global-technologies-limited-sgtl; and OFSI, “Financial sanctions enforcement: decisions and monetary penalties imposed (17 June 2026), available at: https://www.gov.uk/government/collections/enforcement-of-financial-sanctions.

18 Ibid, para 38.