Executive Summary
- What’s new: The office responsible for UK financial sanctions enforcement announced changes to its enforcement procedures and penalty discounts after a public consultation.
- Why it matters: The changes, which affect all businesses that fall within the scope of the UK’s sanctions regime, are intended to provide additional certainty and transparency in the enforcement process. The maximum statutory penalty is expected to rise, but other changes allow for discounts of up to 70% off the base penalties if companies meet certain criteria.
- What to do next: Companies should review record-keeping practices to ensure those are sufficient to support any potential engagement with UK sanctions authorities in the future, and develop crisis management and communications plans given the government’s commitment to publicising enforcement outcomes.
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On 29 January 2026, the UK Office of Financial Sanctions Implementation (OFSI) published its response to a public consultation on proposed changes to its enforcement processes. These changes are designed to strengthen the UK’s financial sanctions regime and provide greater certainty and transparency for firms in an increasingly complex sanctions enforcement environment. This followed shortly after OFSI announced a fine against a UK financial institution for breaches of the UK’s sanctions against Russia.
In response to a cross-government review conducted in 2025, OFSI developed five key proposals to improve the resolution of enforcement cases and increase the deterrent effect of enforcement.
OFSI has since confirmed that it will proceed with all five initial proposals, while also incorporating feedback from 28 responses received during a 12-week public consultation. OFSI has emphasised that it intends to expedite its investigations, while reducing the number of active cases by prioritising those which have the “greatest deterrent or compliance impact,” i.e., cases which are the most serious, support broader objectives or expose sectoral weaknesses and vulnerabilities.1
Key Changes to the Enforcement Framework
The following measures will take effect when OFSI publishes its updated Enforcement and Monetary Penalties guidance later in February 2026. However, the proposed increase in the maximum statutory penalty will require parliamentary approval before coming into force.
Case assessment matrix and voluntary disclosure discount. OFSI will publish a new case assessment matrix to provide greater transparency and predictability in its penalty processes. The framework will introduce a “Voluntary Disclosure and Cooperation” discount that can enable a reduction of 30% on the base penalty. However, this represents a reduction in the available discount from the current 50% for serious cases.
While respondents to the public consultation expressed concern that a reduction in discount would likely reduce incentives to self-report, OFSI assessed this against the negative impact that a high discount could have on the deterrent impact of monetary penalties and, in turn, the effectiveness of the UK’s sanctions regimes. OFSI will retain discretion as to the level of discount awarded, depending on the extent of initial disclosure and cooperation. The new matrix will also clarify how OFSI categorises case severity and the factors it considers as mitigating or aggravating.
Settlement scheme. A new Settlement Scheme will allow for a discount of up to 20% on the base penalty if a successful agreement is reached within a 30-business day settlement period. To participate, subjects must agree not to contest OFSI’s findings and waive their right to ministerial review or a judicial appeal of OFSI’s decision. Admission of the breach (which could expose organisations to additional legal liabilities) will not be required. The settlement discount can be combined with other available discounts, and subjects shall be permitted to provide input on the public penalty notice.
Early Account Scheme (EAS). The EAS will allow subjects under investigation to provide a comprehensive account of a breach at an early stage in order to expedite the investigation process. This could include, for example, meetings between the agency and the subject, as opposed to dealing only in written correspondence. Where enforcement action is taken, an EAS discount of up to 20% on the base penalty will be available. The EAS discount is available independent of participation in the Settlement Scheme, and on top of any other applicable discount.
Streamlined process for information, reporting and licensing offences. OFSI will introduce a simplified enforcement process for these types of offences, with set penalties outlined in public guidance. Fixed monetary penalties of £5,000 or £10,000 will be introduced, with a shorter 15-business day representations window. However, OFSI will retain discretion to impose penalties below or up to the statutory maximum for these specified offences. Not all breaches will result in a penalty; OFSI may instead issue warnings, disclosures or take no further action where appropriate.
Increased statutory maximum penalty amounts. The maximum penalty OFSI can impose for a breach of financial sanctions will be doubled, from the greater of £1 million or half the total value of the breach to the greater of £2 million or the total value of the breach. This increase will only take effect once the necessary legislation is passed. The timeline for that process remains uncertain.
Note that, under this revised framework, it would be possible for investigation targets to obtain a combined discount on the penalty of up to 70% if all criteria are satisfied.
Enforcement in Action
The response to the consultation has come at a time when sanctions-related enforcement activity is increasing. OFSI has said that, as of April 2025, the agency had 240 active cases under investigation, up from 172 as of April 2023. We have also seen OFSI issue a number of fines for breaches of the UK’s Russia sanctions regime in recent months, including a very recent penalty against a financial institution.
On 26 January 2026, OFSI published details regarding an £160,000 fine imposed on a UK financial institution for breaches of the UK’s Russia sanctions. The fine related to 24 payments processed by the bank, between 8 and 24 February 2023, to and from an account held by a designated individual. The breaches resulted from alleged shortcomings in the bank’s sanctions screening systems and internal procedures, including a failure to detect transliteration name variations and the inadequate escalation of an automatically generated Politically Exposed Person (PEP) review. While OFSI determined that the case was “serious”, owing to various aggravating factors such as the high value and number of transactions, and the fact that OFSI deemed the bank’s screening systems to be insufficient commensurate to its sanctions exposure, the fine was ultimately reduced by 50% following a prompt, voluntary disclosure by the firm in 2023 and subsequent cooperation in response to OFSI’s information requests.
Key Points and Next Steps
With the exception of the increase in statutory maximum penalties, all of OFSI’s enforcement framework proposals will be implemented through updates to OFSI’s public enforcement guidance in February 2026. To best prepare, organisations should:
- Stay abreast of forthcoming OFSI public guidance on the newly launched GOV.UK enforcement webpage, which will detail the new case assessment matrix, penalty processes, and eligibility for discounts.
- Monitor for legislative changes regarding an increase to the statutory maximum penalties.
- Reassess risk appetite and consider boosting compliance resources and infrastructure as OFSI’s enforcement focus tightens.
- Sharpen documentation and record-keeping practices to support any future engagement with OFSI, including voluntary disclosures, EAS submissions, and settlement negotiations.
- Develop or update crisis management and communications plans to address potential reputational impacts arising from enforcement actions or settlements, given OFSI’s commitment to publicising enforcement outcomes.
1 This client alert is for informational purposes only and does not constitute legal advice. Complex assessments often have to be made regarding which sanctions regime applies in any given instance, given the multinational touchpoints of many entities and individuals. In that regard, given the complex and dynamic nature of these sanctions regimes, there may be developments not captured in this summary. Additionally, while the summary was accurate when written, it may become inaccurate over time given developments. For all of these reasons, you should consult with a qualified attorney before making any judgments relating to sanctions, as there are potentially severe consequences for failing to adhere fully to sanctions restrictions.
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