Financial sanctions are a key tool of UK foreign policy and national security, used to restrict the financial activity of designated individuals, entities and governments. The most common measure is an asset freeze, which prohibits dealing with the frozen funds or economic resources of a designated person and bars making funds or economic resources available to or for their benefit, directly or indirectly. Breaching a financial sanction is a serious offence regardless of intent in some respects, because the prohibitions operate on a strict-liability basis for the underlying conduct.
OFSI and the legal framework
The Office of Financial Sanctions Implementation (OFSI), part of HM Treasury, administers and enforces UK financial sanctions. OFSI maintains the consolidated UK Sanctions List, grants licences permitting otherwise-prohibited activity, issues guidance, and can impose monetary penalties. Since Brexit, the statutory foundation is principally the Sanctions and Anti-Money Laundering Act 2018, under which the UK now creates its own autonomous sanctions regimes by regulation, alongside measures retained from EU-derived law.
Why it matters
Sanctions breaches can result in substantial OFSI civil monetary penalties and criminal prosecution. Firms must screen customers, transactions and counterparties against the UK Sanctions List, report any frozen assets or knowledge of designated persons to OFSI, and seek a licence before dealing with frozen funds. Sanctions compliance sits alongside, but is legally distinct from, anti-money laundering obligations.
Who it applies to
All UK persons and businesses, with particular obligations on banks, payment firms, insurers and other financial institutions that process funds.
Related terms
OFSI, AML/CFT and financial crime.