FCA Highlights Progress and Remaining Challenges in Sanctions Compliance

Financial services firms across the UK have strengthened their sanctions compliance frameworks in recent years, helping to freeze approximately £37 billion in assets. However, the Financial Conduct Authority (FCA) warns that significant compliance gaps remain.

The regulator has published findings from its latest review of sanctions systems and controls, identifying both strong industry practices and areas requiring improvement.

Growing Focus on Sanctions Compliance

The Office of Financial Sanctions Implementation (OFSI) and the Office of Trade Sanctions Implementation (OTSI) are responsible for enforcing UK financial and trade sanctions. The FCA supports these efforts by supervising regulated firms and assessing whether they have effective systems and controls in place.

Since February 2022, the FCA has reviewed sanctions compliance arrangements at more than 150 financial services firms operating across multiple sectors.

Positive Findings Across the Industry

The regulator found numerous examples of firms implementing robust controls that successfully identified and prevented potential sanctions breaches before they occurred.

Many organisations have invested significantly in compliance technology, staff training, and enhanced monitoring procedures to address evolving sanctions requirements.

Common Causes of Sanctions Breaches

Despite this progress, the FCA identified several recurring weaknesses that contributed to reported sanctions breaches.

• Insufficient customer due diligence processes.
• Weaknesses in transaction monitoring and alert management.
• Inadequate name screening procedures.
• Deficiencies in managing frozen assets.
• Failure to comply fully with licensing requirements.

These issues continue to expose firms to regulatory, financial, and reputational risks.

Trade Sanctions Remain a Key Challenge

The FCA also noted that many firms face difficulties detecting and preventing breaches related to trade sanctions. These restrictions often involve the export or import of specific goods, technologies, and services.

While firms generally employ a broad range of controls for trade sanctions compliance, the complexity of these requirements creates ongoing challenges for compliance teams.

Russian, Iranian and North Korean Sanctions Under Scrutiny

Most reported sanctions-related incidents continue to involve the Russian sanctions regime. However, the FCA has also observed increasing reports linked to sanctions involving Iran and North Korea, as well as ongoing cases connected to Libya.

Strengthening Compliance for the Future

To support the industry, the FCA has shared examples of both good and poor practices identified during its reviews. By learning from these findings, firms can further enhance their sanctions frameworks and reduce the likelihood of future breaches.

As global sanctions regimes continue to evolve, maintaining strong compliance controls remains essential for protecting businesses, customers, and the wider financial system.