The Office of Financial Sanctions Implementation recently published changes to its approach to enforcement and launched a call for evidence on the ownership and control requirements. Ruxandra Murariu of Rahman Ravelli details the main points.
The Office of Financial Sanctions Implementation (OFSI) has recently revised its approach to investigations and civil enforcement. Between July and October 2025, OFSI sought views on proposed measures to enhance the effectiveness of its civil enforcement processes for financial sanctions and the Oil Price Cap. Following its consultation response on 29 January 2026, OFSI published its updated enforcement guidance on 9 February 2026, aimed at improving speed, transparency and efficiency in the investigation and penalisation of sanctions breaches.
Although the reforms apply only to OFSI’s civil enforcement powers, they signal a clear intention to strengthen deterrence and adopt a more assertive enforcement posture. While some measures are framed as reducing procedural burdens, the overall direction suggests a regulator seeking greater impact and credibility. Firms must therefore ensure that their sanctions compliance frameworks are robust and capable of withstanding detailed scrutiny.
Shortly after publishing its revised enforcement guidance, on 16 February 2026, OFSI launched a call for evidence on the operation of the ownership and control test in UK financial sanctions regulations. The review reflects industry concern about legal uncertainty, compliance costs and potential over-deterrence.
Tougher Penalty Framework
The clearest indication of a more robust approach is OFSI’s proposal to increase maximum penalties. Subject to legislative approval, the statutory maximum penalty will rise from £1 million to £2 million, and the value-based cap will increase from 50% to 100% of the breach value. This materially increases exposure in high-value cases and reinforces deterrence, particularly where breaches are repeated, deliberate or linked to systemic compliance failures.
Other significant procedural changes included in OFSI’s revised enforcement guidance are:
- Early Account Scheme (EAS)
Modelled on a similar mechanism introduced by the Prudential Regulation Authority, the EAS allows entities to provide OFSI at an early stage with a detailed account of the breach, its root causes and remedial steps. Participation may result in a standalone discount of up to 20%. Strategically, this incentivises early narrative control and structured engagement. EAS is not available for individuals as they are not able to carry out an investigation with sufficient independence.
- Revised Case Assessment Framework
OFSI has clarified how it evaluates:
- Severity (ranging from minor administrative failings to serious systemic breaches), and
- Conduct (mitigating, neutral or aggravating).
This enhances predictability but also formalises the analytical lens through which compliance failures will be assessed.
- Updated Penalty and Settlement Regime
After establishing a baseline penalty, OFSI may apply cumulative discounts as follows:
- Voluntary Disclosure and Co-operation (up to 30%)
- Early Account Scheme (up to 20%)
- Settlement (within 30 business days; 20%)
Discounts are additive (e.g. 30% + 20% = 50%). However, settlement requires waiver of ministerial review and appeal rights, and anonymised outcomes are not available. OFSI retains discretion to refuse settlement, particularly in cases involving intentional breaches, circumvention or poor co-operation.
- Financial Hardship Policy
In exceptional cases, OFSI may consider financial hardship. The burden of proof rests on the subject, and hardship will not necessarily reduce penalties in serious cases.
- Fixed Monetary Penalties
Lower-level reporting, information and licensing breaches may now attract fixed penalties of between £5,000 and £10,000. These will be published, reinforcing reputational consequences even for technical infringements.
Key enforcement themes
OFSI treats circumvention as highly aggravating; however, the absence of circumvention is not mitigating. Since 15 June 2022, financial sanctions breaches are subject to strict liability. Intent is no longer required to establish a breach. But intention, recklessness or wilful blindness materially increase penalty risk. Low-value breaches can still lead to enforcement, and multiple minor breaches may collectively be treated as serious misconduct. The burden rests on the subject to demonstrate that proportionate and good-faith due diligence was undertaken, particularly regarding ownership and control. Importantly, OFSI’s penalty matrix is indicative rather than determinative, and public interest considerations may justify escalation or de-escalation.
OFSI’s call for evidence on ownership and control
The review seeks to gather feedback from industry and other stakeholders on how the test is interpreted and applied in practice, the legal and compliance challenges it creates, and whether reforms may be needed to improve clarity, proportionality and alignment with international partners. The consultation forms part of a broader effort to ensure that the UK’s sanctions framework remains effective while providing sufficient certainty for firms seeking to comply with their obligations.
OFSI is seeking evidence on:
- How firms interpret and apply the ownership and control test in practice.
- The frequency and practical impact of the so-called “hypothetical control” limb.
- The compliance costs and de-risking behaviours arising from uncertainty.
- Whether existing statutory guidance is sufficiently clear and workable.
- Whether reforms, including alignment with international partners, would improve clarity and consistency.
The “Ownership and Control” test
Under current regulations, ownership and control is assessed through a two-limb test:
- Ownership limb – A designated person (DP) directly or indirectly holds more than 50% of shares or voting rights or has the right to appoint or remove a majority of the board.
- Control limb – A DP is able, if they choose, to ensure that the entity’s affairs are conducted in accordance with their wishes.
The second limb, described by OFSI as “hypothetical control”, extends beyond formal ownership and captures situations involving trust structures, layered ownership chains, proxies or indirect influence.
The High Court in Hellard & Others v OJSC Rossiysky Kredit Bank (in Liquidation) & Others [2024] EWHC 1783 identified four categories of control:
- De jure control
- Actual present de facto control
- Potential future de jure control
- Potential future de facto control
The final category, the potential future de facto control, has generated particular concern, as it may be inferred even in the absence of current evidence of control, provided there is a reasonable basis to believe control could be exercised.
Given the UK’s strict liability framework, uncertainty around the second limb has contributed to increased de-risking by firms seeking to avoid inadvertent breaches. OFSI acknowledges these challenges and is considering possible reforms, including:
- Aligning the threshold with the EU and US by moving to “50% or more”
- Introducing an aggregation model for multiple designated persons
- Clarifying the application of the control limb
Taken together, the enforcement reforms and the ownership and control review suggest OFSI is seeking to balance two objectives: strengthening deterrence while addressing market concerns about overreach and uncertainty. The call for evidence indicates recognition that the current framework may create disproportionate compliance burdens and inhibit legitimate economic activity. However, any move towards international alignment is likely to be calibrated carefully so as not to weaken the UK’s autonomous sanctions regime.
