This article was first published by Thomson Reuters Regulatory Intelligence on 10 February 2026.
January 2026 saw a series of consequential developments in the UK financial sanctions landscape, indicating a shift towards sharper compliance expectations and more streamlined enforcement. The imposition of a new civil monetary penalty; the adoption of a single, consolidated UK Sanctions List; and forthcoming reforms to the UK Office of Financial Sanctions Implementation’s (OFSI) civil enforcement framework reinforce the need to maintain rigorous sanctions screening controls, ensure robust internal oversight and remain alert to evolving expectations around voluntary disclosure and engagement with OFSI.
Penalty for sanctions screening failures
On 26 January, OFSI imposed a civil monetary penalty of £160,000 on Bank of Scotland plc for breaches of regulations 11 and 12 of the Russia (Sanctions) (EU Exit) Regulations 2019 between 8 and 24 February 2023.1 The underlying conduct related to the bank’s processing of 24 payments, totalling more than £77,000, to and from an account held by a designated person.
The bank’s parent company, Lloyds Banking Group, made a prompt voluntary disclosure to OFSI, resulting in the application of a 50% voluntary disclosure discount and reducing what would otherwise have been a £320,000 penalty.
The breaches appear to have taken place, at least in part, because the spelling of the individual’s name on their UK passport differed from the spelling on the OFSI Consolidated List of Asset Freeze Targets. This underlines the importance for companies in high-risk sectors of ensuring sophisticated automated sanctions screening processes are in place, complemented by strong human oversight and clear escalation pathways when sanctions concerns arise.
The case shares the hallmarks of other recent OFSI enforcement cases: accidental technical breaches of relatively low value and seriousness that were self-reported and in which the reporting entity investigated and cooperated fully with the authorities. This pattern suggests that OFSI is primarily using its enforcement powers to reinforce compliance expectations and drive improvements in firms’ internal controls, rather than seeking proactively to identify unreported breaches.
United Kingdom moves to single sanctions list
On 28 January, the United Kingdom adopted the UK Sanctions List as its sole list for sanctions designations. The OFSI Consolidated List of Asset Freeze Targets will no longer be updated.
In light of accidental technical breaches of the kind described above, the government will hope that a more streamlined sanctions screening process will help companies avoid the cost of duplication and more readily identify when they may be dealing with a designated person.
Companies are advised to ensure that all automated and manual screening processes, including those performed by a third-party provider, involve a review of the UK Sanctions List and not the OFSI Consolidated List of Asset Freeze Targets.
Reforms to civil enforcement framework
On 29 January, OFSI published its response to a public consultation outlining significant reforms to the United Kingdom’s civil enforcement processes for financial sanctions.2 The changes took effect on 9 February with the publication of updated Enforcement and Monetary Penalties guidance.3
Key reforms include:
- improving guidance on how OFSI assesses cases and the consideration of aggravating and mitigating factors;
- implementing a civil settlement scheme aimed at shortening enforcement cases and reducing costs for both OFSI and enforcement targets;
- introducing an Early Account Scheme, similar to the one introduced by the Prudential Regulation Authority, aimed at encouraging firms to provide a comprehensive account to expedite case resolution; and
- revising the current 50% maximum discount framework with a potential maximum total penalty reduction of 70% (comprising a potential Voluntary Disclosure and Co-operation discount of 30%, Early Account Scheme discount of 20% and a settlement discount of 20%).
Additionally, OFSI will seek legislative amendments to increase its maximum civil penalty from the higher of £1 million or 50% of the value of the breach to the higher of £2 million or 100% of the value of the breach.
The reforms demonstrate OFSI’s desire to limit the cost and administrative burden of dealing with straightforward cases and to increase the deterrent effect through higher penalties and lower discounts. However, while more robust penalties may encourage compliance, there is a risk they will dissuade companies from self-reporting. Given that self-reporting underpins OFSI’s recent enforcement activity, this approach risks backfiring and dissuading companies from exercising the kind of candour upon which OFSI has lately depended.
Footnotes:
- https://assets.publishing.service.gov.uk/media/697741f167ae94b3280137ee/Penalty_Publication_Notice_LBG_2026.pdf
- https://assets.publishing.service.gov.uk/media/697b5944f8f4a746d9572f12/Consultation_Response.pdf
- https://www.gov.uk/government/publications/financial-sanctions-enforcement-and-monetary-penalties-guidance/financial-sanctions-enforcement-and-monetary-penalties-guidance?utm_content=&utm_medium=email&utm_name=&utm_source=govdelivery