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In brief

The UK’s Financial Conduct Authority (FCA) plays a key role in monitoring how UK-regulated financial institutions guard against financial crime risks, and how effectively they implement financial crime policies and procedures. In recent months, as the UK and other governments have placed increasing focus on preventing the circumvention of sanctions targeting Russia, the FCA has taken a number of steps to emphasise its focus on how financial institutions are complying with financial and trade sanctions, in light of the roles of financial institutions in facilitating global trade and in enabling the flow of funds into capital markets.  

In this briefing, we have provided a summary of key steps that the FCA has taken to ensure that financial institutions are complying effectively with financial and trade sanctions, as discussed in the FCA’s recent Annual Report 2022/23. We have also provided a summary of key sanctions compliance risk mitigation steps for financial institutions to consider going forward.

In more detail


As the UK and other governments have placed increasing focus on preventing the circumvention of sanctions targeting Russia, and in taking enforcement action where companies fail to comply with sanctions, the roles of financial institutions in facilitating global trade and in enabling the flow of funds into capital markets have become an increasingly important focus area for authorities.

Furthermore, for banks operating in the UK, compliance challenges can be amplified by the combination of (i) the significant complexities of the UK’s sanctions regime, in particular targeting Russia, (ii) the UK’s “strict liability” civil enforcement framework for breaches of financial sanctions, (iii) mandatory requirements for banks to report sanctions-related issues to the UK’s Office of Financial Sanctions Implementation (OFSI), and (iv) the UK’s mandatory FCA and AML-related rules, which can be triggered both in circumstances of potential sanctions non-compliance, and also where there is a screening controls issue or failure (regardless of whether the bank has in fact breached any underlying sanctions). The FCA’s focus on the responsibilities of senior managers for ensuring compliance with financial crime, under the Senior Managers and Certification Regime (SMCR), will also be a relevant consideration with regard to sanctions compliance.

In this briefing, we have provided a summary of key steps that the FCA has taken to seek to ensure that financial institutions are complying effectively with financial and trade sanctions (including as discussed in the FCA’s recent Annual Report and Accounts 2022/23, published on 20 July 2023 (“Annual Report”, available here)).We have also provided a summary of key sanctions compliance risk mitigation steps for financial institutions to consider going forward.

Annual Report and Accounts 2022/23: Focus on sanctions

The Annual Report provides details of how the FCA has sought to ensure compliance with sanctions in the following ways:

  • Collaboration with OFSI and other authorities: OFSI, which is part of HM Treasury, is the primary authority in the UK for ensuring that financial sanctions are effectively implemented, understood and enforced in the UK. The Annual Report confirms that the FCA works closely with OFSI in respect of the enforcement of UK financial sanctions. The FCA has also noted that it has worked with other partners “globally”, in order to enforce sanctions in response to the war in Ukraine.
  • Assessment of breaches: The Annual Report notes that the FCA has “reviewed nearly 100 suspected sanctions breaches”. As discussed further below, some of the FCA’s recent enforcement cases have also involved elements of non-compliance with obligations under financial and trade sanctions.
  • Supervision and proactive assessments: In addition to the assessment of suspected breaches (as outlined above), the Annual Report also notes that the FCA has “introduced a data-led approach to proactively supervise firms to ensure they have appropriate sanctions systems and controls”, and has also “conducted 38 proactive assessments looking at firms’ systems and controls”. The Annual Report notes that these reviews have involved “using synthetic data built using the Office of Financial Sanctions Implementation list of financial sanctions targets to test firms’ sanction-screening systems and deep dives into firms’ systems and controls”.

Other key recent developments

In addition to the points above, there have been a range of other noteworthy developments illustrating the FCA’s role in focusing on sanctions compliance and restricting potential sanctions evasion via financial institutions. In particular:

  • Economic Crime Plan 2: The UK Government published the Economic Crime Plan 2023-2026 in March 2023 (“Economic Crime Plan 2”, available here), setting out details of the UK’s approach to counter economic crime going forward. One of the core commitments made by the UK government in this document is to “[c]ombat kleptocracy and drive down sanctions evasion”, and the report notes that “to provide assurance that what firms have implemented in response to these unprecedented sanctions measures is appropriate, the FCA has strengthened its supervisory approach in assessing financial services firms’ sanction controls”. The “Actions” and “Milestones” for achieving this goal that are set out in the Economic Crime Plan 2 include to:
    • “Improve engagement and information sharing of suspected breach cases between statutory supervisors including the FCA, PBS’s and OFSI to enhance UK response to breaches (FCA, OFSI)”.
    • “Drive improvements in financial firms’/regulated population’s sanctions systems and controls through further development of FCA’s intelligence and data led approach, to make the UK inhospitable to sanctions evasion (FCA, all supervisors)”.
  • OFSI and FCA information sharing: OFSI and the FCA have previously entered into a Memorandum of Understanding, and the FCA noted in its response to the Treasury Select Committee’s enquiry into Russia sanctions in July 2022 (“Treasury Committee Response”, available here) that the FCA was “seconding an employee from our Financial Crime Department to OFSI to further develop the flow of information” between the two organisations. The FCA also noted in this document that, where issues are identified regarding sanctions non-compliance in the context of the FCA’s proactive assessments, the FCA “will liaise with OFSI and other government partners as appropriate”. 
  • FCA expectations regarding notifications of sanctions issues: The FCA indicated recently that it expects to also be notified where regulated firms make submissions or disclosures to OFSI in relation to (i) suspected sanctions breaches, (ii) the identification of designated persons, or (iii) asset freezes (see further details here). The FCA has also set up a dedicated reporting line in respect of sanctions evasions (see further details here), in which it notes that “[i]f you have information about sanctions evasion or weaknesses in sanction controls we want you to report it to us”.
  • Focus on trade finance: The FCA has also placed an increasing focus on ensuring that banks conduct trade finance activity in compliance with sanctions and export controls. In September 2021, the FCA (together with the Prudential Regulation Authority) published a “Dear CEO” letter (available here), in which it noted that in trade finance activity “there is often insufficient focus on the identification and assessment of financial crime risk factors, such as the risk of dual-use goods or the potential for fraud”. This “Dear CEO” letter builds upon some of the themes and issues discussed in more detail in the FCA’s previous Thematic Review TR13/3, entitled “Banks’ control of financial crime risks in trade finance” (available here). The intersection between trade finance and financial sanctions also continues to be a contentious issue for market participants, as a number of recent UK court judgments in this area have illustrated.
  • Overlaps with sanctions and money laundering: There has also been a significant recent focus from UK authorities on the overlaps between sanctions and AML, in particular in circumstances where sanctioned parties may be seeking to “evade” or bypass sanctions that have been imposed against them – for example by moving funds or transferring assets. In July 2022, the National Crime Agency, the National Economic Crime Centre, the Joint Money Laundering Intelligence Taskforce and OFSI all published a joint “Red Alert” entitled “Financial Sanctions Evasion Typologies: Russian Elites and Enablers” (available here). Whilst some aspects of this document are framed very broadly, it nonetheless provides a clear indication of the ways in which UK authorities consider that sanctions issues and AML can overlap.
  • Enforcement action and focus on screening weaknesses: The FCA noted in the Treasury Committee Response that issues identified with firms’ sanctions compliance procedures “tend to be around the effectiveness of firms’ customer sanctions screening processes, at onboarding and on an ongoing basis, with some weaknesses also found in firms’ approach to real time payment screening”. This is reflected in a number of recent FCA enforcement cases, where the FCA has identified weaknesses in AML and sanctions compliance systems and controls. The FCA also noted in the Treasury Committee Response that “the implementation of sectoral sanctions can often be challenging for firms”.

Key practical considerations

With the FCA’s focus on sanctions compliance becoming more pronounced, and as the sanctions landscape continues to evolve (including as regards introduction of new measures, regulatory guidance and enforcement outlook), we would recommend that financial institutions operating in the UK keep the following practical considerations in mind.

  1. Consider parallel reporting obligations: Although financial institutions may consider that reporting of sanctions issues is primarily something for OFSI, it is essential to also keep in mind the FCA’s expectations regarding the receipt of notifications of sanctions issues.
  2. Consider different authority expectations and priorities: OFSI and the FCA are different organisations, with different remits and different priorities from a sanctions compliance and enforcement perspective. In the context of any engagements with these authorities in relation to sanctions issues, it will be essential to tailor communications and strategy appropriately. Financial institutions may also need to engage with other authorities in a sanctions context (e.g., the UK Department for Business and Trade, in respect of trade sanctions issues).
  3. Consider AML implications: Where a financial institution identifies a potential sanctions issue, it is important to consider whether this may also create AML implications, in particular given the breadth and complexity of the UK’s AML regime, including under the Proceeds of Crime Act 2002.
  4. Review sanctions compliance policies and procedures (including screening procedures): Given the FCA’s focus on the effectiveness of a bank’s financial crime systems and controls, we would recommend that FCA-regulated institutions re-review their sanctions compliance policies and procedures – in particular to consider whether any updates are necessary to reflect the complex sanctions targeting Russia. 
  5. Consider implementation of sectoral sanctions: Given the complexity of the UK’s sectoral sanctions measures targeting Russia, it is essential for banks to have appropriate systems and controls that seek to manage these risks. These measures require a different set of compliance tools to ensure compliance.

Philip Annett is a partner based in Baker McKenzie’s London office focussing on complex investigations, litigation and compliance matters. He has an in-depth knowledge of working with UK and international regulators and enforcement agencies, having previously been a senior lawyer in the Enforcement Division at the Financial Conduct Authority (FCA) where he led some of the regulator's highest-profile enforcement cases. He also previously worked in the Bribery and Corruption Division at the Serious Fraud Office.


Tristan Grimmer is a partner in Baker McKenzie's London office. He is a member of the Compliance & Investigations and the International Trade and Competition practice groups. Tristan joined the Firm as a trainee in March 2004, qualifying in March 2006. He has advised on parallel investigations by authorities in the United States, Switzerland, Brazil, Japan, and has spent time working in Baker McKenzie's Chicago office. Tristan was recently named as a "Next Generation Lawyer" in the UK Legal 500 2017 directory.


Mark heads the Financial Services & Regulatory (FSR) practice group in London and co-leads the FinTech group. He also acts as Chair of the FSR practice for the EMEA region and sits on the Global FSR Steering Committee. Mark is ranked as a Leading Individual in Legal 500 2022 for Financial Services (Non-Contentious Regulatory) and is individually ranked in Chambers 2022 for FinTech. He is described in these publications as being "very knowledgeable" and "very approachable" with "a wonderful range of FinTech experience" and as someone who is "clear, commercial and pragmatic and understands all the issues in detail." He has authored a number of articles and contributions for leading journals and other publications, most notably the Journal of International Banking and Financial Law, the International Guide to Money Laundering Law and Practice, and A Practitioner's Guide to the Law and Regulation of Financial Crime.


Charles is a partner in the Baker McKenzie Dispute Resolution team based in London. Charles has substantial experience of managing a broad range of high-value, multijurisdictional commercial disputes and investigations, particularly those involving fraud and white-collar crime, contentious trusts and complex banking and finance disputes. He leads the Business Crime Unit, and he is particularly well known for his experience of advising on criminal law issues, and the interaction between criminal and civil law processes. Chambers cite clients in describing Charles as "extremely knowledgeable, user-friendly and always willing to go the extra mile," while Legal 500 similarly remark that he is "a great strategic thinker and a thorough pleasure to work with." Charles is also listed as a Rising Star in Litigation by Legal Week and is also listed in Global Investigations Review as a leading expert in conducting investigations.


Marc Thorley is a partner in the Baker McKenzie Dispute Resolution team, based in London. Marc joined the Firm from another leading multinational firm in 2020 having been a partner there for 12 years, located in London and Hong Kong, and acting as the firm’s Asia Head of Dispute Resolution. Chambers 2020 describes Marc as a "seasoned litigator", and praised him for having "particular experience in financial litigation", "misconduct investigations, breach of contract and mis-selling claims". He is also recognised by other directories for his strong litigation background, including Legal 500.


Sven Bates is Of Counsel for International Trade at Baker McKenzie. He has spent the majority of his career at the Firm's London office, focusing on international trade compliance, trade remedies and anti-bribery. He has also practiced in Amsterdam and has previously worked for the European Commission and the Shadow Attorney General. Sven has extensive experience in particular in the financial services sector, and has undertaken secondments at a Tier 1 UK bank and the Lloyd's insurance market.


Julian Godfray is a senior associate in Baker McKenzie's Competition, Trade and Foreign Investment Department in London. Julian works in particular in the Firm's market-leading International Trade and Compliance & Investigations practices. Julian joined the Firm as a trainee in September 2014, and qualified in September 2016. Julian has been seconded to two FTSE 100 clients during his time at the Firm, including in the ethics and compliance team of one client. Julian has also completed secondments to the Firm's European and Competition Law Practice in Brussels in 2016, and more recently to the Firm's Madrid office in 2020, working as part of the Firm's trade compliance practice in Spain.

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