The FCA has recently published the findings of its latest review of sanctions systems and controls across the financial services sector. While the regulator acknowledges that firms have made significant progress in strengthening sanctions compliance since 2022, it has also identified a number of weaknesses that continue to result in sanctions breaches.
The review is particularly relevant for MLROs, compliance teams and senior management as sanctions remain a key regulatory priority and continue to evolve in scope and complexity.
A More Complex Sanctions Environment
The FCA notes that UK sanctions regimes have expanded considerably in recent years. What was once largely focused on asset freezes now extends to broader financial restrictions, trade sanctions and sector-specific measures.
This increased complexity has led to a significant rise in sanctions exposure across the financial sector. The value of frozen assets in the UK increased from £24.4 billion in 2023/24 to £37 billion in 2024/25, highlighting the growing importance of effective sanctions controls.
Since February 2022, the FCA has assessed the sanctions systems and controls of more than 150 firms across a range of sectors. While many firms have strengthened their frameworks and successfully prevented potential breaches, the regulator has identified a number of common weaknesses that continue to create risk.
Key Areas of Concern
The FCA found that the most common causes of sanctions breaches stem from weaknesses in due diligence, transaction and name screening, alert management and the handling of frozen assets.
In particular, firms continue to face challenges in identifying indirect sanctions exposure through complex ownership structures and intermediary relationships. The regulator also observed weaknesses in firms’ oversight of third-party providers and screening vendors, with some firms unable to demonstrate adequate governance over outsourced sanctions controls.
Another key finding was the variation in the quality of sanctions risk assessments. While some firms demonstrated a clear understanding of their sanctions exposure, others relied on outdated assessments or failed to adequately consider trade sanctions and emerging risks.
Growing Focus on Trade Sanctions
A notable theme throughout the report is the FCA’s increasing focus on trade sanctions.
The regulator found that firms’ controls for financial sanctions are generally more mature than those used to manage trade sanctions risks. However, trade sanctions have become increasingly important as restrictions now cover a wider range of goods, technologies and services.
The FCA expects firms to understand their exposure to trade sanctions and ensure that appropriate controls are incorporated into their wider sanctions framework.
The Importance of Governance
The report reinforces the importance of strong governance and senior management oversight.
The FCA found that firms with effective sanctions frameworks typically maintained up-to-date policies, provided meaningful management information and delivered targeted sanctions training to relevant staff. These firms were also more likely to undertake regular assurance testing and independent reviews of their controls.
Conversely, weaker firms often had outdated policies, insufficient oversight of outsourced arrangements and limited management information on sanctions risks.
What Firms Should Do Next
The FCA expects firms to review their sanctions frameworks and ensure that controls remain proportionate to their business model and risk exposure.
Particular attention should be given to governance arrangements, risk assessments, due diligence processes, screening controls and the management of sanctions alerts. Firms should also ensure they have appropriate oversight of third-party providers and contingency arrangements in place to manage operational disruptions.
With closer cooperation now in place between the FCA, the Office of Financial Sanctions Implementation (OFSI) and the Office of Trade Sanctions Implementation (OTSI), firms can expect continued regulatory focus on sanctions compliance.
How Complyport Can Help
Complyport assists regulated firms in assessing and enhancing their sanctions compliance frameworks in line with FCA expectations.
Our services include:
- Sanctions risk assessments;
- Sanctions framework reviews;
- Independent testing of screening and transaction monitoring controls;
- Governance reviews;
- Internal audits;
- Staff training and awareness programmes;
- Remediation support and regulatory review preparation.
We also support firms with the implementation of robust sanctions controls and ongoing compliance enhancements.
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Sanctions Compliance Remains Under the FCA Spotlight in 2026
Key findings from the FCA’s latest review and what firms should do next
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