Financial firms have made progress in preventing sanctions breaches – with £37bn worth of assets frozen in the UK as of last year – but gaps remain, warns the FCA.
The Office of Financial Sanctions Implementation (OFSI) and the Office of Trade Sanctions Implementation (OTSI) implement financial and trade sanctions. The FCA supports them through its role supervising firms within the financial services sector. This includes checking they have adequate sanctions systems and controls.
Since February 2022, the FCA has proactively assessed the sanctions systems and controls of over 150 firms across a range of financial services sectors. In its latest review, the FCA found:
- Repeated examples of firms exhibiting strong controls and identifying potential sanctions breaches before they occurred.
- The most common root causes of reported sanctions breaches were weaknesses in due diligence, alert management, transaction and name screening, as well as the management of frozen assets and compliance with licences.
- Firms face challenges in detecting and preventing specific breaches of trade sanctions.
- The range of controls used for trade sanctions compliance - related to bans on the export and import of goods, technologies and services - was greater than those used for financial sanctions.
The regulator is sharing good and poor practice it identified to help all firms further strengthen their sanctions controls.
Reports from firms continue to relate primarily to the Russian sanctions regime, but the FCA also saw reports relating to Libya and, increasingly, Iran and North Korea.
Today (28 May), the FCA has signed a Memorandum of Understanding (MoU) with OTSI (PDF). It sets out the arrangements for cooperation and the sharing of intelligence between the two organisations.
There is already an MoU between the FCA and OFSI (PDF).
Notes to editors
- Sanctions systems and controls in our firms: our findings.
- The FCA previously looked at firms’ sanctions systems and controls in 2023.