On 9 February 2026, the OFSI published the updated Enforcement and Monetary Penalties Guidance outlining significant reforms to investigation and enforcement of UK financial sanctions breaches. These reforms mark the most substantial overhaul of OFSI’s civil enforcement framework since 2017 and are designed to make enforcement faster, clearer, and more predictable, while increasing the deterrent effect of sanctions compliance failures.
New Case Assessment Framework
A new four-level seriousness model has been introduced to provide greater structure and transparency to how OFSI evaluates potential breaches. As one of the most significant changes to the guidelines, several case factors have been revised and reorganised for greater clarity and consistency. This includes:
- the new “strategic priority of the regime” case factor;
- updated factors on
- intention,
- knowledge,
- reasonable cause to suspect, and
- circumvention; and
- removing previous case factors, including:
- professional facilitation,
- failure to apply for a license, and
- failure to respond to an information request.
This new framework should provide organisations with better insight into how OFSI thinks about risk, severity, and culpability. This should also make it easier to predict likely outcomes and thus shape internal compliance strategies—particularly for businesses handling large volumes of sanctions sensitive transactions.
Revised Voluntary Disclosure and Cooperation Discounts
OFSI has strengthened incentives for firms to self report breaches by introducing a Voluntary Disclosure and Cooperation discount of up to 30% of the baseline penalty in all cases. OFSI will retain discretion as to the applicable discount, taking the extent of initial disclosure and subsequent co-operation into account. The previous discount of up to 50% for serious cases has been removed.
The expansion of voluntary disclosure incentives brings OFSI closer to the approach used by regulators such as the Financial Conduct Authority (“FCA”). While the penalties will continue to reflect the seriousness of the breach, firms now have a clearer financial incentive to “come forward early”, which may promote a cultural shift toward transparency and help reduce enforcement timelines.
Formal Settlement Scheme
For the first time, OFSI offers the option to settle enforcement cases in exchange for a 20% penalty discount of the baseline penalty amount (notwithstanding any other discounts that may be available), provided the case settles and a settlement agreement is signed within 30 business days of settlement discussions starting.
This mirrors established settlement procedures used by UK financial regulators (although both the FCA and Bank of England provide a 30% discount) and aims to resolve cases more quickly, reduce administrative burdens, and offer greater certainty, making settlement an attractive option.
Early Account Scheme
OFSI has introduced an Early Account Scheme (EAS), allowing subjects of an investigation to provide a complete and structured account of the facts at an early stage. If enforcement action is ultimately taken, firms may receive a discount of up to 20% of the baseline penalty amount for participating in the EAS. The EAS is distinct from the Settlement Scheme and the subject may be eligible for both discounts.
While OFSI recognises that EAS may “not be appropriate in all cases”, it is designed to speed up investigations. For many organisations, extended uncertainty is one of the most challenging aspects of sanctions enforcement. By providing a transparent and accelerated process, EAS reduces disruption and allows firms to manage regulatory issues with greater predictability.
Financial Hardship Policy
The guidance introduces a new policy for considering claims of financial hardship: monetary penalties will be reduced only in exceptional circumstances where a subject can objectively demonstrate that paying the penalty would cause severe financial difficulty. The burden rests entirely on the subject to prove their case, and there is no expectation that a reduction will be granted. OFSI will assess whether hardship exists and whether reducing the penalty aligns with the public interest and may instead offer instalment plans where short term constraints exist. Crucially, even where genuine hardship is established, OFSI may still refuse a reduction if the breach is sufficiently serious, underscoring the high threshold and discretionary nature of this relief.
Fixed monetary penalties for Administrative Offences
The guidance introduces a new fixed monetary penalties system —set at £5,000 or £10,000—for information, reporting and licensing offences, creating a faster and more consistent enforcement route for lower level administrative breaches. The guidance sets out clear criteria for when each penalty level applies, supported by examples of conduct likely to trigger these sanctions, giving firms far greater predictability around OFSI’s approach.
What Should Businesses Do Now?
Firms must be prepared for quicker, more structured, and more robust enforcement. For organisations with an international element, these changes should prompt a closer look at internal sanctions controls. Key takeaways include:
- Expect faster, more assertive enforcement. Delays will become shorter and outcomes more visible.
- Document everything. OFSI values transparency and cooperation; good recordkeeping can materially influence outcomes.
- Invest in training and systems. With OFSI increasing its scrutiny, firms need strong frontline awareness and robust screening processes.
- Engage early if issues arise. Prompt, proactive engagement with OFSI may mitigate penalties and demonstrates strong compliance culture.
Conclusion
The updated OFSI enforcement framework reflects a maturing and increasingly sophisticated sanctions environment in the UK. These reforms should be seen not as an administrative reshuffle, but as part of a broader strategic effort to protect the integrity of the UK financial system and ensure sanctions remain an effective foreign policy tool.
For businesses, the message is clear: sanctions compliance is no longer a box ticking exercise. With increased clarity, speed and strategic focus from OFSI, firms must be ready to respond quickly, cooperate transparently, and build resilient systems that can withstand regulatory scrutiny. The costs of getting it wrong, financially, operationally and reputationally, are only set to grow.
For further information, please contact our Dispute Resolution department. Alternatively, telephone 020 7465 4300.
