Bite-size: FCA highlights strengths and weaknesses in firms’ sanctions controls

The FCA has published the findings from recent supervisory work looking at firms’ sanctions systems and controls, following the sharp rise in UK sanctions activity in recent years, particularly since Russia’s invasion of Ukraine.

The report shows that firms have made real progress with around £37bn of assets frozen in the UK last year but the FCA says gaps remain and  sanctions compliance continues to be a key supervisory focus. 

The FCA’s message is clear: firms must understand their sanctions risk exposure, maintain strong governance and oversight, keep risk assessments up to date and make sure screening systems are properly designed, tested and monitored. Sanctions controls must also keep pace with changing geopolitical risks, new products and business growth. 

Examples of good practice included firms with clear sanctions risk assessments, regular board reporting, effective testing of screening systems, strong staff training and clear escalation routes for potential matches. The FCA also highlighted the value of integrating sanctions controls into wider financial crime frameworks. 

Areas of concern included poor record keeping, weak governance, over-reliance on manual processes, outdated systems, unclear ownership of sanctions risks and limited consideration of trade sanctions or wider geopolitical exposure.

Key takeaway:

The FCA expects sanctions compliance to be active, risk-based and kept under regular review. Firms should use this report as a prompt to test whether their own controls remain proportionate, properly governed and able to respond to changing risks. This is particularly relevant as sanctions compliance remains firmly on the FCA’s wider financial crime agenda.

How Auxillias can help

Sanctions compliance is becoming a bigger part of the FCA’s wider financial crime focus and firms are expected to be able to show that their controls are proportionate, properly governed and regularly reviewed.

Auxillias supports firms with practical legal, regulatory and compliance advice across sanctions, financial crime and wider governance frameworks. Our team can help firms:

•         review sanctions policies, procedures and governance arrangements

•         assess sanctions risk frameworks and escalation processes

•         review screening controls, oversight and record keeping

•         support board reporting and management information

•         advise on wider financial crime and regulatory obligations

•         provide training for senior management, compliance teams and operational staff

If you would like to discuss your current sanctions framework or would like an independent review of your controls against the FCA’s latest findings, please contact a member of the Auxillias team.‍‍ ‍