A View From The Exchange: OFSI Updated Enforcement Approach: Practical Implications

The Office of Financial Sanctions Implementation ("OFSI"), the UK's main financial sanctions enforcement authority, updated its Financial Sanctions Enforcement and Monetary Penalties Guidance (the "Guidance") on 9 February 2026.

The update follows a public consultation on proposed measures to enhance the effectiveness of OFSI's enforcement process between July and October 2025. On 29 January 2026, OFSI published its consultation response confirming it would proceed with all proposed reforms. The updated Guidance implements most of these reforms. The remaining measure—the proposed increase of the maximum monetary penalty to the greater of £2 million or 100% of the value of the breach (from the current £1 million or 50% of the value of the breach)—will require a legislative act.

In summary, OFSI has made the following updates to the Guidance:

• Early Account Scheme ("EAS"): At OFSI's discretion, the EAS allows an investigation subject to secure a monetary penalty discount of up to 20% in exchange for conducting a time-limited investigation and providing OFSI with a "comprehensive and accurate" report of any suspected breaches.
• Settlement discount: The investigation subject may secure a discount of 20% if they agree to waive their rights to contest OFSI's findings.
• Revised case assessment framework: A revised case assessment framework classifies breaches through a four-tier seriousness model, based on the severity and conduct of the investigation subject, to arrive at a proposed resolution and baseline penalty.
• Voluntary disclosure and co-operation discount: OFSI has replaced the existing discount for voluntary disclosure with a voluntary disclosure and co-operation discount of up to 30%.
• Fixed monetary penalties for information, reporting and licensing offences: OFSI has introduced fixed monetary penalties for lower-level breaches relating to reporting obligations, compliance with licence conditions, and responses to OFSI requests for information.

The reforms have several practical implications for UK businesses:

• More assertive enforcement environment with higher penalties: The updated Guidance heralds a more assertive and focused OFSI enforcement posture, helping OFSI prioritise cases that have "the greatest deterrent or compliance impact". The proposed doubling of monetary penalties, if enacted, will materially increase the potential financial exposure for businesses that identify suspected breaches.
• Self-disclosure, prompt and comprehensive internal investigation, and co-operation may unlock up to 70% in monetary penalty discounts: All three discounts (EAS, settlement, and voluntary disclosure and co-operation) are cumulative. Where appropriate, businesses should consider early engagement with OFSI.
• Internal escalation and investigation processes are key to mitigating enforcement outcomes: Businesses should review their training materials, internal escalation, whistleblowing and internal investigation processes to ensure that suspected sanctions breaches, including external reports or enquiries, are appropriately escalated and investigated. Failure to identify breaches in a timely manner may jeopardise the availability of valuable discounts.
• Businesses should ensure appropriate controls for compliance with administrative requirements: The introduction of fixed monetary penalties, and a streamlined enforcement process, for breaches of reporting obligations and licence conditions, and non-compliance with OFSI requests for information suggests that fines for administrative breaches may become more common. Banks and other regulated firms that are subject to reporting obligations or are more likely to rely on licences or receive OFSI information requests should ensure appropriate controls for timely and accurate reporting, complying with licence conditions, and receiving and responding to OFSI requests for information.
• Parallel investigations will require skilful navigation: The reforms only affect OFSI's enforcement process. Where potential financial sanctions breaches implicate trade sanctions issues or obligations under the AML regulatory regime, businesses may also need to consider engagement with, and enforcement approaches of, HM Revenue & Customs, the Office of Trade Sanctions Implementation, the Financial Conduct Authority or other relevant regulator.

Summary of the Updates to the Guidance

Early Account Scheme

The EAS is designed to accelerate investigations and incentivise early, comprehensive factual engagement. The EAS has the following key features:

• The investigation subject must conduct an internal investigation and provide to OFSI, within agreed timelines (usually no longer than six months), a full factual early account of potential breaches, supported by all relevant evidence.
• Entities (not individuals) may request access to the EAS within 15 business days of being notified of OFSI's investigation.
• OFSI has sole discretion whether to allow access to the EAS. OFSI will consider the potential complexity and scope of its investigation, the amount of evidence already available to it, and the investigation subject's ability to provide a truthful and comprehensive account. OFSI may require the investigation subject to appoint an independent third party (e.g. a law firm or consultancy) to produce the account, if internal independence is lacking.
• OFSI and the investigation subject will record the terms of the EAS at the outset, including the agreed scope of the internal investigation and cadence of updates to OFSI.
• OFSI may terminate access if it has concerns about the level of co-operation. The subject may also terminate the EAS at any point.
• If OFSI decides to impose a penalty, it will apply an EAS discount of up to 20% depending on the completeness, accuracy, and timeliness of the investigation subject's report.

Settlement Scheme

OFSI has introduced a settlement scheme enabling enforcement subjects to resolve monetary penalty cases through a negotiated agreement within a defined timeframe. Participation in the scheme requires the subject to agree not to contest OFSI's findings and to waive the right to ministerial review and appeal to the Upper Tribunal. In return, the subject will receive a 20% discount to the baseline penalty and will have an opportunity to input on the summary of the case that OFSI will publish.

Revised Case Assessment Framework

OFSI has revised its case assessment framework to promote greater transparency of how it determines case resolutions. OFSI has introduced a new four-level case seriousness model that takes into account the severity of the breach and the conduct at issue, and provides a likely case outcome:

OFSI retains discretion to depart from these outcomes based on the facts and public interest. OFSI has also refined and clarified the case factors that it uses to assess the seriousness of the breach and conduct at issue. In particular, OFSI has introduced a new case factor designed to take into account the strategic priority of the sanctions regime that was breached.

Fixed Monetary Penalties

OFSI has introduced fixed penalties of £5,000 and £10,000 for offences relating to:

• non-compliance with reporting obligations;
• incomplete or otherwise non-compliant reporting on specific and general licences;
• failing to respond or responding late to a Request for Information; and
• breaches of licences, including breaches involving funds or economic resources with a value of up to £10,000.

The level of the monetary penalty depends on the severity of the breach and conduct at issue. In less serious cases, OFSI may instead issue a private warning letter. OFSI also retains the discretion to impose a higher fine up to the statutory maximum.

Subjects of fixed penalties will have 15 business days to make representations, with a further 15 business days for OFSI to make a decision, and a review must be requested within an additional 15 business days.

Voluntary Disclosure and Co-operation Discount

OFSI has replaced the voluntary disclosure discount with a voluntary disclosure and co-operation discount of up to 30%. This reflects OFSI's view that both voluntary self-disclosure and co-operation should be rewarded. Practitioners will also note the reduction in the discount rate: from 50% (in cases classified as "serious" under the old guidance) to 30%.

The Guidance also clarifies that where multiple discounts apply (e.g. a subject is entitled to Early Account Scheme, Settlement Scheme and Voluntary Disclosure discounts) they are cumulative and calculated against the baseline monetary penalty. This means that total reductions could reach as much as 70%.

Other author: Kandice Clarke, Trainee Solicitor