so, I asked Gemini to build the story of sanctions evasion-related advisory and guidance documents. Its response:
The latest advisory from March 31, 2026, titled “Guidance on Sham Transactions and Sanctions Evasion,” signals a new frontier in the U.S. government’s efforts to stop illicit actors from hiding their wealth. By reviewing this document and the history of OFAC’s guidance, we can see a clear evolution: sanctions have moved from simple “do not trade with this person” lists to complex “detective manuals” that require companies to spot sophisticated lies.
Part 1: Summary of Today’s Advisory (March 31, 2026)
Verified Document:Guidance on Sham Transactions and Sanctions Evasion.
The core message of this document is that a “paper trail” is no longer enough to prove a transaction is legal. OFAC is warning that blocked individuals—such as sanctioned Russian oligarchs or international drug kingpins—are using “Sham Transactions” to pretend they no longer own their luxury assets (like private jets, yachts, or companies).
Key “Red Flags” for Sham Transactions:
Family Transfers: A sanctioned person “sells” or transfers an asset to a spouse, child, or close associate shortly before or after being sanctioned.
Below-Market Deals: Selling a multi-million dollar asset for a tiny fraction of its value, or on terms that don’t make business sense.
Invisible Control: The sanctioned person “sells” their private jet but continues to use it for personal travel, meaning they still effectively own it.
Unnecessary Complexity: Using layers of shell companies in “tax haven” countries to hide who really benefits from the property.
Part 2: The Evolution of Sanctions Evasion Guidance
Over the last decade, OFAC’s guidance has evolved through four distinct “generations.”
1. The “Who” Era (Foundational / Pre-2019)
In this era, compliance was relatively simple: don’t do business with anyone on the SDN List (Specially Designated Nationals).
The Big Rule (2014): OFAC clarified the “50 Percent Rule,” stating that if a sanctioned person owns 50% or more of any company, that company is also automatically sanctioned—even if its name isn’t on a list.
The Evasion: People began splitting ownership into 49% chunks to stay “under the radar.”
2. The “How” Era (2019: The Framework)
OFAC realized that companies needed a “playbook” to avoid making mistakes.
Key Document:A Framework for OFAC Compliance Commitments (May 2019).
Evolution: This established the “5 Pillars” of a good compliance program: management support, risk assessment, internal controls, testing, and training. It told companies: “We won’t just look at who you trade with; we will look at how hard you tried to follow the rules”.
3. The “Behavioral” Era (2020: Global Maritime Advisory)
Sanctions evasion moved to the high seas, where bad actors began using “Deceptive Shipping Practices” (DSPs).
Key Document:2020 Global Maritime Advisory.
Evolution: Guidance shifted from “Lists” to “Patterns”. Companies were told to watch for ships turning off their GPS (AIS), “spoofing” their location, or transferring cargo between ships in the middle of the ocean (STS transfers) to hide the cargo’s origin.
4. The “Detective” Era (2023–2026: Shadow Fleets and Sham Deals)
The current era is defined by the war in Ukraine and the “Russian Oil Price Cap”.
The “Shadow Fleet”: Guidance now focuses on “Ghost Ships”—older, poorly maintained vessels with fake insurance used to bypass oil price limits.
“Know Your Cargo” (2023): A landmark “Quint-Seal” note (issued by five agencies) told companies they must now verify the cargo, not just the customer.
The Latest Step (Today): The 2026 “Sham Transactions” advisory completes the circle. It warns that even when the person looks clean and the ship looks clean, the legal paperwork might be a lie.
Summary for Non-Experts: How the “Rules of the Game” Changed
Old Way (2016)
New Way (2026)
“Check the List”: If the name isn’t on the SDN list, you are probably fine.
“Check the Vibe”: Even if the name is clean, you must ask: “Does this deal make sense? Why is this ship’s GPS off?”.
“Simple Ownership”: Just check if a sanctioned person owns 51% of a business.
“Ultimate Control”: Check if they secretly control it through a trust, a shell company, or their spouse.
“Bank Responsibility”: Mostly banks and financial firms had to worry about this.
“Industry Responsibility”: Insurers, ship captains, freight forwarders, and luxury goods dealers are now on the front lines.
Today, OFAC treats every company as a “mini-detective agency.” If you ignore a red flag—like an oligarch suddenly “giving” his yacht to his wife for $1—the government can hold you responsible for “sham” activity.
So, what do you think? The inclusion of the Framework Document seems a bit of a curveball (certainly I didn’t expect that to pop up), but it seems to follow a certain logic….
While this seems pretty basic, for those of us who have been in financial crime compliance for a while, it’s always good to publish this as a reminder for those new to the field or those caught up in the day-to-day who could use a refresher….
As part of Canadas ongoing commitment to keeping the exporting community well-informed, this newsletter will now include periodic information on changes to Canadas export controls. Information on newly enacted sanctions will continue to be included as announced.
This message is to notify exporters that as of 30 days from 31 March, 2026, the January 2026 edition of A Guide to Canada’s Export Control List (the Guide) will enter into force.
The new version of the Guide will bring into force the commitments Canada has made in the various multilateral export control regimes up to January 1, 2026.
The guide is available in sections as opposed to one big PDF:
A Guide to Canada’s Export Control List
A Guide to Canada’s Export Control List identifies the items included on the Export Control List that are controlled for export in accordance with section 3 of the Export and Import Permits Act and for which an export permit is required.
To make guidance on UK sanctions regimes clearer and more accessible, we’ve published summaries of prohibitions under each regime. These new summaries will enable readers to see an overview of what sanctions apply in a regime.
Each summary gives a quick overview of the sanctions in place under the regime, covering, where applicable:
the regime’s scope
what applies to designated persons and specified ships
wider financial and trade sanctions
sanctions on goods and services
additional sanction types
Regime summaries are not comprehensive and are not a replacement for the statutory guidance or the regulations themselves.
You can open the summary and the refreshed statutory guidance for each regime directly from the Current UK sanctions regimes page using the regime’s ‘guidance’ link.
OFSI has today published a blogpost, Reasonableness in licensing – updated approach. It provides more clarity on the evidence we require to support licence applications under the legal services and routine holding and maintenance licensing grounds, helping applicants to submit complete, well‑evidenced applications. The blogpost should be read alongside OFSI’s earlier blogpost, Reasonableness in licensing.
The updated guidance:
Reasonableness in licensing – updated approach
In June 2021, OFSI published a blogpost, “Reasonableness in licensing”, which set out how we assess “reasonableness” when considering licence applications under UK financial sanctions regimes.
This blogpost, “Reasonableness in licensing – updated approach”, updates that guidance and applies across all UK financial sanctions regimes.
OFSI regularly receives applications under the legal fees licensing ground which relate to legal services provided on ongoing and complex matters. Some of these applications request permission for payment of fees in the millions of pounds. It is for the applicant to demonstrate to OFSI that the legal fees and expenses they are requesting payment for are reasonable.
To support OFSI’s assessment of reasonableness in these cases, OFSI will now require an independent Costs Draftsperson’s Report (CDPR) to be submitted as part of the licence application in certain circumstances.
Applicants may also choose to provide a CDPR proactively even where the relevant threshold has not been met but there are other factors which increase the complexity of the application. This may assist OFSI’s assessment of reasonableness.
When a CDPR is required
OFSI will require an independent CDPR in the following cases:
Law firms – where within any six-month period:
total legal fees and Counsel fees (where instructed via solicitors), including expenses, to be licensed exceed £2,000,000.00 (inclusive of VAT)
Counsel (instructed directly) – where within any six-month period:
Counsel related costs, including disbursements, to be licensed exceed £1,000,000.00 (inclusive of VAT).
How the thresholds apply
These thresholds:
apply per UK law firm or per Counsel,
are assessed in relation to each designated person, and
are cumulative across all specific licences and applications in relation to that designated person from the law firm or Counsel.
Applications covering periods longer than six months
Where a single licence application covers a period longer than six months, OFSI will apply the relevant threshold pro rata to reflect the length of the period covered.
For example, an application covering 18 months of legal services would have threshold caps of:
£6,000,000 (inclusive of VAT) for a UK law firm (i.e., £2,000,000 per six-month period); and
£3,000,000 (inclusive of VAT) for Counsel (instructed directly) (i.e., £1,000,000 per six-month period).
What to include in your application
When submitting an application, please indicate clearly whether the criteria above apply. For example, you may wish to include a statement such as: “The legal costs exceed £2 million (including VAT) and a CDPR is attached.”
Anticipated (future) costs
OFSI recognises that applicants may seek licences for work already done and also work anticipated in the future. Where legal work is anticipated but not yet incurred, OFSI will accept a CDPR that assesses anticipated costs.
For long-running legal matters, where it is not feasible to obtain a CDPR covering anticipated costs, applicants are encouraged to consider applying for licences on a quarterly basis, with an enclosed CDPR covering costs incurred during the relevant period.
OFSI will seek to help applicants understand the licencing process, including by directing them to relevant guidance.
Disbursements
Where the threshold requiring a CDPR has been met, OFSI may, on a case-by-case basis and in extenuating circumstances, agree to assess disbursements (excluding Counsel fees or other legal services) without the provision of a CDPR separately in advance of the assessment of the wider legal fees element of the application. Examples include where a disbursement must be paid on a time‑critical basis to avoid prejudice to legal proceedings, and the applicant can provide clear evidence for that disbursement even though the CDPR for the wider legal fees is not yet available.
This is at OFSI’s discretion, and applicants should provide clear supporting evidence for the disbursements in question.
Independence and qualification of the Costs Lawyer
CDPRs must be produced by independent practising Costs Lawyers who:
are regulated by, and hold a current practising certificate issued by, the Costs Lawyer Standards Board (CLSB);
comply with the CLSB’s Code of Conduct; and
are not part of the legal team undertaking the work covered by the OFSI licence application.
How OFSI uses the CDPR and assesses reasonableness
A CDPR is one part of the evidential package that OFSI will consider when assessing whether legal fees and expenses are reasonable. We will look at the CDPR alongside other material you provide.
However, even where a CDPR concludes that costs are reasonable, OFSI may still determine that reasonableness has not been fully demonstrated; license a lower amount than requested; or decline to license certain costs altogether.
The costs of obtaining a CDPR may be licensed under the legal services licensing ground, subject to the normal reasonableness test. These costs can be included within the main legal services application or sought via a separate licence application.
You may apply for CDPR costs before you submit the primary application, at the same time as an application, or as a separate application after the primary application has been considered. In all cases, OFSI will assess the CDPR costs in the same way as any other legal fees and reasonableness must be demonstrated.
Legal services: Administrative and other additional fees
OFSI sometimes receives legal services licence applications that include an additional administration or similar fee applied as a percentage uplift to the total of fee earners’ charges.
To assess the reasonableness of any such fee, OFSI requires applicants to provide:
a clear, itemised breakdown of what the administration (or similar) charge covers; and
supporting evidence demonstrating the basis for, and level of, those costs.
Where this information is not provided, OFSI will not be able to assess the fee as reasonable and may refuse to license it. Applicants should therefore provide this information at the outset, as it is likely to enable a quicker assessment.
Maintenance of frozen funds and economic resources licensing ground: independent expert reports
For applications under the maintenance of frozen funds and economic resources licensing ground, applicants are encouraged to submit an independent expert report where the requested payments are high value, novel, or complex. For example, this could be payments related to a niche asset (such as a superyacht or racing car) for which expertise is required to determine the maintenance required; or for extraordinary payments which are not routinely required (for example, significant construction works to prevent a building falling into disrepair).
Where an expert report is not provided, OFSI may on a case-by-case basis and at OFSI’s discretion, request one where it is needed to support our assessment of the necessity and reasonableness of the proposed costs.
Type and qualification of the independent expert
The independent expert should have demonstrable and relevant expertise in the area to which the costs relate. This expertise may be demonstrated through relevant experience and/or appropriate professional accreditation.
Examples include, but are not limited to:
Maritime assets – a marine surveyor or naval architect accredited by a recognised professional body.
Aviation – an aircraft engineer or aviation asset manager with appropriate professional registration.
Technical infrastructure / industrial assets – an engineer with chartered status (or equivalent) in the relevant discipline and experience of maintaining comparable assets.
The expert should:
be independent of the applicant and any service provider benefiting from the payments;
have no financial interest in the proposed works or services, beyond standard professional fees for preparing the report; and
provide a signed report, prepared and presented in line with the relevant professional/industry standards, setting out the basis for their opinion on the proposed costs and their necessity.
How OFSI uses the report and assesses reasonableness
As with CDPRs, OFSI will treat any independent expert report as part of the overall evidential package. Even if the report supports the proposed costs, OFSI may conclude that costs are not fully justified and license a reduced amount or decline certain costs.
Cost of obtaining independent expert reports
As with CDPR fees, the costs of obtaining an independent expert report may be licensed under the relevant licensing ground, subject to the normal reasonableness test. Applicants may include these costs within the main application or request them via a separate licence application.
OFSI will assess the reasonableness of independent expert fees case-by-case, taking account of the scope, complexity, location, and urgency of the works.
To assist OFSI’s assessment, applicants should provide (as applicable):
A clear scope of services: what the expert will do, deliverables, and the time period covered.
How the fee is calculated: whether a fixed fee (and what it covers), or hourly rates and estimated hours (including any fee cap).
Evidence of market reasonableness: multiple quotes/tenders, or an explanation of why a single provider was selected.
Evidence to demonstrate reasonableness
OFSI will continue to assess reasonableness in line with our existing guidance and policy (see Reasonableness in Licensing).
Evidence submitted to demonstrate reasonableness should be recent and as a general rule, OFSI considers evidence dated within the past 6 months to be appropriate (in relation to the application).
Where evidence is older than 6 months, applicants must provide a clear explanation of:
why more recent evidence could not be obtained; and
why the older evidence remains a reliable basis for assessing reasonableness (for example, due to the nature of the market or stability of pricing).
Further information
These updates are intended to enhance transparency around OFSI’s assessment of reasonableness, and to help applicants prepare complete and well evidenced applications. This should support more efficient processing of applications and clearer outcomes.
the relevant regime-specific and thematic guidance on GOV.UK; and
the terms of any applicable General Licences.
If you are unsure how these updates affect your application, you can contact OFSI using the details provided on GOV.UK.
and the original post, from June 2021:
Reasonableness in licensing
If you are applying for a licence from OFSI to release otherwise frozen funds for legal fees or the maintenance of frozen funds or economic resources, you will likely come across the term “reasonableness”.
When issuing a licence to enable the payment of professional fees and expenses for the provision of legal services, OFSI is legally obliged to ensure that those fees and expenses are “reasonable”.
OFSI’s Introduction to licensing blog, which was published in April 2021, set out the key changes to licensing under the Sanctions and Anti Money Laundering Act (the Sanctions Act) that came into effect from 23.00 on 31 December 2020. The following changes to reasonableness now apply:
Under the legal fees licensing ground, reasonableness now also applies to expenses
A reasonableness test has been applied to the maintenance of frozen funds and economic resources licensing ground.
OFSI receives many applications where applicants have not provided sufficient evidence of reasonableness or with no evidence at all. This could be because the applicant may not understand the full policy intention behind the regulations that need to be considered in parallel, or the justification submitted may be one-sided in the applicant’s favour. However, OFSI requires a significant level of evidence when scrutinising the reasonableness threshold. This is because the Sanctions Act which gives us the power to issue these licences, also stipulates that legal fees and maintenance of frozen funds should be ‘reasonable’. When we don’t receive the level of detail that we need, we will need to engage with the applicant for these further details. This can invariably cause delays in processing such licence applications and, in some cases, may result in the refusal of the licence application if further information is never provided. OFSI does not want to cause delays to the consideration and issuance of any of our licences, so this blog is aimed at setting out what information we need to consider when identifying if an application is “reasonable”.
Financial sanctions are a foreign policy tool. In the UK they are implemented through UK legislation (which sometimes applies restrictions imposed through the UN) in order to achieve a specific foreign policy or national security objective. Financial sanctions are generally imposed to:
coerce a regime or individual to change their behaviour;
constrain a target by denying access to key resources to continue their offending behaviour;
signal disapproval; and
protect the value of assets that have been misappropriated from a country until these assets can be repatriated.
As the competent authority for the implementation of financial sanctions in the UK, OFSI has to ensure that any permitted release or use of frozen funds maintains the integrity of the financial sanctions regime, supports the foreign policy ambition and that the decision to release remains in line with its legal duty under UK law. The term ‘reasonable’ is written in to the Sanctions Act which means there is a legal requirement both for OFSI to assess this and for applicants to provide evidence of why a payment is reasonable.
If you are in possession of an OFSI licence that permitted the use of frozen funds for the payment of legal fees/maintenance under the previous EU regulations, you may need to provide a new explanation for reasonableness, if that licence requires an amendment. In addition, if you were granted a licence that has now expired after only being partially used, or not used at all, any new application will need to meet the new requirements as set out under the Sanctions Act for the regime. This should include explaining and/or evidencing the reasonableness of the payments. Licence extensions under derogations that have reasonableness written into them will need to undergo ‘reasonableness’ assessments again. This can be done by providing evidence such as previous invoices against the licence to assist OFSI in its determination that the costs remain reasonable and whether all of the licence is being used in the same way that it was when the licence was initially granted.
The two licensing derogations under the Sanctions Act that include a ‘reasonableness’ test are ‘legal services’ and ‘maintenance of funds or frozen resources’. We have broken them down below and have outlined the types of questions that applicants may wish to consider when applying under these specific licensing grounds.
Legal Services
It is for the applicant to demonstrate to OFSI that the legal fees and expenses they are requesting payment for are reasonable. OFSI considers that the Solicitors’ guideline hourly rates or the sums that could be expected to be recouped if legal costs were awarded following civil court proceedings, provide a useful starting point for assessing the reasonableness of legal fees and expenses. If you seek fees of a level above those set out in the guideline, you need to demonstrate why those increased fees are reasonable in the given case. Whilst we will consider rates that vary from the guideline, it is a useful benchmark in the assessment of reasonableness.
When applying to for a legal fees and expenses licence, you should consider addressing the following in your application form:
Whether the work has already taken place or if it is anticipated work;
What the work will involve/has involved;
Which fee earner(s) will be/have been involved in the work (and their position(s)/role(s) within the firm, including relevant level of experience);
The fee earner(s)’ hourly rate;
How many hours each fee earner(s) will be estimated to spend/has already spent on each workstream;
Any supporting evidence as to why the involvement and/or the number of hours of the particular fee earner(s) is reasonable and/or proportionate to the nature and complexity of the work;
Any expenses that are expected and have been paid out; and
If any expenses are expected, why are they necessary.
If you are requesting a licence amendment to permit an increase in the hourly rate of fee earner(s) you should provide a detailed explanation. For example, this may be a breakdown and evidence of the firm’s running costs to explain the proposed increase. When OFSI reviews such amendments, it is not enough to cite for example, “an engagement letter between the DP and the law firm” which provides for an annual increase, nor that it is a “common practice amongst law firms”. As set out in OFSI’s guidance, legal services may be provided without a licence, but any payments for legal services provided, do require a licence.
In terms of legal professional privilege (LPP), OFSI expects legal professionals to carefully ascertain whether LPP applies and which information it applies to. It is not generally considered that fees notes and narratives of work (in generic terms) are privileged as they do not constitute the giving or obtaining of legal advice. OFSI may challenge a blanket assertion of LPP where it is not satisfied that such careful consideration has been made. For example, simply providing the cost of a workstream without providing a breakdown due to LPP is not satisfactory. This is because OFSI is unable to undertake a reasonableness assessment without having a breakdown of the individual legal cost for each area of work.
Maintenance of funds and frozen resources
Under the derogation of ‘Maintenance of funds and frozen resources’, licences may be issued for a number of purposes. These can range from the supply of Covid-related personal protective equipment, to property maintenance. When a licence application or amendment request is submitted under this derogation, sufficient evidence will need to be included for OFSI to make a decision. When applying, you should consider the following in your application form:
Provide evidence when submitting your licence application. Appropriate evidence will vary based on what you are applying for.
Explain why the proposed activity is necessary. You may wish to explain what the outcome would be should you not receive a licence.
Where appropriate, consider obtaining quotes from more than one supplier to ensure that the fees can be demonstrated as reasonable and that you are receiving value for money.
If a quote is unable to be obtained, provide an evidence-based estimate. If you are a property management company looking to obtain a licence for a commercial building, you may wish to use quotes from similar-sized commercial buildings as evidence for reasonableness.
Provide a breakdown of the proposed payment/work. If you are requesting a licence to pay £100,000 for a change of windows, provide a breakdown of the payment – this could include the exact number of windows you are looking to change, cost of personnel and/or material etc.
If you are applying for a licence extension, you will be required to undergo the reasonableness assessment again. This may include reviewing your licence to ensure it is being used.
For any applicant that is submitting a licence application under a derogation that has ‘reasonableness’ written in to the regulations, you should use your own best judgement and not assume OFSI understands the process and practice of the profession when providing your response. We understand that reasonableness may have different meanings in different contexts and applicants should note that just because a payment has been licensed on a previous case, does not automatically mean that it will necessarily be licensed again. This is why OFSI considers each application on a case by case basis and the above pointers serve as a guideline of best practice when engaging with us.
For further information on licensing and financial sanctions implementation, please refer to OFSI’s general guidance.
To make guidance on UK sanctions regimes clearer and easier to navigate, we’ve introduced a series of improvements to structure and wording of the statutory guidance.
You do not need to take any action. These changes make the sanctions guidance easier to read and use, and do not reflect changes to the meaning of the text or scope of the regulations.
Summary of changes to statutory guidance, by section:
Prohibitions and requirements: Minor changes to text throughout. Wording under ‘Director disqualification’ and ‘Information and record keeping’ is updated, and an introductory section added.
Enforcement: Deletion of content that duplicates departmental enforcement guidance. This section will link out to departmental guides.
Licences and exceptions:
3.1 Exceptions: Added introductory definition of exceptions. Each exception now has a header, and links to additional departmental guidance where helpful. New ‘lookup’ guide for exceptions to the Belarus trade and transport sanctions.
Older versions of statutory guidance and other GOV.UK pages can be accessed for reference via the National Archives Web Archive.
This improvement to sanctions guidance delivers on recommendation ii of the May 2025 cross-Whitehall review of sanctions.
The UK Sanctions List from FCDO lists which people, entities and ships are designated or specified under the Sanctions and Anti-Money Laundering Act 2018, and why.
Call for evidence on ownership and control in financial sanctions regulations
OFSI has launched a call for evidence to seek industry’s views on how UK financial sanctions regulations on ownership and control are applied in practice, including how firms implement the regulations and where they face challenges.
The ownership and control test is designed to stop sanctioned individuals and entities from sidestepping UK sanctions by hiding behind complex company structures, trusts or proxies. However, industry representatives report to OFSI that assessing the ability of a designated person to control an entity – even if they are not actively doing so – can be difficult in practice and may create additional costs and legal risk.
We are therefore asking firms, representative bodies and other interested stakeholders to share evidence and practical examples of:
How often ‘hypothetical control’ is present in real financial sanctions cases;
The impact it has on compliance costs, legal risk and business decisions (including derisking);
Whether existing legal concepts and typologies of control are helpful in applying ownership and control regulations.
This information will help us understand whether the current approach is as clear, effective and proportionate as it should be, so that sanctions remain tough on those they target while being workable for legitimate businesses.
The Call for Evidence is open until 13th April 2026.
HMG is launching a call for evidence to seek industry’s views on how UK financial sanctions regulations on ownership and control are applied in practice, including how firms implement the regulations and where they face challenges.
We are asking firms, representative bodies and other interested stakeholders to share evidence and practical examples of:
How often ‘hypothetical control’ is present in real financial sanctions cases;
The impact it has on compliance costs, legal risk and business decisions (including de-risking);
Whether existing legal concepts and typologies of control are helpful in applying ownership and control regulations.
This information will help us understand whether the current approach is as clear, effective and proportionate as it should be, so that sanctions remain tough on those they target while being workable for legitimate businesses.
How to respond
OFSI is keen to hear from a wide range of stakeholders in response to the consultation, including businesses, financial institutions, legal and compliance professionals, civil society and other interested parties.
This Call for Evidence goes live on Monday 16th February 2026 and will be open for eight weeks. Responses will be accepted until 11:59pm on Monday 13th April 2026.
OFSI has launched a call for evidence to seek industry’s views on how UK financial sanctions regulations on ownership and control are applied in practice, including how firms implement the regulations and where they face challenges.
The ownership and control test is designed to stop sanctioned individuals and entities from sidestepping UK sanctions by hiding behind complex company structures, trusts or proxies. However, industry representatives report to OFSI that assessing the ability of a designated person (DP) to control an entity – even if they are not actively doing so – can be difficult in practice and may create additional costs and legal risk.
This information will help us understand whether the current approach is as clear, effective and proportionate as it should be, so that sanctions remain tough on those they target while being workable for legitimate businesses.
Background
The policy intention of the UK government’s approach to ownership and control (O&C) in UK sanctions regulations is to ensure that sanctions cannot be easily circumvented. The two-condition O&C test set out in legislation (e.g. Regulation 7(4) of The Russia (Sanctions) (EU Exit) Regulations 2019) serves as a critical safeguard against sanctions circumvention, by ensuring that entities owned or controlled by a DP are subject to financial sanctions, even if not explicitly named on the UK Sanctions List. In particular, the second condition of that test (also referred to as ‘the control test’) is broadly drafted to capture as much activity as possible.
We have repeatedly heard from financial and legal representatives that they face challenges when implementing O&C provisions, with particular emphasis on the degree of uncertainty of the control test and the potential for multiple and sometimes conflicting interpretations. Firms have told OFSI that determining when these situations constitute control for sanctions purposes can be challenging and that it is not always clear what evidence should be reasonably sought to support these assessments.
In response to industry feedback, HM Government committed to delivering measures to provide further clarity on ownership and control as part of the Review of Sanctions Implementation and Enforcement, published in May 2025. We are therefore launching a call for evidence on how the UK’s O&C test is applied during financial sanctions compliance. We want to hear from those who apply the test about where it works well, where challenges arise and the practical impacts of these assessments. Formal evidence across these areas, in addition to anecdotal evidence already held by OFSI, will help form a comprehensive picture of how implementation works in practice.
The call for evidence focuses on control as a direct response to industry feedback, which has highlighted greater implementation challenges associated with the control element of the O&C test rather than the ownership element. On ownership, HMG continues to actively explore options to respond to calls for greater alignment with international partners, including adopting an aggregation model and amending the 50% ownership rule to “50% or more,” in line with the EU and US sanctions frameworks.
Why we are calling for evidence
Under UK financial sanctions, a DP is subject to an asset freeze. The regulations also apply to entities that designated persons own or control.
An entity is owned or controlled directly or indirectly by another person in any of the following circumstances:
The person holds more than 50% of the shares or voting rights in an entity.
The person has the right to appoint or remove a majority of the board of directors of the entity.
It is reasonable, having regard to all the circumstances, to expect that a DP would (if they chose to) be able, in most cases or significant respects, by whatever means and whether directly or indirectly, to achieve the result that affairs of an entity are conducted in accordance with that DP’s wishes.
Evidence presented that the DP has not exercised control does not mean they do not have the ability to do so and therefore does not necessarily refute a DP’s control over an entity. This may be referred to as a DP’s hypothetical ability to exercise control, or simply ‘hypothetical control.’ If a DP can continue to move money or operate through others, the impact of sanctions is weakened. The O&C test helps ensure that sanctions bite on the real economic interests of DP.
At the same time, firms need regulations they can apply in a clear and proportionate way. Uncertainty can mean operational delays while investigations are conducted, higher costs to ensure compliance and de-risking behaviour, where firms may exit contracts or avoid new business relationships to avoid breaching sanctions.
This call for evidence will help us understand those pressures by gathering evidence on these issues in a structured way. It will build a picture of how firms and practitioners are currently interpreting and applying the test, which aspects of the ownership and control test cause the most difficulty and the practical impacts – including on costs, timing and business decisions. Our aim is to build a concrete, evidence-based picture of practice, rather than relying on anecdote.
Scope of the call for evidence
It is important to be clear about scope. The call for evidence does not invite comment on whether ownership and control rules are desirable as a matter of policy. Instead, we are asking for evidence across the following areas:
Chapter 2 examines the prevalence and nature of hypothetical control in financial sanctions, including how frequently this form of control is encountered and in what contexts. We are seeking evidence on its significance in the application of financial sanctions.
Chapter 3 explores the practical challenges and ease of implementation associated with the control test. This chapter has a particular focus on the assessment of the hypothetical element of the test and the financial impact of compliance and implementation.
Chapter 4 considers the practical utility of control typologies as a tool to assist with assessing the hypothetical element of the control test for financial sanctions. This includes, in particular, the typology of control set out by Deputy Judge Nicholas Thompsell in his ruling on Kevin Hellard & Ors v OJSC Rossiysky Kredit Bank & Ors.
We are particularly interested in concrete examples (anonymised where necessary) that show the realities of sanctions compliance and welcome evidence from any organisation or individual involved in sanctions implementation.
How to respond
The call for evidence is open until 13th April 2026.
Financial sanctions enforcement and monetary penalties guidance updated
Following our recent consultation, we have published updated guidance, reflecting a stronger and more transparent enforcement framework. These updates are designed to support compliance, give firms greater certainty and ensure sanctions are applied in a fair, effective and robust way. This guidance comes into effect from today and as a matter of policy OFSI assess all breaches of financial sanctions in line with the enforcement guidance in effect at the time of making its first formal decision whether to take enforcement action.
The guidance published today includes minor updates to a number of chapters, and the significant updates and additions below:
Early Account Scheme, Settlements & Financial Hardship
Chapter 4 – Early Account Scheme (EAS): Introduction of a new EAS (with a penalty discount of up to 20%), enabling subjects to provide an early factual account of a breach in eligible cases. This section sets out clear eligibility criteria, a step-by-step process, and the information OFSI expects to receive.
Chapter 6 – Settlement Scheme: Introduction of a new Settlement Scheme (with a penalty discount of 20%). This section sets out how the scheme operates in practice and how it can apply to existing cases.
Chapter 7 – Financial Hardship: New policy explaining how OFSI will consider exceptional claims of financial hardship, including the burden on the subject to evidence hardship and OFSI’s ability to consider public interest factors.
Enforcement Case Assessment & Discounts
Chapter 5 – Updated Case Factors: Several case factors have been updated, added, removed or renamed to provide clearer and more consistent assessments.
Chapter 5 – Four Level Seriousness Model: Replacement of the previous framework with a new four-tiered seriousness model (Levels 1–4), each with indicative outcomes ranging from warning letters to monetary penalties.
Chapter 6 – Voluntary Disclosure & Cooperation Discount: Introduction of a single penalty discount (up to 30%) for complete voluntary disclosure and co-operation, supported by expanded guidance clarifying what OFSI considers complete and timely cooperation.
Information, Reporting & Licensing Offences
Chapter 13 – Fixed Monetary Penalties: New section detailing how £5,000 and £10,000 fixed penalties will be applied for relevant offences, including the assessment process, penalty determination, and examples of applicable conduct. This section also expands on OFSI’s interpretation of information offences.
OFSI will host an online webinar in March 2026 to explain these changes in more detail. Further details on registration will follow.
Unlike earlier versions of enforcement guidance, this is not in PDF – it’s a standard HTML web page here:
I asked Gemini to compare and contrast “ownership and control” guidance and regulation across the world. Based on the responses I got, I ended up adding FATF, Wolfsberg, Switzerland and Japan to the bodies offering guidance:
This comprehensive analysis compares the “Ownership and Control” guidance across major national and international bodies.
Executive Summary: The “Control” vs. “Ownership” Divide
The central divergence in global sanctions regulation lies in how “Control” is treated:
The “Mathematical” Approach (US): Ownership (50% or more) automatically triggers sanctions. Control without ownership does not automatically trigger sanctions—it is merely grounds for future designation.
The “Status-Based” Approach (EU, UK, Canada): If a sanctioned person controls an entity (even with 1% ownership), that entity is automatically treated as sanctioned by operation of law. This shifts the burden of identifying “shadow control” onto the private sector.
1. Comparative Matrix: Global Ownership & Control Rules
Jurisdiction
Ownership Threshold
Aggregation Rule
Does “Control” Automatically Sanction?
Key Differentiator
USA (OFAC)
50% or more (≥ 50%)
YES
NO (See FAQ 398)
Strict mathematical application; Control is a designation criteria, not an automatic trigger.
EU (Council)
50% or more (≥ 50%)*
YES
YES
Recent 2024 update aligned EU with US. Burden is on operators to detect “dominant influence.”
UK (OFSI)
More than 50% (> 50%)
NO (Unless acting in concert)
YES
Higher threshold (>50%); Aggregation is rare; “Control” test is extremely broad.
Canada (GAC)
50% or more (≥ 50%)
Implied
YES (“Deemed Ownership”)
“Deemed ownership” legally conflates control and ownership into one trigger.
Australia (ASO)
“Owned or Controlled”
Silent(Principles-based)
YES
Less prescriptive; relies on “due diligence” to determine if assets are “indirectly” controlled.
Japan (MOF)
“Substantial Control”
Case-by-Case
YES (Permission required)
Uses a “Permission System” for payments rather than “Blocking” assets.
Switzerland
50% or more
De Facto Yes
YES (Indirect Prohibition)
Subsidiaries aren’t “blocked” per se, but paying them is “making funds indirectly available.”
UN (Security Council)
Varies by Regime
N/A
Varies
No global standard; relies on Member State implementation.
2. Detailed Jurisdictional Analysis
United States: The Office of Foreign Assets Control (OFAC)
The US provides the most “bright-line” guidance, prioritizing clarity over catch-all nuance.
The “50% Rule”: If Blocked Persons own 50% or more, individually or in the aggregate, the entity is blocked.
Aggregation: Explicitly required. If SDN A owns 25% and SDN B owns 25%, the entity is blocked.
The “Control” Gap: OFAC explicitly states (FAQ 398) that an entity controlled by an SDN (but owned <50%) is not automatically blocked.
Why? OFAC prefers to name and shame. If they want a controlled entity sanctioned, they will list it.
Applicability: Applies to all OFAC regimes unless specified otherwise (e.g., Sectoral Sanctions).
European Union: Council & Commission
The EU has moved aggressively to close loopholes, resulting in complex “control” tests.
Ownership Update (July 2024): The EU updated its “Best Practices” to align with the US, changing its test from “more than 50%” to “50% or more.”
The “Control” Trigger: If a Designated Person (DP) has “dominant influence” (e.g., right to appoint board majority, use of assets), the entity is sanctioned.
Burden of Proof: Unlike the US, EU operators must assess control themselves. If you trade with a subsidiary of a Russian oligarch, and the EU later decides the oligarch “controlled” it, you are liable for a breach, even if the subsidiary was never listed.
United Kingdom: Office of Financial Sanctions Implementation (OFSI)
The UK is unique for its rejection of automatic aggregation and its slightly higher ownership threshold.
Threshold: Strictly “more than 50%.” A 50/50 Joint Venture is not automatically sanctioned in the UK (unlike US/EU).
Aggregation: OFSI does not aggregate ownership of different DPs unless there is evidence they are parties to a “joint arrangement” (acting in concert).
Broad “Control” Definition: The UK test asks if it is “reasonable to expect” that the DP can achieve their desires regarding the entity’s affairs. This is a functional, outcome-based test.
Canada: Global Affairs Canada (GAC)
Canada uses a unique legal mechanism called “Deemed Ownership.”
Concept: Property is “deemed” to be owned by a DP if the DP “controls” it directly or indirectly.
Ambiguity: The definition includes any situation where the DP can “direct the entity’s activities.” This creates significant gray areas for compliance teams, as “influence” is often conflated with “control.”
Australia: Australian Sanctions Office (ASO)
Australia utilizes a “principles-based” approach rather than strict mathematical formulas.
Guidance: “Control” is defined as a question of fact—whether someone has “command or direction” over an asset.
Differentiation: Australia does not publish a “50% Rule” document comparable to OFAC. Instead, it relies on the prohibition against “making assets available to” a DP. If a DP owns a company, paying that company is effectively paying the DP.
Japan: Ministry of Finance (MOF) & METI
Japan operates a “Permission System” under the Foreign Exchange and Foreign Trade Act (FEFTA).
Mechanism: Rather than “blocking” an entity, Japan prohibits payments to DPs without “permission” (which is never granted).
Substantial Control: Restrictions apply if a DP holds a majority of shares OR exercises “substantial control” (e.g., dispatching executives).
End-User Lists: Japan places heavy reliance on METI’s “End User List.” If a subsidiary is not on the list, Japanese firms often presume trade is permitted unless “control” is glaringly obvious.
Switzerland: SECO
Switzerland aligns autonomously with the EU but maintains legal distinctiveness.
“Making Available”: Swiss law does not always “block” the subsidiary of a DP. Instead, it prohibits “making funds available” to the DP.
Interpretation: Paying a subsidiary is viewed as “indirectly” making funds available to the parent.
Differentiation: In the Popov case, Swiss courts demanded high evidence of control. However, 2024 guidance has aligned Switzerland closer to the EU’s broad “control” presumption to prevent circumvention.
United Nations (UNSC)
No Global Standard: The UN designates individuals/entities but leaves “ownership/control” interpretation to Member States.
Regime Specific: Some resolutions (e.g., DPRK) include specific language on “entities owned or controlled by” designated persons, but the implementation of what “controlled” means (e.g., 50% vs 25%) is decided by national authorities (OFAC, OFSI, etc.).
The “25% Gap”: FATF recommends a 25% threshold for identifying beneficial owners for AML screening.
Conflict: This creates a disconnect. Compliance teams screen at 25% (for FATF/AML) but block at 50% (for Sanctions). FATF guidance on “Proliferation Financing” urges countries to look beyond legal ownership to “ultimate effective control” to prevent evasion.
The Wolfsberg Group
Guidance: Represents global banking best practices.
Recommendation: Wolfsberg explicitly notes that the “50% Rule” is a legal baseline, not a risk management ceiling.
Control Risk: They advise that relying solely on lists is insufficient in “Control-based” jurisdictions (UK/EU). They recommend screening for Beneficial Owners (at 10-25%) to identify “aggregation” risks that might sum up to >50%.
Summary of Practical Implications
The “Joint Venture” Trap: A 50-50 JV with a sanctioned party is Blocked in the US/EU, but Allowed in the UK (statutorily, though high risk).
The “Minority Owner” Risk: A company 25% owned by a sanctioned oligarch who appoints the CEO is Safe in the US (unless listed), but Radioactive in the EU/UK (due to “Control”).
The “Aggregation” Headache: Three sanctioned individuals each owning 20% of a company results in a Block in the US/EU (60% total), but No Block in the UK (unless they are proven to be working together).
Source List for “Ownership and Control” Analysis
The following is a curated list of the primary government and regulatory source documents used in the comparative analysis.
Document:Update of the EU Best Practices for the Effective Implementation of Restrictive Measures (July 3, 2024)
Description: The critical update that aligned the EU ownership threshold (“50% or more”) with the US and clarified the “Dominant Influence” control tests.
Document:OFSI General Guidance – UK Financial Sanctions
Description: See specifically Chapter 4 (Ownership and Control), which details the “reasonable to expect” test and the rejection of automatic aggregation.
UK Lowers Oil Price Cap on Seaborne Russian Crude Oil
Today, the UK, alongside the EU, has announced that the Oil Price Cap on seaborne Russian Crude Oil will be lowered from $47.60 to $44.10 per barrel. The lowered Oil Price Cap of $44.10 per barrel comes into effect at 23:01 (GMT), Saturday, 31 January 2026.
This action will maintain regulatory alignment in targeting Russian revenues and is part of the UK’s ongoing commitment to supporting Ukraine in its struggle against Russia’s illegal war of aggression.
This will apply to all services captured by the Oil Price Cap, including maritime transportation and the provision, directly, or indirectly, of brokering services or financial services or funds, related to the maritime transport of Russian crude from a place in Russia to third countries or from one third country to another.
For any trades with an effective date of contract before 23:01 (GMT), Saturday, 31 January 2026 and which are compliant with the existing price cap of $47.60 per barrel, there will be a wind-down ending at 22.59 (BST), Thursday, 16 April. After the wind-down, the lower price cap of $44.10 per barrel takes effect. This measure is necessary to give UK businesses the required time to adjust and ensure the consistent implementation of the price cap by all operators.
OFSI has updated FAQs 154-161 today to support industry in adapting to the lower price cap over the wind-down period. Market participants must comply with the usual reporting and attestation requirements imposed by the Oil Price Cap General Licence.
