Sanctions Watch | Weekly Vol. 156

Sanctions Watch Vol 156

In the latest edition of our Sanctions Watch weekly digest, we present significant updates on sanction watchlists and regulatory developments.

OFAC Highlights Expanding Sanctions Compliance Obligations and Enforcement Risks for Global Businesses

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has released updated guidance outlining the scope of U.S. sanctions programs, compliance expectations, and enforcement mechanisms applicable to individuals and organizations operating under U.S. jurisdiction. OFAC administers economic sanctions targeting foreign governments, entities, and individuals involved in activities such as terrorism, narcotics trafficking, weapons proliferation, and other threats to U.S. national security and foreign policy objectives.

The guidance emphasizes that sanctions can take multiple forms, including list-based sanctions, government and regime sanctions, jurisdiction-wide restrictions, sectoral sanctions, and secondary sanctions affecting certain non-U.S. persons. Organizations are urged to adopt risk-based sanctions compliance programs incorporating management commitment, risk assessments, internal controls, testing, auditing, and employee training. Screening of customers, counterparties, transactions, and supply chains remains a key compliance requirement.

OFAC further highlights reporting and recordkeeping obligations, including requirements to report blocked or rejected transactions and maintain records for up to ten years. The agency notes that sanctions violations may trigger significant civil and criminal penalties under a strict liability framework, meaning liability can arise even without knowledge of a prohibited transaction. Enforcement actions may include penalties, settlements, cautionary letters, or referrals for criminal investigation. OFAC also encourages voluntary self-disclosures of apparent violations, which may substantially reduce potential penalties. The publication reinforces the importance of robust sanctions compliance measures amid evolving global sanctions risks and regulatory scrutiny.

EU Reaches Landmark Deal to Accelerate Returns of Illegal Migrants and Establish Return Hubs in Third Countries

The Council of the European Union and the European Parliament have reached a provisional agreement on a new regulation aimed at strengthening and accelerating the return of third-country nationals who are staying illegally within EU member states. The legislation introduces stricter obligations requiring individuals without legal residency rights to cooperate with authorities and leave the concerned member state. Non-compliance may result in reduced benefits, denial of voluntary return incentives, and, where permitted under national law, criminal penalties including imprisonment.

A key feature of the agreement is the creation of a legal framework allowing member states to establish “return hubs” in third countries. These facilities may serve either as final destinations or transit centers for onward return, provided the host countries comply with international human rights standards and the principle of non-refoulement. Unaccompanied minors are excluded from such arrangements.

The regulation also introduces a European Return Order (ERO), a standardized document designed to facilitate future mutual recognition of return decisions across member states. While recognition will initially remain voluntary, the European Commission will review the mechanism after three years and may propose mandatory recognition.

Additional provisions target individuals considered security risks, enabling member states to impose entry bans exceeding ten years or, in some cases, indefinite bans, alongside stricter detention measures.

The agreement complements the EU Pact on Migration and Asylum and is expected to enhance the efficiency and credibility of the EU’s migration management framework. Following formal approval by the Council and Parliament, the regulation will enter into force shortly after publication in the Official Journal, with certain provisions becoming applicable after 12 months.

OFAC Enforcement Action Highlights Risks of Indirect Dealings with Sanctioned Russian Financial Institutions

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced a settlement with FTI Consulting, Inc., a Washington, D.C.-based global business advisory firm, for apparent violations of U.S. sanctions targeting Russia’s financial sector. FTI agreed to pay $1.05 million to resolve allegations that it indirectly dealt in prohibited debt of VTB Bank, a Russian state-owned bank subject to OFAC’s Sectoral Sanctions Identification (SSI) List restrictions.

According to OFAC, between April 2019 and May 2021, FTI provided economic consulting services to VTB through an intermediary law firm. Although invoices were formally issued to the law firm, payment was ultimately dependent on VTB. OFAC determined that by continuing to provide services and issuing invoices that remained unpaid for periods exceeding the permitted 14-day maturity threshold, FTI effectively extended prohibited credit to VTB on six occasions.

OFAC found the violations to be non-egregious but concluded that FTI did not voluntarily self-disclose the conduct. Aggravating factors included the firm’s awareness of sanctions risks, repeated warning signs regarding overdue payments, and the use of a payment structure that obscured the underlying sanctions exposure. Mitigating factors included FTI’s cooperation with the investigation, agreement to toll the statute of limitations, and significant enhancements to its sanctions compliance program.

The enforcement action underscores OFAC’s position that sanctions prohibitions apply equally to indirect and direct dealings, emphasizing that businesses cannot structure transactions through intermediaries to circumvent sanctions restrictions.

UK Trade Sanctions Office and FCA Formalize Intelligence-Sharing Partnership to Strengthen Sanctions Enforcement

The United Kingdom’s Office of Trade Sanctions Implementation (OTSI) and the Financial Conduct Authority (FCA) have signed a Memorandum of Understanding (MoU) establishing a formal framework for cooperation and information sharing to enhance the implementation and enforcement of UK trade sanctions. The agreement, signed on 28-May-2026, aims to improve coordination between the UK’s trade sanctions enforcement authority and financial regulator in identifying, investigating, and addressing sanctions-related risks and breaches.

Under the MoU, both authorities will exchange intelligence relating to suspected or actual sanctions violations, weaknesses in firms’ sanctions controls, enforcement matters, and broader financial crime risks. The arrangement allows for proactive and request-based information sharing, including intelligence gathered through supervisory activities, investigations, and enforcement actions. Personal data relevant to sanctions breaches may also be shared where necessary and proportionate under applicable legal frameworks.

The agreement reflects OTSI’s expanding role since its launch in October 2024 as the UK authority responsible for strengthening trade sanctions compliance, licensing, and civil enforcement. It also reinforces the FCA’s responsibility to ensure regulated firms maintain effective systems and controls to mitigate sanctions and financial crime risks.

The partnership is expected to enhance the detection of sanctions evasion, support coordinated investigations, and improve regulatory oversight of UK businesses and financial institutions. While the MoU is not legally binding, it establishes a structured mechanism for cooperation that strengthens the UK’s overall sanctions enforcement architecture and compliance framework.

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Sanctions Watch is a weekly recap of events and news related to sanctions around the world.