backOn 29 January 2026, HM Treasury’s Office of Financial Sanctions Implementation (“OFSI”) – the UK authority responsible for the implementation and civil enforcement of UK financial sanctions – published its consultation response outlining upcoming changes to its enforcement practices for financial sanctions breaches, including a proposal to double the maximum civil enforcement penalty.
These reforms follow a cross-government review of sanctions enforcement launched in 2024 to strengthen the UK’s enforcement framework. As part of this effort, OFSI published a public consultation seeking feedback on a set of proposals aimed at streamlining and modernising its enforcement processes. The consultation covered five key areas:
- Guidance via a case assessment matrix and changes to voluntary self-disclosure discounts;
- A formal settlement scheme;
- An Early Account Scheme;
- Information, reporting and licensing offences; and
- Increases to the statutory maximum penalties.
OFSI will now proceed with implementing all of the proposals originally put forward, taking into account the feedback received from respondents. The majority of the changes to OFSI’s enforcement processes will be implemented in February 2026 through updates to OFSI’s public enforcement guidance. A summary of each reform is set out below.
Overview of Upcoming Reforms to Enforcement Processes
Case assessment matrix and Voluntary self-disclosure discounts
OFSI currently assesses the seriousness of a financial sanctions breach by categorising it as Lower Severity, Moderate Severity, Serious or Most Serious. Monetary penalties are typically reserved for Serious or Most Serious cases.
To improve transparency and predictability, OFSI plans to publish a new case assessment matrix explaining the factors it considers when assessing breaches and how those assessments inform penalty calculations.
OFSI also intends to overhaul its voluntary disclosure model. Currently, a voluntary self-disclosure may reduce monetary penalties by up to 50% in a Serious case or 30% in a Most Serious case. Under the new regime, OFSI will introduce a Voluntary Disclosure and Co-operation discount of up to 30% across all cases. The level of discount will depend on both the extent of the initial disclosure and the subsequent co-operation during the investigation.
Settlement scheme
OFSI will introduce a formal settlement scheme for monetary penalty cases. Under the scheme:
- OFSI will conduct settlement negotiations in parallel with its issuance of the formal Notice of Intention to impose a monetary penalty.
- Subjects will have 30 business days to reach a settlement. OFSI may grant short extensions to the settlement period on a case-by-case basis in limited circumstances.
- To settle, subjects must waive ministerial review and judicial appeal of OFSI’s penalty decision.
- In return, subjects will be eligible to receive a 20% penalty discount and may provide input into the public penalty notice.
Initially, OFSI indicated that settlement would unlikely be offered where breaches were committed knowingly or intentionally, involved circumvention, or subjects failed to co-operate or engage with OFSI in good faith. However, following public feedback, OFSI has softened its approach and will now consider settlement in circumvention-related cases on a case-by-case basis, particularly where circumvention is historic and responsible individuals have been removed. OFSI will provide further detail of the circumstances where it may offer settlement in forthcoming guidance.
Early Account Scheme
An Early Account Scheme (“EAS”) will allow subjects of an investigation to provide OFSI with a comprehensive and early explanation of a breach, supported by all relevant materials and evidence. In return, OFSI may apply an EAS discount of up to 20% to the baseline penalty. This scheme is designed to accelerate investigations and encourage full and timely disclosure.
Information, reporting and licensing offences
Currently, information, reporting and licensing offences follow the same penalty process as substantive financial sanctions breaches. To streamline the process for low-value penalties, OFSI will introduce fixed-value penalties of either £5,000 for standard cases or £10,000 for aggravated cases. OFSI will retain discretion to impose penalties below or up to the statutory maximum for certain offences where appropriate.
Such penalties will be made public and subject to a shortened 15-business-day representation period replacing the current 28-working-day timeline.
To avoid “over-penalisation” for technical breaches, OFSI has clarified that not all information, reporting and licensing offences will necessarily result in monetary penalties. OFSI may instead use an alternative enforcement option, as appropriate to the case, including issuing warning letters or public disclosures, or taking no further action.
Statutory maximum penalties
Under the Policing and Crime Act 2017 (“PACA”), OFSI may currently impose monetary penalties for financial sanctions breaches up to the greater of £1 million or 50% of the value of the breach. OFSI now seeks to increase the maximum penalty to the greater of £2 million or 100% value of the breach. This increase will be the first time that OFSI has altered the penalty cap since its introduction in 2017. Importantly, maximum penalties will not be imposed automatically under this new penalty model. OFSI will continue to exercise its discretion to determine the value of any penalty on a case-by-case basis, with the highest penalties reserved for the most serious offences. This change, however, significantly increases potential exposure for businesses.
Next Steps
OFSI intends to implement the non-legislative changes – including the case assessment matrix, the revised discount structure, the Settlement Scheme, the EAS, and fixed penalties for information, reporting and licensing offences – through an updated Enforcement and Monetary Penalties guidance, which will be published in February 2026.
The increase to the statutory maximum penalty requires legislative action and will be brought before Parliament in due course.
Key Considerations
The new enforcement framework introduces strong incentives for companies to co-operate with OFSI at each stage of the investigation, while also expanding OFSI’s ability to impose significant civil monetary penalties.
Under the revised enforcement framework, companies will be able to access a range of discounts: the Voluntary Disclosure and Co-operation discount (maximum 30%); the EAS discount (maximum 20%); and a settlement discount (20%). Collectively, these discounts could result in a reduction of up to 70% to the same baseline penalty; however, businesses may continue to face liability in parallel civil or criminal proceedings from other UK government agencies, depending on the nature of the breach. In addition, OFSI’s continued publication practices means that offences – including those that result in low-value penalties – will be made public. Finally, the plan to increase the statutory maximum penalty to the higher of £2 million or the total value of the breach considerably raises the stakes for compliance failures.
Companies should closely review their sanctions compliance programme in light of the following:
- Evaluate legal and reputational risks of engaging with OFSI under the new settlement scheme. While voluntary disclosure, early engagement, and settlement can significantly reduce the penalty amount (potentially by up to 70% in total), they require careful consideration of legal rights and reputational impact of a public reporting.
- Strengthen internal escalation and decision-making processes. Businesses will need the ability to conduct internal investigations and secure approvals quickly to meet the 30-business day settlement window and EAS timing expectations.
- Enhancing controls for information, reporting and licensing obligations. Companies should improve governance over reporting timeliness, licence compliance, and responsiveness to OFSI’s requests, and prepare to manage the compressed 15-business day representation period.
King & Spalding has extensive experience advising companies on UK financial sanctions and will continue to monitor OFSI’s forthcoming updates and legislative developments. Please reach out to a member of our team if you have any questions.