When sanctions enforcement jumped 200% in 2024 and penalties hit £300,000, staying current with OFSI guidance became a matter of business survival.
Something shifted in UK sanctions enforcement this year. The pace accelerated, the penalties grew sharper, and the margin for error disappeared. On 18 August, HM Treasury’s Office of Financial Sanctions Implementation (OFSI) updated their financial sanctions guidance and FAQs, marking another milestone in what’s become the most demanding compliance landscape cross-border payment firms have ever faced.
This isn’t another routine regulatory update. It’s a response to an environment where over 1,700 Russia-related designations have been added since 2022, enforcement actions have surged more than 200% year-on-year, and firms are discovering that compliance gaps cost more than just money—they cost business relationships, banking partnerships, and operating licences.
If you’re running a payment service provider, EMI, or any money service business handling cross-border flows, this guidance update demands your attention. Here’s why, and more importantly, what you need to do about it.
The Compliance Landscape Has Fundamentally Changed
Let’s start with the numbers that matter. Since May 2022, OFSI has added more designations to the UK sanctions lists than in the previous decade combined. The Russia/Belarus sanctions alone include over 1,700 individual and entity designations. Each addition creates new screening requirements, new compliance risks, and new opportunities for costly mistakes.
The enforcement data tells the story even more clearly. OFSI issued at least three major enforcement actions in July and August 2025 alone, including a £300,000 penalty that should make every compliance officer pay attention. These aren’t targeting the obvious bad actors anymore; they’re catching firms that thought they were doing enough but weren’t keeping pace with changing requirements.
For cross-border payment businesses, sanctions represent what compliance experts call “highest-velocity risk.” Unlike other regulatory requirements that evolve slowly, sanctions lists change daily. New designations appear overnight. Enforcement priorities shift based on geopolitical events you can’t predict or control.
Your correspondent banks know this. They’re tightening their due diligence on payment partners because their own regulatory scrutiny has intensified. When OFSI investigators review a sanctions breach, they don’t just look at the firm that processed the transaction; they examine the entire payment chain, including banking partners who should have caught the red flags.
What the August Update Actually Changes
The 18 August OFSI guidance update focused on three critical areas that directly impact how payment firms operate:
Enhanced Reporting Obligations The guidance clarifies requirements that took effect on 14 May 2025, expanding mandatory reporting beyond traditional financial institutions. If you’re a relevant firm under the updated definition (which includes most PSPs, EMIs, and related services), you must report knowledge or reasonable suspicion of sanctions breaches. The guidance sharpens what constitutes “reasonable suspicion” and tightens timelines for reporting.
Stricter Screening Expectations OFSI now provides specific examples of adequate screening procedures, including requirements for daily list updates, delta checking, and fallback controls. The guidance explicitly addresses emerging risks in cryptoassets and intermediated transactions. Recent enforcement actions show that “we didn’t know about the update” is no longer an acceptable defence.
Refined Licensing Guidance The update clarifies when general licences apply and when specific licences are required. For payment firms handling trade finance, humanitarian payments, or other potentially licensed activities, the guidance provides clearer boundaries but also stricter documentation requirements.
The Real-World Impact on Your Business Operations
Here’s what these changes mean for your day-to-day operations. When your screening system flags a potential match, your response time and escalation process now face greater scrutiny. OFSI expects immediate reporting of suspected designated persons, and “immediate” has been clarified to mean within hours, not days.
Your staff training requirements have expanded. The guidance includes new sector-specific examples that your operations team needs to understand. Recent sector audits found that firms with outdated training materials faced extended regulatory reviews and increased penalty exposure.
Your technology controls must be more robust. Daily list-refresh processes need documented delta checks and automated fallback procedures. Manual processes are acceptable as backups but not as primary controls. Firms that experienced system failures without adequate fallbacks have faced enforcement actions even when no actual violations occurred.
Documentation standards have increased. Every gap analysis, every training session, every system update needs dated records. OFSI investigators and banking auditors consistently cite inadequate documentation as evidence of insufficient compliance commitment.
Your Step-by-Step Compliance Action Plan
Based on the updated guidance and recent enforcement patterns, here’s your comprehensive response plan:
Immediate Actions (This Week)
Re-validate your entire sanctions policy against the updated OFSI guidance. Don’t just skim for changes; conduct a line-by-line comparison. Create a dated gap analysis documenting every discrepancy between your current procedures and the updated requirements. This document becomes crucial evidence if questions arise later about your compliance efforts.
Verify your daily list-refresh controls immediately. Test your primary system, backup procedures, and staff notification processes. Document the test results. If you find gaps, fix them now and document the remediation steps.
Short-Term Actions (Next Two Weeks)
Re-run comprehensive screening QA on your highest-risk transaction corridors. Focus particularly on Russia/Belarus designations and any newly listed regimes. The guidance specifically highlights cryptoasset risks, where international operations froze £26 million in illicit assets in March 2025 alone. Document your sample results and any system improvements made.
Schedule mandatory retraining for all operations staff who handle transaction screening, escalations, or customer due diligence. Use the updated OFSI examples and sector-specific guidance. Keep attendance records and training materials dated to the guidance version used.
Update your operational runbooks to include direct links to live OFSI guidance. Staff need access to current information, not printed procedures that become outdated. Recent audits found that firms with embedded live links demonstrated better compliance outcomes than those relying on static procedures.
Ongoing Actions (Monthly)
Establish monthly OFSI guidance reviews. The August update won’t be the last; OFSI updates this guidance regularly based on emerging risks and enforcement experience. Set calendar reminders and assign responsibility to specific staff members.
Implement quarterly screening QA testing with documented results. Don’t wait for annual audits to discover system weaknesses. Regular internal testing helps you catch problems before regulators or banking partners do.
Maintain continuous staff awareness through brief monthly updates on sanctions trends, new designations, and regulatory developments. Compliance isn’t a one-time training event; it’s an ongoing operational discipline.
The Strategic View: Why This Matters Beyond Compliance
Understanding OFSI guidance updates as purely compliance exercises misses their broader business impact. Your sanctions compliance directly affects your banking relationships, which determine your ability to operate effectively in cross-border markets.
Correspondent banks now conduct more frequent and detailed reviews of their payment service provider partners. They’re looking for evidence of robust, current compliance programmes. Firms that can demonstrate proactive responses to guidance updates maintain stronger banking relationships and better access to payment corridors.
Your compliance standards also affect customer acquisition and retention. Larger corporate customers increasingly include sanctions compliance requirements in their vendor selection criteria. Demonstrating current, comprehensive compliance programmes becomes a competitive advantage, not just a regulatory obligation.
The reputational aspects matter too. Sanctions enforcement actions receive significant industry attention. Being named in OFSI enforcement notices affects your ability to attract customers, banking partners, and even staff. In our interconnected industry, regulatory red flags spread quickly through professional networks.
Preparing for What’s Coming Next
The August OFSI guidance update reflects broader trends in UK sanctions enforcement that show no signs of slowing. Enforcement actions have increased dramatically, penalties have grown larger, and regulatory expectations continue rising.
Looking ahead, expect more frequent guidance updates as OFSI responds to emerging sanctions evasion techniques, new designated persons and entities, and evolving international coordination requirements. The regulatory environment has shifted from periodic major updates to continuous refinement.
Your compliance programme needs to be designed for this new reality. Static procedures reviewed annually won’t suffice. You need systems and processes that can adapt quickly to changing requirements while maintaining consistent documentation and staff competency standards.
The firms that will thrive in this environment are those that view sanctions compliance not as a burden but as an operational discipline. They invest in robust systems, comprehensive staff training, and proactive monitoring of regulatory developments. They document everything, test regularly, and maintain strong relationships with banking partners who value their compliance commitment.
The updated OFSI guidance is available on GOV.UK and should be bookmarked by every compliance officer in the cross-border payments sector. More importantly, it should be understood not just as a regulatory requirement but as a blueprint for maintaining the business relationships that enable your continued operation in an increasingly complex global payments landscape.
