UK Firms Freeze £37 Billion as FCA Flags Sanctions Compliance Gaps Across 150 Firms

£37 billion. That’s how much UK financial firms have frozen in assets over the past year — and the Financial Conduct Authority wants people to know it’s still not enough.

The FCA dropped its findings on May 28, wrapping up a review cycle that started back in February 2022. Since then, the regulator has gone through more than 150 financial firms, poking at their sanctions systems and controls. Some of what it found was encouraging. A lot of it wasn’t. Gaps in due diligence, weak alert management, sloppy handling of frozen assets — these keep showing up. The FCA didn’t name specific firms, but the message was pretty clear: the industry has work to do, and the regulator is watching closely.

The compliance picture is murky.

Where Firms Keep Falling Short

The review flagged a handful of recurring weak spots. Transaction screening. Name screening. How firms manage assets once they’ve been frozen. And compliance with trade sanctions licenses — which, it turns out, is a whole different beast compared to financial sanctions. Trade sanctions cover goods, technologies, and services, and firms are apparently deploying a broader set of controls there than they do on the financial side. Whether that’s a good sign or just a sign that trade sanctions are harder to dodge, unclear.

What is clear: detecting actual trade sanctions breaches in real time remains genuinely difficult for most firms. The FCA didn’t sugarcoat that. It’s not just a matter of ticking compliance boxes — firms are struggling to catch specific violations before they happen or before they escalate. That’s a problem.

And the scope of what firms are flagging keeps widening. Reports have predominantly involved Russian sanctions — no surprise, given the scale of measures introduced after February 2022. But the FCA said it’s seeing increasing mentions of Libya, Iran, and North Korea in the reports it receives. That’s a broader geographic footprint than some firms probably planned for when they built their compliance systems a few years ago.

New MoU With OTSI Expands Regulatory Reach

To try to close some of these gaps, the FCA signed a Memorandum of Understanding with the Office of Trade Sanctions Implementation — OTSI, for short. The deal focuses on cooperation and intelligence sharing between the two bodies. It’s basically an extension of what the FCA already has with the Office of Financial Sanctions Implementation, or OFSI. Now both trade and financial sanctions enforcement have a formal channel for regulators to talk to each other and pool what they know.

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The FCA didn’t spell out exactly what intelligence sharing looks like in practice. No details on frequency, format, or what triggers a joint action. But the intent seems to be catching things that fall through the cracks when agencies work in silos — which, historically, they do.

It’s worth remembering that OTSI itself is relatively new. It was set up to specifically handle trade sanctions enforcement, and this MoU probably helps it build operational muscle faster by tapping into what the FCA has already learned from its 150-firm review.

What the FCA Is Sharing With the Industry

One thing the FCA has been doing consistently throughout this process: sharing findings. Both good practices and bad ones. The idea is that if a firm in one sector figures out a solid way to handle frozen asset management, other firms should hear about it. Same goes for common pitfalls — if the same mistake keeps showing up across multiple firms, broadcasting that probably saves everyone time.

The regulator’s been pretty deliberate about this. Disseminating what it learns is part of the strategy, not just a side effect. And given how complex sanctions compliance has gotten — especially with Russia, Iran, Libya, and North Korea all in the mix — firms genuinely need that kind of guidance. Building a compliance framework that covers all of those regimes, across goods, services, technologies, and financial transactions, is not a small lift.

Due diligence and alert management keep coming up as the two areas where firms need the most work. Those aren’t minor technical issues — they’re basically the front line of any sanctions program. If your alerts aren’t firing correctly, or your due diligence on counterparties is thin, the £37 billion in frozen assets starts to look less impressive and more like a floor that should be higher.

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The FCA said it will keep sharing findings and keep pushing firms to reinforce their controls. Further cooperation between the FCA and OTSI is the next step, with shared intelligence expected to drive how both bodies approach ongoing compliance issues.

£37 billion frozen. More than 150 firms reviewed. And the gaps are still there.