A trade compliance guide to how sanctions work, who enforces them, and what they require of UK businesses in 2026

Economic sanctions have become an unavoidable reality for any business that trades across borders. For many UK companies, the conflict in Ukraine was the moment sanctions compliance stopped being someone else’s problem and became a board-level concern for the first time. This is our economic sanctions explained guide for business: a clear account of what sanctions are, what sanctions mean in practice, who enforces them, and what they require of any company importing and exporting goods, as well as processing payments or running an international supply chain.

The stakes are high. Breaching UK trade sanctions is a criminal offence that can carry up to ten years’ imprisonment, alongside unlimited fines, asset seizures and serious damage to reputation. Sanctions regimes also change quickly, sometimes within days of a geopolitical event, so a position that was compliant last quarter may not be compliant now. What follows is a practical trade compliance guide to the types of sanctions, how they work, and what they mean in day-to-day terms for UK businesses.

What are economic sanctions?

Economic sanctions are restrictive measures imposed by governments or international bodies to further foreign policy and security objectives. They are used to maintain international peace and security, strengthen national security, prevent terrorism, and preserve human rights, democracy, and the rule of law. In short, they are a tool of diplomacy: a way of changing the behaviour of a state, organisation or individual without resorting to military force.

Financial sanctions are one particular type. They are measures designed to have an adverse financial effect on designated persons or entities, for example by freezing their funds and economic resources and by restricting the financial services that may be provided to them. It is worth distinguishing sanctions from embargoes: Both sanctions and embargo’s are targeted. An embargo is targeted at countries. An arms embargoes prohibits the export, supply or delivery, making available and transfer of military items and on the provision of technical assistance, financial services and funds, and brokering services related to military items. Sanctions are  aimed at named individuals, entities, sectors or activities.

In the UK, the sanctions framework rests principally on the Sanctions and Anti-Money Laundering Act 2018 (SAMLA), which allows the UK to impose, update and lift both thematic and country-specific sanctions. It is supported by the Counter-Terrorism Act 2008 and the Export Control Act 2002, among other legislation. You can read more on our sanctions and embargoes page.

Types of sanctions: an overview

Under the UK regime, the measures that may be imposed by regulations made under SAMLA fall into a few broad categories:

• Trade sanctions: restrictions on the export, import, supply or movement of goods, software, technology and services (as applicable) connected with designated persons or prescribed countries.
• Financial sanctions: asset freezes, restrictions on funds and economic resources, and prohibitions on providing financial services to designated persons.
• Immigration sanctions: travel bans on named individuals.
• Aircraft and shipping sanctions: controls on the movement, registration or detention of aircraft and ships connected with designated persons or countries.

Businesses also need to keep US sanctions in view. These are administered by the Office of Foreign Assets Control (OFAC), part of the US Treasury. As of 2026, the countries subject to comprehensive US embargoes are Cuba, Iran and North Korea, together with the Crimea, Donetsk and Luhansk regions of Ukraine. Syria was, for over a decade, on that comprehensive list. Still, the US terminated its complete Syria sanctions programme in 2025 following the fall of the Assad regime, a useful illustration of how quickly these regimes can move. Crucially, non-US firms can also be exposed to US secondary sanctions, discussed further below. The US Consolidated Screening List (CSL) includes OFAC designations, as well as other list designations, for example Entity List designations.

A brief history: sanctions in action

Recent examples show both the reach of modern sanctions and the speed at which they evolve. The most significant for UK business is the Russia regime. The Russia (Sanctions) (EU Exit) Regulations 2019 came fully into force on 31 December 2020, and were then expanded very substantially following Russia’s full-scale invasion of Ukraine in February 2022. They now cover an extensive range of goods and activities, including military items (goods, technology & software), dual-use items to, critical industry items, luxury goods, energy products as well as specified metals and other materials.

At the other end of the spectrum, the US maintained comprehensive sanctions on Syria for more than a decade before removing them in 2025. The long-standing US programmes against Iran, North Korea and Cuba, by contrast, have persisted for many years. The lesson for businesses is not to assume that today’s position will hold: sanctions regimes tighten and loosen in response to fast-moving events, and compliance has to be kept under continuous review.

Why sanctions are imposed

The policy rationale behind sanctions is to change behaviour without military action. Governments use them to maintain international peace and security, counter terrorism, answer to human rights abuses, and promote democracy and the rule of law. They are, in effect, a form of economic pressure applied to a state, regime, organisation or individual.

Their effectiveness is widely debated. Sanctions can impose real costs on a target and signal international resolve. Still, they can also be absorbed, evaded or circumvented, and their success often depends on how broadly other countries adopt them. That debate matters less to the individual business than the compliance obligation itself, which applies regardless of whether any particular sanction is achieving its political aim.

What do economic sanctions mean for international businesses?

For a business, sanctions translate into concrete operational constraints. They can restrict shipping lanes and supply chains, block or delay payments, and prevent a contract from being performed lawfully. A deal that made commercial sense can become unlawful overnight if a counterparty, or its owner, becomes a designated person.

What do trade sanctions mean for importing goods into the UK? In practical terms, they mean screening suppliers and customers (and their beneficial owners) against the UK Sanctions List, checking the supply chain to determine whether import prohibitions apply, and seeking the correct licences where trade (directly or indirectly) with a sanctioned country is involved. Under the Russia regime, for example, the UK now prohibits the import or acquisition of a range of Russian-origin goods, including iron and steel, coal, oil and oil products, and gold, as well as certain goods processed in third countries from Russian raw materials..

What do financial sanctions mean for online payment services and businesses handling money? The core prohibition is on making funds or economic resources available, directly or indirectly, to or for the benefit of a designated person, and on dealing with frozen assets. Payment platforms and any business that processes transactions therefore need to screen those transactions and the parties to them, and to be alert to indirect exposure.

One point catches many businesses out. Sanctions can apply even where an entity is not itself named on any list. Under the ownership and control rules, if a designated person holds more than 50 per cent of the shares or voting rights in a company, or can appoint or remove a majority of its board, or can otherwise ensure the company acts in accordance with their wishes, then that company is treated as subject to the same financial sanctions, even though it does not appear on the sanctions list in its own right.

The international sanctions impact on international commerce

At the macro level, sanctions reshape global trade flows, disrupt commodity markets and impose significant compliance costs across whole sectors. Certain sectors are particularly exposed because of the nature of the goods and technology involved. Andrew Skinner regularly advises clients across exactly these areas, including electronics, defence, scientific equipment, metals and civil nuclear, where a single component or technology transfer can cover multiple regimes at once.

The international sanctions impact is not limited to businesses that deal directly with a sanctioned country. Through US secondary sanctions, a non-US business can be targeted for engaging in activity that benefits a sanctioned country or person, even where the activity has no direct US nexus. Foreign companies caught by secondary sanctions can find themselves added to the US SDN List or cut off from the US financial system, which for most international businesses is a commercially existential risk.

Who enforces sanctions in the UK?

Responsibility for sanctions in the UK is split across several bodies, and the enforcement landscape changed significantly in 2024. The key players are:

• FCDO: overall policy responsibility, and it holds the UK Sanctions List.
• OFSI (part of HM Treasury): implements and enforces financial sanctions, and can impose civil monetary penalties as an alternative to criminal proceedings.
• OTSI, the Office of Trade Sanctions Implementation (part of the Department for Business and Trade): launched in October 2024, it now handles the civil enforcement of most UK trade sanctions, can impose civil penalties of up to the greater of £1 million or 50 per cent of the value of the breach, and refers criminal cases to HMRC.
• HMRC: criminal enforcement of trade sanctions and export controls. The Customs & Excise Management Act 1979, (CEMA), now allows HMRC to impose civil penalties for certain export control violations.
• ECJU (Department for Business and Trade): administers the export and trade licensing regime.
• Department for Transport: civil enforcement of aircraft and shipping sanctions.
• Home Office: travel bans.

The introduction of OTSI is important. It signals a firm intention to strengthen trade sanctions enforcement; it brings mandatory reporting obligations for certain firms in the financial, legal, shipping and aviation sectors, and it means trade sanctions breaches now attract civil penalties on a strict liability basis, in much the same way that OFSI enforces financial sanctions.

In the United States, OFAC enforces sanctions robustly. Criminal penalties for wilful violations can reach up to $1 million per violation and up to 20 years’ imprisonment, with civil penalties applied separately and adjusted over time.

Penalties for getting it wrong

A breach of UK sanctions may be a criminal offence. The maximum sentence on conviction on indictment is ten years’ imprisonment for trade sanctions breaches, and seven years for financial and transport sanctions breaches, in each case with the possibility of an unlimited fine. Beyond the criminal route, UK authorities  can impose civil monetary penalties, and have recently published details of the businesses breaching these controls. Hence, a breach increasingly carries reputational as well as financial consequences.

Sanctions and international relations: a double-sided sword

Sanctions rarely affect only their intended target. They can damage relationships with third countries that are not themselves the subject of the measures, create economic spillover effects across supply chains, and, in some cases, harm civilian populations rather than the regimes at which they are aimed. Businesses often find themselves caught in the middle, facing operational and legal uncertainty due to no fault of their own. That is precisely the situation in which specialist legal advice and a solid trade compliance programme earn their keep.

Challenges businesses face in practice

The theory becomes real when goods are stopped, or a determination has to be made under pressure. In practice, the issues we most often help clients with include goods detained by HMRC at the border, difficult determinations around dual-use goods, export controls reporting obligations under general licences, and voluntary self-disclosures for inadvertent breaches. Handling these well, quickly and with the right evidence, can be the difference between a manageable outcome and a serious one. You can read more about how these situations are approached on our sanctions and embargoes page, and in our article on trade sanctions due diligence.

The future of sanctions, and what it means for you

Sanctions are a complex and fast-moving area of international law, and their reach now extends from SMEs importing or exporting raw materials, to multinationals managing global supply chains. The direction of travel is more enforcement, not less, as the creation of OTSI and the public naming of those who breach make clear.

The practical response is pre-emptive trade compliance: live screening of customers and suppliers against the relevant sanctions lists, robust contractual clauses dealing with sanctions risk, and access to specialist advice before entering into any deal that could be caught. If you are unsure whether a transaction is affected, it is far cheaper to ask before you act than to unwind it afterwards. Our sanctions and embargoes service is built around exactly these questions, and you can follow Andrew Skinner on LinkedIn for updates as the regimes change.

Get fast, expert advice on UK and US sanctions and embargoes

For a free initial 15-minute consultation to find out how Andrew can help you, please call +44 (0) 1423 734019 or enquire. All enquiries will be responded to promptly. You can also connect with Andrew Skinner on LinkedIn.

Frequently asked questions

What do financial sanctions mean for online payment services?

For any business that processes payments, financial sanctions mean two core prohibitions. First, you must not make funds or economic resources available, directly or indirectly, to or for the benefit of a designated person. Second, you must not deal with funds or economic resources that belong to, or are owned or controlled by, a designated person, which in practice means freezing them. Payment platforms, as well as businesses trading goods and services therefore need to screen both the transactions and the parties involved against the UK Sanctions List  and to remember that the ownership and control rules can catch a company that is not itself named. Getting screening and escalation processes right is central to compliance.

What do trade sanctions mean for exporting goods from the UK?

Businesses should ensure that they do not trade with designated (listed) individuals or entities, or with an entity which is owned or controlled by a designated individual or entity. This means that all parties involved in any transaction (customer or supplier) should be screened against all applicable sanctions lists.

Businesses should also ensure that all items (goods, software or technology) are classified correctly against all applicable export control lists. Additionally, trade sanctions include lists of controlled goods and raw materials for import and export control reasons, so businesses need to ensure that they are compliant with these controls.

As well as business sanctions, other export or import controls may also be applicable, depending on the type of item, or on the end-use application.

Where a transaction involves a person or organisation subject to financial sanctions (whether directly or indirectly), businesses must obtain a licence in order to allow the activity to take place without breaching financial sanctions. Where a transaction is subject to trade sanctions, then businesses must obtain a licence from the Export Control Joint Unit (ECJU).What do trade sanctions mean for importing goods into the UK?

Trade sanctions can prohibit or restrict the import of particular goods from a sanctioned country, and can also catch goods processed in third countries from sanctioned inputs. In practice this means checking whether the goods you intend to import are subject to a prohibition, screening your suppliers and their owners against the relevant lists, and applying for any licence that is required. Under the Russia regime, for example, the UK bans the import of a range of Russian-origin goods including iron and steel, coal, oil and gold. Where there is any doubt about classification or origin, it is better to resolve it before the goods move than to have them detained at the border.

What is the difference between sanctions and embargoes?

The terms overlap to a certain extent, but broadly, an embargo under US law is a wide prohibition on trade with a particular country or territory. An embargo under UK law is more targeted, for example a military embargo relating to certain countries listed in Schedule 4, Part 2 of the Export Control Order 2008, including, but not limited to, Belarus, Burma (Myanmar), China, Hong Kong, Iran, North Korea, Sudan, Syria, Zimbabwe. At the same time, sanctions are the more general label for restrictive measures that can be far more targeted, aimed at named individuals, entities, sectors or specific activities. A comprehensive embargo, such as the US programmes on Cuba, Iran and North Korea, prohibits virtually all dealings. Most modern UK measures are more surgical, which is why careful screening and classification are so important.

This article is for general information only and does not constitute legal advice. Sanctions regimes change frequently; specific situations should be discussed with a qualified adviser.