The Solicitors Regulation Authority (SRA) has recently updated its guidance on the UK financial sanctions regime, with the latest version published on 1 May 2025. This follows a period of increasing regulatory scrutiny in the area of financial sanctions, fuelled by international developments and the UK government’s desire to strengthen compliance and enforcement. The revised guidance aims to provide clarity for solicitors and firms on their obligations under the regime, especially in light of evolving expectations and the strict liability nature of financial sanctions breaches.
This article looks at the main changes covered in the updated guidance and considers how firms can adapt their systems and controls to ensure effective implementation.
The UK Financial Sanctions Framework: A Brief Recap
The financial sanctions regime is part of the UK government’s broader system of sanctions designed to achieve foreign policy and national security objectives. The measures can include asset freezes, prohibitions on financial services, restrictions on trade, immigration bans, and transport-related sanctions. The Office of Financial Sanctions Implementation (OFSI) is responsible for enforcing financial sanctions, while the Office of Trade Sanctions Implementation (OTSI) handles trade-related enforcement.
Crucially, under the Sanctions and Anti-Money Laundering Act 2018 and related statutory instruments, it is a criminal offence to breach financial sanctions. When first implemented the offence would only have arisen if the breach had been committed intentionally or recklessly, but this was elevated into an offence of strict liability by the Economic Crime (Transparency and Enforcement) Act 2022. This Act was rushed through the Parliamentary processes in the immediate aftermath of the Russian invasion of Ukraine and took effect in the June of that year.
Since this is now an offence of strict liability, there is therefore the risk of liability or censure by the SRA even if the firm did not intend to commit an offence or failed to realise that they were doing so. This has even opened up such risks in relation to any dealings with a sanctioned person who is a counterparty to a matter that the firm is acting in, rather than in relation to just its own client. As such, although the risks of ever encountering such a person might be extremely slight for most firms, nevertheless it is important that all solicitors should take steps to mitigate the risk of contravening these now more burdensome regulations.
So far as inadvertent breaches of the regime are concerned, the SRA has stated that it will “take a view” as to whether to prosecute. In such cases, if the firm can show that it is aware of what is required, and has taken active steps to ensure compliance, it would have to be hoped that a more sympathetic approach would be adopted. It is also important to stress that liability can arise in relation to any dealings that firms might have with their clients or others and is not limited to those areas of advice that fall within the regulated sector for anti-money laundering compliance under the Money Laundering Regulations 2017.
Key Sanctions Changes in the May 2025 SRA Guidance
One of the most significant developments in the updated SRA guidance is a reorganisation of the content. The structure has been revised so that the core principles, which apply to all firms, are now clearly set out first. These are then followed by sections aimed at firms more likely to be affected by the provisions in practice, such as those dealing with international clients or those that have exposure to high-risk jurisdictions.
The updated guidance also incorporates insights from the SRA’s recent thematic reviews and supervisory visits. These show how compliance can be maintained across a range of firm types and sizes. For example, the SRA notes that firms with well-documented screening procedures and staff training programmes were more likely to identify and manage potential sanctions risks early.
A notable addition is a detailed case study which illustrates how a firm, despite having no previous contact with sanctioned individuals, found itself involved in a matter with sanctions implications. This highlights the increasing complexity of global transactions and underlines the need for heightened vigilance, even in apparently low-risk work.
The guidance also expands on warning signs and “red flags” that firms should consider when assessing client risk. These include behaviours that suggest attempts to circumvent sanctions, such as clients seeking to use multiple intermediaries, requesting transactions involving opaque ownership structures, or displaying reluctance to provide identification. In addition, the guidance now confirms that firms should carry out sanctions screening not only on clients, but also on staff and when recruiting them in particular.
The SRA has gone on to clarify its expectations around reporting obligations. There is guidance on how to report to the SRA itself—separate from reporting obligations to OFSI or other bodies. This reflects the regulator’s growing interest in how firms deal with potential sanctions breaches internally, and how they communicate issues when they do arise.
Additional clarifications have been made to references concerning ownership and control. In particular, the SRA has corrected earlier references to the 50% ownership threshold, ensuring consistency with the legal definition of control under UK sanctions legislation. Firms should be especially alert to situations where designated persons may exert control through indirect means, such as through family members or corporate structures.
The guidance also includes further explanation of the licensing provisions. It is possible to continue to act for a designated person if a licence to do so has been obtained from OFSI in which case the firm must ensure that all conditions of that licence are strictly followed. This includes reporting, record-keeping, and compliance with specific terms about the nature and scope of the legal services provided.
Implications for Firms
Solicitors must ensure that client due diligence (CDD) procedures are robust enough to identify individuals or entities subject to sanctions. This is especially critical when acting for corporate clients, where beneficial ownership or controlling interests might not be immediately visible.
The expanded guidance on staff screening will require many firms to update their recruitment and HR processes. Screening new staff against the consolidated sanctions list may have previously been considered best practice, but it is now presented as an expected part of risk management. Firms will need to ensure that screening tools and databases are accessible and up to date.
One of the most operationally important aspects of the revised guidance is its focus on reporting. Firms must have clear internal policies on how to escalate concerns, who is responsible for investigating red flags, and the process for contacting OFSI or the SRA when necessary. The message is clear: prompt and transparent reporting can help mitigate regulatory consequences.
Another area of importance is licence compliance. Where firms act for clients who are sanctioned, or are linked to sanctioned individuals or entities, a specific licence from OFSI may be required. The SRA now expects firms to have systems in place to manage these licences and ensure their terms are fully understood and followed by all staff involved in the matter. It has also advised that firms might wish to include a provision in their terms of business to permit them to terminate the retainer on learning that their client has now been made a “target” in the regime. Infolegal subscribers will find that this is contained in our model terms of business document.
Firms must also consider the impact on insurance coverage. Some policies may exclude work involving sanctioned entities. Firms are advised to review their indemnity insurance to check for any exclusions or notification requirements and to speak with their brokers or insurers if in doubt.
Embedding the Sanctions Guidance into Practice
To comply with the updated expectations, law firms should begin by conducting a thorough review of their existing sanctions policies and procedures. Where gaps are identified, updates should be made without delay. This may involve amending onboarding procedures, updating risk assessments, and ensuring that practice management systems support sanctions checks. Infolegal subscribers can use our updated sanctions template policies. In addition, although conducting a risk assessment for possible sanctions involvement is not a regulatory requirement this has been recommended by the SRA. Again, Infolegal subscribers will find that we have added a short template questionnaire for this as an appendix to our “Fourfold AML Risk Assessment” questionnaire.
Training will also be essential. All staff, particularly those in client-facing roles, should receive regular, tailored training on identifying sanctions risks and understanding their personal responsibilities. Training should include scenario-based discussions, drawing on the case study examples in the guidance. Infolegal provides subscribers with a Sanctions training course that outlines the key issues.
Periodic internal audits can help ensure that controls are effective in practice. In firms handling international work or high-value transactions, compliance officers may wish to commission external reviews or seek specialist advice to validate their approach.
Finally, firms should commit to staying informed. The sanctions landscape changes frequently. The consolidated list of designated persons maintained by OFSI is updated regularly, and so too are relevant statutory instruments and licensing guidance. Designated persons may be added or removed with little warning. Solicitors should subscribe to updates from the SRA and OFSI and ensure that any third-party screening tools are updated in real-time.
Conclusion
The SRA’s revised guidance on the financial sanctions regime marks a clear shift in tone and expectation. While many of the core obligations remain the same, the emphasis is now on proactive engagement, systematised controls, and a firm-wide culture of awareness and accountability.
By taking the necessary steps to review policies, enhance training, and strengthen due diligence procedures, solicitors and law firms can protect themselves from the serious legal and reputational risks posed by sanctions breaches. In doing so, they also support the UK’s broader efforts to combat financial crime and uphold the rule of law on the international stage.
For the full guidance, visit: sra.org.uk/solicitors/guidance/financial-sanctions-regime