UK Regulatory Update: Sanctions and Export Controls, July 2025 Edition
The UK's Office of Financial Sanctions Implementation (OFSI) has published a cryptoassets threat assessment report, highlighting the potential risks to financial sanctions compliance for UK cryptoasset firms. The report, which is the fifth and final in a series of sector-specific reports, covers threats of relevance to UK cryptoasset firms and provides best-practice recommendations for sanctions compliance [1][2].
According to the report, there have been instances of significant delays in identifying suspected breaches and making reports to OFSI, resulting from inconsistent reporting in the sector. The report also identifies common compliance vulnerabilities, such as facilitating transfers made to Iranian cryptoasset firms with suspected links to designated persons, and the risk of being targeted by hackers and IT workers operating on behalf of the North Korean government [1].
One of the significant threats identified is the exposure to the designated Russian exchange Garantex. The report urges cryptoasset firms to monitor for any new addresses linked to designated persons and to report suspected breaches to OFSI [1].
In response to these threats, OFSI has launched a consultation on proposed updates to its financial sanctions enforcement policies and processes. The consultation, which opened on July 22, 2025, outlines several proposed changes aimed at improving effectiveness, efficiency, and transparency [1].
Key proposed measures include changes to OFSI’s public case assessment guidance, the introduction of a settlement scheme for monetary penalty cases, the creation of an Early Account Scheme (EAS), and the implementation of a streamlined process with indicative penalties for cases related to information, reporting, and licensing offences [1].
The consultation also proposes changes to statutory penalty maximums, possibly updating the limits to better align with enforcement objectives. These changes apply specifically to civil enforcement of financial sanctions, including Russia-related asset reporting and the UK Maritime Services Ban and Oil Price Cap exception [1].
The report includes a set of best-practice recommendations when reporting suspected breaches to OFSI for UK cryptoasset firms and firms interacting with cryptoassets. It emphasizes the importance of reporting suspicious transaction chains involving the management of frozen funds or economic resources to OFSI as soon as they are discovered [1].
The consultation seeks stakeholder views on these proposed changes and encourages firms to provide feedback by the closing date of October 13, 2025 [1]. This consultation is part of OFSI's ongoing efforts to strengthen sanctions compliance in sectors such as cryptoassets, addressing issues like under-reporting and delays through best-practice recommendations [2].
[1] Office of Financial Sanctions Implementation. (2025). Consultation on proposed updates to OFSI's financial sanctions enforcement policies and processes. Retrieved from https://www.gov.uk/government/consultations/consultation-on-proposed-updates-to-ofsis-financial-sanctions-enforcement-policies-and-processes [2] Office of Financial Sanctions Implementation. (2025). Cryptoassets threat assessment report. Retrieved from https://www.gov.uk/government/publications/cryptoassets-threat-assessment-report/cryptoassets-threat-assessment-report
Businesses operating in the cryptoasset sector must be cautious about sanctions compliance, as delays in identifying suspected breaches can result from inconsistent reporting in the sector. To strengthen sanctions compliance in the cryptoasset industry, the UK's Office of Financial Sanctions Implementation (OFSI) has proposed updates to its financial sanctions enforcement policies and processes, including changes to public case assessment guidance, the introduction of a settlement scheme for monetary penalty cases, and the implementation of a streamlined process with indicative penalties for cases related to information, reporting, and licensing offenses.
