UK SANCTIONS AN OVERVIEW (PART 1 of 6)
Introduction and Background
This is the first of six notes looking at the UK's sanctions framework, and in particular at: how sanctions legislation is structured; how the Russian sanctions regime has been implemented; how the courts have approached difficult questions about how sanctions affect individuals; and, finally, how sanctions are enforced in practice by UK authorities. As a whole, the eight notes are very lengthy, and yet collectively, they are only an overview; anything more would have started to turn into a book. They cannot, and do not, cover every aspect of sanctions law, and so I have tried to select topics that I think will be of most interest to the general reader. That is an entirely subjective exercise, and I no doubt will have missed something that at least one reader thinks is of critical importance.
If these notes make only one point that stays with the reader, I hope it is this: sanctions are not an esoteric policy tool of relevance to compliance specialists or international relations wonks. They are dynamic, fast-moving, and have real-world effects capable of impacting almost any business or individual with any form of international presence, and often with little warning. A designation can be made overnight; a regulation can be amended within weeks of a geopolitical event; and a business that was entirely compliant on day one can find itself in breach a matter of days later. It is this dynamism, more than the underlying legal architecture, that in my experience catches people out. Businesses of all sizes, ranging from American tech giants to small property management firms, have learned this lesson to their cost, with breaches of UK sanctions resulting in fines ranging anywhere from £5,000 to over £20 million. I note that, as of writing this note, it has been reported that another big company, TikTok (doubtless with an army of compliance staff), has referred itself to the UK authorities for potential breaches of sanctions.
The reality is this: understanding and keeping on top of sanctions is a strategic and legal necessity.
This note is a fairly gentle introduction to the basics: some background and why the UK was particularly vulnerable when the war between Russia and Ukraine escalated; a look at categories and types of sanctions; and the different methods used to impose them.
The UK's Moscow-on-Thames Problem
The Russian invasion of Ukraine had an outsize impact on the UK. Following the collapse of the Soviet Union, wealthy Russians and Russian capital flooded the UK. London in particular was a prime destination for Russian oligarchs, so much so that it earned the nicknames "Moscow-on-Thames" and "Londongrad."
It is hard to get a precise handle on just how much Russian money flowed into the UK, but the House of Commons has estimated that, prior to the invasion of Ukraine, around £30 billion in UK financial assets were owned by Russians not resident in the UK.
Football
Football became a microcosm of Russian influence in the UK. Roman Abramovich became almost a household name after he acquired Chelsea FC. Perhaps less well known is Alisher Usmanov, a Monaco-based Uzbek with extensive interests in Russia and connections to Vladimir Putin, who held a 30% stake in Arsenal FC between 2007 and 2018. Usmanov's close associate Farhad Moshiri sold his stake in Arsenal to Usmanov in 2016, shortly before Moshiri bought what would become a majority interest in Everton FC.
Abramovich and Usmanov, once powerful figures in UK football, are now both the subject of UK sanctions on the basis of their connections to President Putin. The £2.5bn proceeds from the sale of Abramovich's stake in Chelsea are sitting in a frozen account. Not every Russian-connected owner has ended up sanctioned, however. Maxim Demin, a Russian-born British businessman, was the owner of AFC Bournemouth between 2011 and 2022, yet was never sanctioned. The fact that some wealthy Russians, or Russian-connected individuals, have not been sanctioned while others have is a point that was itself raised before the Supreme Court, as I discuss later in this note.
Russian State Aggression on UK Soil
The UK has, on more than one occasion, found itself the target of hostile activity by the Russian state. A UK public inquiry concluded that the 2006 poisoning of Alexander Litvinenko in London was likely carried out by Russian agents. In March 2018, Sergei Skripal, a former Russian double agent, and his daughter Yulia were poisoned in Salisbury with the novichok nerve agent, an attack the UK attributed to Russia's military intelligence service, the GRU. In June 2018, Charlie Rowley and Dawn Sturgess were exposed to novichok from the same batch used against the Skripals, after Rowley found a discarded container and gave it to Sturgess, believing it to be perfume. Sturgess died on 8 July 2018. A subsequent UK public inquiry concluded that the Russian state was responsible for her death. It is for these reasons, amongst others, that the UK has been one of the most vociferous supporters of Ukraine and opponents of Russia, whether through the supply of military aid or by the imposition of all-embracing sanctions.
About UK Legislation
Please skip this section if you are already familiar with how UK legislation operates.
UK legislation is typically thought of in terms of the Acts of Parliament ("Acts") debated in the House of Commons and Lords. In complex and technical areas, however, an Act often serves as an overarching framework enabling the creation of detailed secondary legislation, in the form of regulations, which put substantive law-making into the hands of executive bodies such as government ministers, local authorities, and public boards. To implement and enforce their provisions, an Act or regulation may in turn delegate specific powers to, for instance, a minister or regulatory body.
This relationship between an Act, a regulation, and the exercise of delegated powers can be convoluted. Whilst a regulation may implement a particular law, it does not stand apart from the Act. A regulation might best be viewed as the practical implementation of the enabling Act, with a more technical or developed focus to deal with a particular set of issues or problems. However, a regulation will be predicated on the foundations laid down in the Act, and the regulation is only as good, in legal terms, as the authority the Act gives it — a regulation that strays beyond its enabling power risks being unlawful and open to challenge. Similarly, the exercise of delegated powers is, in turn, subject not only to the internal rules of the relevant legislation, but also to general administrative law and, in some cases — such as the designation of individuals to be subjected to sanctions — human rights law.
Part 1: Understanding Sanctions
Anatomy of a Sanction
It is worth pausing to consider the categories of sanctions and the various methods used to impose them, as they are reflected in UK legislation. Given that sanctions legislation is complex, keeping the different categories and methods in mind can help in navigating a sanctions regime and identifying what is relevant — whether that be in understanding how they affect a particular transaction or matter, or in assisting the development of a coherent and strategic approach to managing the risks that sanctions pose.
Trade and Financial Sanctions
This is the most important categorisation from a practical point of view.
Trade Sanctions
These restrict the import, export, transfer, or provision of specific goods, technology, or services connected with a targeted country, sector, or activity.
The Office of Trade Sanctions Implementation("OTSI"), launched in 2024 and part of the Department for Business, Innovation, Science and Trade ("DBIST"), is, as its name suggests, responsible for the oversight, administration, and civil enforcement of trade sanctions.
Financial Sanctions
These target funds and economic resources and impose restrictions such as asset freezes, as well as wider restrictions on investment and financial services.
The Office of Financial Sanctions Implementation ("OFSI"), part of HM Treasury ("HMT"), is, like its counterpart OTSI, the principal body responsible for the implementation, monitoring, and enforcement of financial sanctions in the UK.
Targeted Sanctions
Territorial
These are sanctions in the classic and widely understood sense that target nations and regimes. The UK currently maintains around 28 geographic sanctions regimes, covering countries including Russia, Iran, Syria, and North Korea, among others. The sanctions themselves range from narrowly targeted sectoral measures, such as arms embargoes or restrictions on products usable for internal repression, through to much broader restrictions, such as those imposed on Russia and North Korea, which cover vast sectors of a targeted country's economy.
Thematic
These sanctions target types of conduct, regardless of where in the world they occur or the nationality of those involved. The UK currently has 9 thematic regimes, each with its own regulation, covering chemical weapons, counter-terrorism (domestic and international), cyber activity, global anti-corruption, global human rights, irregular migration and trafficking in persons, ISIL and Al-Qaida, and unauthorised drilling activities. A thematic designation can in theory capture anyone, anywhere, not just individuals or groups connected to a particular jurisdiction, regime, or terror organisation.
Individual
These attach to a specific designated person, whether by name or by description, and whether that person is a private individual, a company, or another entity. It is worth stressing that a person subject to sanctions need not be alleged to have committed any wrongdoing, whether criminal or otherwise. Nevertheless, they can be subject to severe restrictions on their ability to deal with their own assets, travel, do business, and engage in routine everyday activities. Furthermore, their friends and colleagues are themselves at risk of committing criminal offences if they engage with a sanctioned person.
Methods of Imposing Sanctions
Trade and financial sanctions are, of course, methods of imposing sanctions. However, there are other methods that might, at first blush, look like mere subsets of trade and financial sanctions — and in a sense they are. However, treating them purely as such would be a mistake, since UK legislation treats these as standalone methods that operate as complements to trade and financial sanctions. These methods are:
Aircraft and Shipping Sanctions
Target a vessel or aircraft itself, not a designated individual.
Restrict ownership, registration, or movement.
Can prevent entry to UK airspace or waters.
Allow detention of vessels or aircraft.
Direct operators and controllers accordingly.
Immigration Sanctions
Commonly known as travel bans.
Those already in the UK lose their right to remain and may be removed.
Those outside the UK are refused entry or transit.
Director Disqualification Sanctions
Director disqualification sanctions rest on the premise that an asset freeze can immobilise a person's funds, but it does little to stop them exercising influence through corporate vehicles — whether by deciding strategy, sitting on the board, or lending a company the credibility of their name. Director disqualification sanctions target that power.
Putting It All Together
Categories and methods of sanctions are best understood as cutting across one another, rather than nesting neatly inside a single hierarchy. Geographic and thematic regimes are defined by jurisdiction and conduct respectively, and each supplies the substantive criteria — the definition of an "involved person," and the trade or sectoral restrictions that apply regardless of any individual designation. Individual sanctions, by contrast, are a mechanism rather than a standalone category: a designation is always made within a geographic or thematic regime, applying that regime's specific criteria to a named person or description of persons. The overlap runs in both directions. A geographic regime, such as Russia, combines individual designations with trade, transport, and sectoral measures that apply irrespective of any person being named. A thematic regime, such as global human rights, may produce individual designations with no country-specific element at all. Recognising this interplay matters in practice: identifying the correct regime, and the correct type of measure within it, is usually the first step in working out what obligations, if any, actually apply to a given transaction or matter. An ostensibly simple scenario illustrates how the various categories and methods interact in practice.
A UK bank is asked to process a payment to a Russian-incorporated shipping company. The transaction sits within the Russia sanctions regime (a geographic category).
If the shipping company is itself a designated person (an individual category), or is owned or controlled by one, the payment engages financial sanctions and may be prohibited outright as an asset freeze breach.
Even if no individual is designated, the company may still be a "person connected with Russia" for the purposes of trade sanctions, meaning the underlying goods or services involved could be separately restricted regardless of who is being paid.
If the payment relates to a vessel, shipping sanctions may apply independently.
Finally, an individual connected with the transaction might also be subject to a travel ban, by way of immigration sanctions operating on an entirely separate basis, unconnected to whether the underlying bank payment itself is lawful.
I hope this example demonstrates the importance of understanding these categories, given that a single transaction has the potential to trigger several sanctions issues at once, each governed by a different method within the same geographic regime, and each requiring separate analysis rather than a single yes-or-no check against one category alone.
In my next post I will consider, in some detail, the foundation of UK sanctions legislation, the Sanctions and Anti-Money Laundering Act 2018.
This article is intended to provide general information only and does not constitute legal advice. Specific advice should be sought in relation to particular circumstances.
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