Who this is for: compliance officers, MLROs and sanctions leads at Lloyd’s managing agents, London market carriers, MGAs and coverholders. It sets out what UK financial sanctions law actually requires of an insurance business, with the source for every obligation. It is general information, not legal advice.
Last reviewed 23 August 2026. Every obligation below was checked against the legislation or against OFSI guidance current at that date.
The Office of Financial Sanctions Implementation is part of HM Treasury. It implements and enforces UK financial sanctions. It is distinct from the Foreign, Commonwealth and Development Office, which maintains the UK Sanctions List of designated persons, and from the Department for Business and Trade, which handles trade sanctions.
UK financial sanctions apply to all persons within the UK and to all UK persons wherever they are in the world. There is no threshold and no exemption for small firms.
UK sanctions regulations impose a specific reporting obligation on a defined category called a relevant firm. Insurers are not listed as a separate category, which leads some firms to assume the duty does not reach them. It does, through the first limb of the definition.
Regulation 71(1)(a) of the Russia (Sanctions) (EU Exit) Regulations 2019 defines a relevant firm to include “a person that has permission under Part 4A of the Financial Services and Markets Act 2000 (permission to carry on regulated activity)”. Effecting and carrying out contracts of insurance is a regulated activity. So is insurance distribution. Every UK authorised insurer, insurance intermediary and Lloyd’s managing agent therefore holds Part 4A permission and is a relevant firm.
Equivalent definitions appear across the other UK sanctions regimes. The Russia regulations are cited here because they are the most frequently engaged in the London market.
Regulation 70 sets out the duty. A relevant firm must inform the Treasury as soon as practicable where it “know[s], or has reasonable cause to suspect, that a person (i) is a designated person, or (ii) has committed an offence” under the regulations, and that information came to it in the course of carrying on its business.
A separate duty at regulation 70(1ZA) applies where a firm knows or has reasonable cause to suspect that it holds funds or economic resources for a prohibited person.
The report must state:
There is a further annual obligation. Firms holding funds or economic resources for designated persons must report to OFSI by no later than 31 October each year under regulation 70(1ZB).
Failing to report is itself a criminal offence under regulation 70(6). This is the point most often missed. A firm can commit an offence by staying silent about a suspicion even where it never made a payment and never breached an asset freeze.
The trigger is “reasonable cause to suspect”, not certainty and not proof. OFSI’s general guidance describes this as “an objective test that asks whether there were factual circumstances from which an honest and reasonable person should have inferred knowledge or formed the suspicion”.
In practice this means a firm cannot rely on the fact that it did not connect the dots. If the information was in front of it and a reasonable compliance function would have formed a suspicion, the duty was engaged.
This is the single most important change of the last decade and it is still not universally understood.
Section 146 of the Policing and Crime Act 2017 gives HM Treasury the power to impose monetary penalties for breaches of financial sanctions. That section was amended on 15 March 2022, removing the requirement for OFSI to demonstrate that a person had knowledge or reasonable cause to suspect they were in breach.
For breaches occurring on or after 15 June 2022, OFSI does not have to prove that the firm knew or should have known. The breach itself is enough. Intent and knowledge still matter, but they affect the size of the penalty rather than whether one can be imposed at all.
| Circumstance | Maximum civil monetary penalty |
|---|---|
| Breach involves funds or economic resources whose value can be estimated | The greater of £1,000,000 or 50% of the estimated value |
| All other cases | £1,000,000 |
Criminal prosecution remains available in parallel and is not displaced by the civil regime.
OFSI’s enforcement and monetary penalties guidance, last updated 9 February 2026, sets out three reductions that are added together before being applied:
| Reduction | Maximum discount |
|---|---|
| Voluntary disclosure and co-operation | up to 30% |
| Early Account Scheme | up to 20% |
| Settlement | 20% |
The commercial consequence is direct. A firm that finds a breach itself, reports it promptly and co-operates can reduce a penalty by a substantial margin. A firm that finds out when OFSI writes to it cannot. Detection speed is worth money, not just comfort.
Lloyd’s imposes its own market requirements, and they are more specific than the general law about when screening must happen.
Lloyd’s states that coverholders must “conduct appropriate due diligence and screening against applicable financial sanctions target lists prior to underwriting (ie the HMT Consolidated List… the OFAC list)”, and must have systems and controls to prevent payments to listed persons, with additional screening prior to the payment of claims, return premiums and all other sums.
Critically, responsibility does not transfer with the pen. Lloyd’s is explicit that while coverholders are obliged to have adequate systems and controls, managing agents have a separate legal responsibility to ensure this, and must include specific and measurable questions on sanctions in coverholder audits.
That mirrors the general regulatory position. FCA rule SYSC 8.1.6 R provides that a firm outsourcing critical or important operational functions “remains fully responsible for discharging all of its obligations under the regulatory system”, and that “the outsourcing must not result in the delegation by senior personnel of their responsibility”.
| Obligation | What it requires in practice |
|---|---|
| Screen before binding | The check has to happen before the risk is written, not at month end. Bordereaux in arrears do not satisfy this on their own. |
| Screen before paying | Claims, return premiums and any other payment need a separate check at the point of payment. |
| Re-screen against list changes | Designations change constantly. A subject clean at inception may not be clean at renewal or at claim. |
| Report as soon as practicable | A suspicion is reportable even where nothing was paid. The clock starts when the suspicion is or should have been formed. |
| Evidence every decision | A cleared alert with no recorded reason is indistinguishable from an alert nobody looked at. |
| Report frozen assets annually | By 31 October each year. |
| Oversee the coverholder | Contractual flow down is necessary and not sufficient. The managing agent has to be able to show it supervised. |
Yes. Insurers are not named as a separate category, but regulation 71(1)(a) of the Russia (Sanctions) (EU Exit) Regulations 2019 captures any person holding permission under Part 4A of the Financial Services and Markets Act 2000. Effecting and carrying out contracts of insurance and insurance distribution are regulated activities, so UK authorised insurers, intermediaries and Lloyd’s managing agents are all relevant firms.
As soon as practicable. Regulation 70 does not set a fixed number of days. The obligation is engaged when the firm knows or has reasonable cause to suspect, and delay is judged against what was practicable in the circumstances. Failing to report is a criminal offence under regulation 70(6).
Not for a civil monetary penalty relating to a breach on or after 15 June 2022. Section 146 of the Policing and Crime Act 2017 was amended in March 2022 to remove the requirement for OFSI to demonstrate knowledge or reasonable cause to suspect. Liability is strict. Knowledge and intent affect the size of the penalty rather than whether one can be imposed.
Where the breach involves funds or economic resources whose value can be estimated, the maximum is the greater of £1,000,000 or 50 percent of the estimated value. In all other cases it is £1,000,000. Criminal prosecution remains available in addition.
Yes, materially. Under OFSI’s enforcement and monetary penalties guidance updated 9 February 2026, voluntary disclosure and co-operation attracts up to 30 percent, the Early Account Scheme up to 20 percent, and settlement 20 percent. Where more than one applies, OFSI adds the discounts together before applying them.
Both. Lloyd’s requires coverholders to have adequate systems and controls, and states that managing agents have a separate legal responsibility to ensure they do. FCA rule SYSC 8.1.6 R provides that a firm outsourcing critical or important functions remains fully responsible for discharging all of its regulatory obligations and that outsourcing must not result in senior personnel delegating their responsibility. Delegating the pen does not delegate the duty.
Screening at inception is not enough. Lloyd’s requires additional screening prior to the payment of claims, return premiums and all other sums. Designations also change between inception and claim, so a subject that was clean when the risk was bound may not be clean when the money moves.
Global RADAR screens against more than 1,400 sanctions and watchlists, including the OFSI Consolidated List and OFAC, on a daily update cycle, and records a reason code, a rationale and a confidence score for every alert disposed of. Every decision is reproducible: replaying the recorded input through the recorded prompt version returns the recorded outcome, which is what an examiner asking about a decision made eighteen months ago actually needs.
Read the full alert clearing methodology and model governance, or see how clearing is delivered and priced.
