UK strict liability
UK enforcement has shifted decisively towards the regulator. The Economic Crime (Transparency and Enforcement) Act 2022 changed the test for OFSI monetary penalties, removing the requirement that the person knew or had reasonable cause to suspect a breach. OFSI can now impose a civil monetary penalty on the balance of probabilities without proving fault - strict liability in substance - which means a firm can be penalised for a breach it did not intend and did not realise it had committed.
Trade sanctions have also gained a dedicated civil enforcer. The Office of Trade Sanctions Implementation (OTSI), operational from 2024, can impose civil penalties for trade-sanctions breaches on a similar strict-liability footing, closing a gap where trade measures were previously harder to enforce. The combined message is that UK sanctions compliance is now a strict-liability exercise, and good-faith error is not a defence to a civil penalty.
EU criminal harmonisation
The EU has moved in a parallel but criminal direction. Directive (EU) 2024/1226 harmonises the definition of sanctions offences and the minimum penalties across member states, requiring that serious violations be treated as crimes. For individuals it sets maximum custodial penalties of at least five years, and for companies it requires fines of at least 5% of total worldwide turnover or, alternatively, up to EUR 40 million.
The Directive entered into force in 2024, with member states required to transpose it, so the precise national penalties depend on implementing law. The direction of travel, though, is unmistakable: sanctions evasion is being criminalised at scale across the EU, with turnover-based corporate fines of the kind already familiar from competition law.
US enforcement
US enforcement remains the most financially significant, and it reaches non-US firms. OFAC settlements regularly run into the hundreds of millions of dollars: recent examples include a virtual-currency exchange settling apparent violations for close to USD 1 billion, and a multinational consumer-goods group settling North Korea-related violations for over USD 500 million - the latter notable as one of the largest settlements against a non-financial business. The figures move quickly, but the order of magnitude is the point.
US enforcement also tracks new technology and new evasion routes. The sanctioning of the Tornado Cash crypto-mixer, and the subsequent litigation in Van Loon v Department of the Treasury (where the US Court of Appeals for the Fifth Circuit held in 2024 that immutable smart contracts were not 'property' that OFAC could block, leading to delisting in 2025), shows both the reach of US measures and the limits the courts will impose. For commercial parties the lesson is simply that US exposure is large and unpredictable, and worth pricing into the risk.
The EU Blocking Statute conflict
Enforcement risk does not run in one direction only. The EU Blocking Statute (Council Regulation (EC) No 2271/96) prohibits EU operators from complying with certain listed US extraterritorial sanctions, so that an EU business can face liability for doing the very thing US law demands. In Bank Melli Iran v Telekom Deutschland AG (Case C-124/20), the Court of Justice confirmed that the prohibition applies even without a specific US order to comply.
The Court also held that an EU operator may terminate a contract with a sanctioned counterparty without giving reasons - but that where the termination is challenged, a national court may require the operator to show the termination was not motivated by a desire to comply with the listed US sanctions, subject to proportionality. The practical effect is a genuine conflict of laws that has to be managed in the drafting article and in the compliance programme, rather than wished away.
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Practical checklist
- Treat UK sanctions compliance as strict liability - OFSI need not prove knowledge (ECTEA 2022).
- Account for OTSI's civil enforcement of trade sanctions from 2024.
- Factor in EU criminal penalties (Directive (EU) 2024/1226: up to 5 years; turnover-based corporate fines).
- Price in large, unpredictable US settlements (hundreds of millions of dollars), including for non-US firms.
- Where EU operators are involved, manage the Blocking Statute conflict (Reg 2271/96; Bank Melli, C-124/20).
- Build compliance into the contract and the programme together - a clause alone will not prevent a penalty.
This guide is informational only and is not legal advice. It does not replace advice from licensed counsel on the facts of a specific transaction.
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