Sanctions threat assessments – essential reading for law firms!

Since the Russian invasion of Ukraine in February 2022 the UK sanctions landscape has changed dramatically. In April 2025, recognising the challenges faced by UK stakeholders in understanding the rapidly evolving nature of financial sanctions compliance, the Office of Financial Sanctions Implementation (OFSI) published threat assessments for the legal, financial and property and related services.

Legal Services

The Legal Services Threat Assessment outlines OFSI’s assessment of threats to sanctions compliance involving UK legal services providers, including solicitors’ firms; barristers’ chambers; trust and company service providers (TCSPs); and notarial service providers.

The legal services sector has submitted the second highest number of suspected breach reports to OFSI (16% of the total, compared with 65% submitted by the financial services sector). Most non-compliance occurred due to breaches of OFSI licence conditions, typically, receipt of payments from Designated Persons (DP) clients in excess of the licence value limit. OFSI encourages legal services providers to consider the terms of OFSI licences when billing DP clients, and to remember that receiving payment for legal services rendered to DPs requires an OFSI licence.

Complex corporate structures, including trusts, mainly linked to Russian Designated Persons (DPs) and their family members, have obscured the ownership and control of assets, including UK property and high value goods such as art and superyachts, which could be frozen under UK financial sanctions. Since February 2022 Russian DPs have also transferred the ownership and control of assets to non-designated individuals and entities, creating uncertainty over whether assets held through the same structures should be frozen under UK financial sanctions.

Red Flags

The report highlights a number of red flags and encourages particular vigilance when these occur in conjunction with an intermediary jurisdiction nexus. Since February 2022, 23% of suspected breach reports involving UK legal services providers have included an intermediary jurisdiction nexus, most frequently involving British Virgin Islands (BVI); Cyprus; Guernsey; and Switzerland. OFSI also noted links between suspected breaches involving UK legal services providers and the Isle of Man; Jersey; Cayman Islands; Austria; and the United Arab Emirates (UAE).

Links to Money Laundering

UK legal services providers are also reminded to remain alert to signs of Russian DPs and their enablers obfuscating the source of funds through money laundering through, for example, transfers of high value crypto assets to cash (or vice versa).

Property Services

The Property and Related Services Threat Assessment presents OFSI’s assessment of threats to sanctions compliance involving UK property and related services firms ‘involved in the sale, maintenance, or upkeep of residential and commercial properties’. Whilst targeted at estate and letting agents, property managers, investors and developers, the report’s contents are directly relevant to firms of solicitors undertaking property work:

‘… conveyancers and legal service providers play a crucial role in ensuring compliance with UK financial sanctions and are particularly well placed to identify and report any suspected breaches related to the property and related services sector to OFSI due to their role in facilitating property-related transactions.’

The report assesses sanctions threats relevant to UK property and related services firms from February 2022 to the present and should be read by conveyancers in conjunction with the Legal Services threat report. Of all suspected property-related breaches that had been reported to OFSI, around 50% related to UK residential property ownership or letting by DPs, while less than 25% were linked to UK commercial properties. The key findings are:

• UK property and related services firms have under reported suspected breaches of financial sanctions to OFSI
• DPs have breached UK financial sanctions by making or facilitating transactions involving UK properties without or outside the scope of an OFSI licence
• Property-related suspected breach activity by or on behalf of Russian DPs has been facilitated by small-scale property or related services firms with high-risk appetites and longstanding relationships with DPs
• Russian DPs in particular have used intricate layers of ownership to distribute their wealth by placing property and related assets under the ownership and control of their family members
• UK property and related services firms have facilitated sanctions breaches by acting as professional enablers for DPs

How can COLPs ensure their firm complies with the Sanctions Regime?

If you’re unsure of the sanctions requirements, or how to comply, a good start would be SRA Guidance on Complying with the UK Sanctions Regime. This was first published in November 2022, but was updated on 1 May 2025. The Law Society also published a Guide to the UK sanctions regime in September 2024.

If you need help, please let us know. We can draft a Sanctions Policy and risk assessment or start by auditing your firm’s sanctions compliance.