Partners James Clark and Ian Hargreaves, Associate James Philippsohn and Paralegal David Robertson contrast UK and US sanctions regimes

Partners James Clark and Ian Hargreaves, Associate James Philippsohn and Paralegal David Robertson analyse both the UK and US’ approach to sanctions on Russia, and explore how businesses can best navigate these differing and constantly evolving regimes.

James, Ian and James’ article was published in New Law Journal, 5 June 2025, and can be found here.

Introduction

President Trump made no secret of his intention to change the US’s policy on Russia. Within less than a month of taking office, the President held a formal telephone call with President Putin, which is believed to be the first official dialogue between the leaders of the US and Russia since February 2022. Since then, there have been meetings between high-ranking officials from both countries. In March, it was announced that the White House has asked the State and Treasury Departments to produce a plan for lifting sanctions against certain (undisclosed) individuals and entities.

Conversely, on 24 February 2025, the UK announced its “largest sanctions package against Russia since 2022”. The UK’s attempt to increase the economic pressure on Russia by ramping up sanctions is in contrast to the Trump administration’s apparent desire to rekindle diplomatic relations with Russia. This divergence presents significant legal and compliance challenges for individuals and businesses operating across these jurisdictions.

Differences in Practical Implementation

As well as the increasing divergence between the UK’s and the US’s policies over Russia, there are differences between the black letter law of their respective sanctions regimes, which is challenging for those doing business under the jurisdiction of both.

Under the UK’s Russia Regulations, the Secretary of State may designate persons, who are then added to the UK’s consolidated Sanctions List. In contrast, the US employs multiple mechanisms, including Executive Orders and actions by the Office of Foreign Assets Control (OFAC) and the Bureau of Industry and Security (BIS). This multi-agency approach in the US can result in a more fragmented system, requiring parties to consult multiple databases and to navigate distinct licensing requirements to ensure compliance.

Further, whilst there is significant overlap, the US and the UK sanction different individuals and entities. It is possible for a transaction to be permitted under US law, but a criminal offence under the UK sanctions regime, and vice versa. These differences are likely to increase given the divergence in the US’s and the UK’s approach to Russia, particularly if the US decides to lift sanctions.

Jurisdictional Reach

Both the UK and US adhere to traditional principles of jurisdiction, applying sanctions to their nationals, activities within their territory, and entities incorporated under their laws. This would include: their nationals being involved wherever they are in the world; any part of the transaction is conducted in their territory; legal entities incorporated/constituted under their law.

However, the US asserts a much broader extraterritorial reach. US sanctions can apply if a transaction is conducted in US dollars or clears through the US financial system, even if no US person is directly involved. Sanctions also extend to data routed through US servers or instances where US persons provide back-office support. Furthermore, the US can penalise non-US persons for causing US persons to violate US sanctions, such as by concealing the involvement of a sanctioned party in a transaction.

Secondary Sanctions

A critical difference is the US use of “secondary sanctions”. These sanctions target non-US persons outside the US, even without a US nexus, if they engage in sanctionable conduct that would be prohibited for a US person and is deemed a “significant” transaction or involves providing material support to a sanctioned party. Additionally, US export control restrictions can apply to the re-export of US-origin goods from a third country, even without the involvement of US persons.

While the UK’s Russia Regulations have extraterritorial effect and can apply to non-UK persons outside the UK, the Office of Financial Sanctions Implementation’s (OFSI) Enforcement Guide states that “To come within OFSI’s enforcement of sanctions, there has to be a connection to the UK, which we call a UK nexus.” Establishing whether conduct or a particular transaction has a UK nexus is a fact-sensitive question, but unlike the equivalent test for US secondary sanctions there must be such a nexus.

Asset Freezes

Both the UK and US require the freezing of assets of designated parties and prohibitions on making funds or economic resources available to them. Typical asset freezes (including the UK) require those within the scope of the national sanctions (i.e., those that fall within application/jurisdiction section above) to: 1) freeze any assets of the designated party and report these to the relevant authorities; and 2) not make any funds or economic resources available to them. However, the US goes further, prohibiting all transactions with designated parties (except for limited exceptions, e.g., payment for the provision of legal services, for which an OFAC licence must be obtained).

Both regimes extend their respective restrictions to non-designated entities owned by designated entities, although the ownership threshold differs slightly (US: 50% or more / UK: more than 50%). The UK sanctions also apply to any entities “controlled” by a designated person. OFSI’s non-exhaustive criteria for “control” includes:

• controlling alone, pursuant to an agreement with other shareholders in or members of an entity, a majority of shareholders’ or members’ voting rights in that entity;
• having the right to exercise a dominant influence over an entity, pursuant to an agreement entered into with that entity, or to a provision in its Memorandum or Articles of Association, where the law governing that entity permits its being subject to such agreement or provision;
• having the right to exercise a dominant influence referred to in the point above, without being the holder of that right (including by means of a front company); and
• having the ability to direct another entity in accordance with one’s wishes. This can be through any means, directly or indirectly. For example, it is possible that a designated person may have control or use of another person’s bank accounts or economic resources and may be using them to circumvent financial sanctions.

The US does not have a separate “control” test.

Types of Sanctions

There are a number of different types of sanctions which, again, differ between the US and the UK.

US Sanctions include trade restrictions (prohibiting services and restricting imports and exports), blocking sanctions (i.e., asset freezes) and financial sanctions (prohibiting new investments in Russia or any transactions involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation or the Ministry of Finance of the Russian Federation). Other sanctions include restrictions Russian-affiliated vessels from entering into US ports, sanctions on the so-called Donetsk People’s Republic and Luhansk People’s Republic regions of Ukraine and secondary sanctions authorising the US government to target non-US persons determined to have provided material assistance or support for persons blocked pursuant to E.O. 14024.

By contrast, UK Sanctions can be broadly categorised into either financial sanctions against designated persons/entities and investment into Russia (i.e., asset freezes and investment restrictions) or trade or economic sanctions, which are sanctions against engaging with Russia in a wider sense (including export/import restrictions and transports restrictions).

Enforcement

OFSI monitors compliance with the UK’s financial sanctions and assesses suspected breaches. In response to the conflict in Ukraine, the UK government expedited the Economic Crime (Transparency and Enforcement) Act 2022 which bolstered OFSI’s enforcement powers. In particular, for breaches of financial sanctions committed after 15 June 2022, OFSI may impose fines on a strict liability basis. Previously, OFSI had to prove that a person had knowledge or reasonable cause to suspect that they were in breach of financial sanctions. Now OFSI only needs to establish that there was a breach of financial sanctions, irrespective of whether the person knew that they were committing a breach.

According to the 2023-2024 OFSI Annual Review published in March 2025, OFSI opened a record 396 cases in the period and closed 242, up from 74 closed cases the previous year. Most suspected breaches were in relation to Russia (347 reports), followed by Libya (21 reports). In response to the increase in cases, OFSI has expanded its workforce, invested in advanced data analytics, and is seeking greater co-operation with the US’s OFAC.

Whilst OFSI has the power to impose fines for breaches of financial sanctions (as opposed to trade sanctions, which are implemented and enforced by the new ‘Office of Trade Sanctions Implementation’), it does not handle criminal investigations and prosecutions. Instead, OFSI refers those criminal cases to law enforcement agencies (including HM Revenue & Customs, the National Crime Agency and the Border Force). This fragmented approach to enforcement may explain the notable lack of successful prosecutions. So far, there have only been two successful convictions for breaches of the UK’s Russia Regulations (Dmitry Ovsyannikov, the former Governor of Sevastopol, and his brother). Mr Ovsyannikov has appealed his conviction.

Historically, the US has been much more aggressive (and arguably effective) at enforcing sanctions than the UK. OFAC’s Civil Penalties and Enforcement Information has seen the total value of annual settlements/penalties gradually rise from c. $20.9m in 2021, up to $48.8m in 2024. In 2023, the figure totalled over $1.5 billion, largely due to the almost $1bn settlement with Binance Holdings Ltd, regarding virtual currency trades on its online exchange platform between US persons and users in sanctioned jurisdictions or blocked persons, in violation of Ukraine/Russia-Related Sanctions Regulations, amongst others. However, there has been a steady decline since 2021 in the number of penalties and settlements achieved (2021 – 20, 2022 – 16, 2023 – 17, 2024 – 12).

Interestingly, within these settlement/penalty figures, alleged violations of Iranian sanctions are more common than for Russian sanctions.

In 2022, the US Department of Justice set up the Task Force KleptoCapture, which was set up to enforce sanctions and specifically target oligarchs close to the Kremlin. This interagency law enforcement task force was behind charges being brought in September 2024 against Dimitri Simes and Anastasia Simes. They were accused of laundering funds and violating U.S. sanctions for the benefit of Channel One Russia, a Russian broadcasting station sanctioned in May 2022. Neither of them has left Russia following these charges. However in February 2025, the Task Force KleptoCapture was disbanded. Enforcement of Russian sanctions is seemingly becoming a secondary concern, as US policy shifts instead to combating international gangs and drug cartels.

Conclusion

Despite both nations imposing sanctions on Russia, and potentially collaborating in several aspects of their sanction policies, there are notable differences in their approaches and the specific policies implemented. These differences create a complex and challenging environment for businesses and individuals. It is therefore crucial those potentially affected by sanctions focus on the detail of both regimes and diligently monitor for policy changes because small differences can have large implications when it comes to compliance.