OFAC and OFSI Issue Joint Comparative Overview of US and UK Sanctions Regimes

The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) and His Majesty’s Treasury’s Office of Financial Sanctions Implementation (OFSI) have published a joint comparative overview of the United States’ and United Kingdom’s sanctions regimes. A reflection of the increasingly close cooperation between the two authorities, the publication is intended to help businesses operating across both jurisdictions understand their respective compliance obligations.

The comparative overview (the Publication) follows OFAC’s recent release of an Introduction to the Office of Foreign Assets Control, which provides an overview of the US sanctions regime, including OFAC’s sanctions authorities, licensing, compliance, and enforcement framework.

The Publication provides a high-level comparison of the key features of the US and UK sanctions frameworks, including sanctions lists, licensing, reporting and recordkeeping obligations, enforcement, and the respective roles of OFAC and OFSI. It also highlights several key differences between the two systems.

These distinctions demonstrate that compliance with one sanctions regime will not necessarily satisfy the requirements of the other and underscore the importance of conducting jurisdiction-specific sanctions analyses when operating across, or engaging in transactions involving, one or both jurisdictions.

Within the following sections, the Publication identifies several key practical differences between the two regimes that businesses should consider when developing and operating their sanctions compliance programs: Responsibilities; Legal Framework; Sanctions Terminology; Sanctions Types, Lists and Programs/Regimes; Jurisdiction; Prohibited and Permitted Activity; Recordkeeping and Reporting Requirements; Guidance; Licensing; and Enforcement.

Two particular topics of note are the contrasting approaches to ownership and control and to licensing.

OWNERSHIP AND CONTROL: DIFFERENT APPROACHES TO THE 50% RULE

One of the most significant practical differences concerns the treatment of entities owned or controlled by sanctioned persons. Under OFAC’s 50 Percent Rule, an entity is considered blocked if one or more blocked persons collectively own, directly or indirectly, 50% or more of the entity. The US rule focuses solely on ownership and aggregates the ownership interests of multiple blocked persons.

By contrast, UK sanctions may apply where a single designated person owns, directly or indirectly, more than 50% of an entity’s shares or voting rights. The UK analysis extends beyond ownership to include direct and indirect control. Accordingly, an entity may be subject to UK sanctions where it is reasonable to expect that a designated person could “ensure the affairs of the entity are conducted in accordance with the person's wishes,” even without majority ownership.

LICENSING AUTHORITIES

The Publication also highlights important differences in how OFAC and OFSI administer sanctions licenses. Both authorities issue general and specific licenses authorizing transactions that would otherwise be prohibited.

The source of each authority’s licensing power differs. OFSI may issue specific licenses only where the applicable UK sanctions regulations expressly provide a licensing ground, including, for example, basic needs.

Conversely, OFAC has greater discretion to authorize otherwise-prohibited transactions through general or specific licenses. In practice, this gives OFAC greater flexibility to address unintended consequences of sanctions or authorize otherwise-prohibited activity, whereas OFSI must ensure that any license falls within a specific licensing ground established by the applicable UK sanctions regulations.

The Publication further highlights distinctions in the jurisdictional reach of the two regimes. While both may apply to persons within their respective jurisdictions and nationals abroad, OFAC’s framework extends more broadly in certain circumstances, including through restrictions applicable to non-US persons and secondary sanctions in some programs.

LOOKING AHEAD: OFAC-OFSI’S CONTINUED COOPERATION

The Publication illustrates the continued strengthening of the OFAC-OFSI partnership. Beyond issuing comparative guidance, the two authorities emphasize ongoing cooperation in sanctions implementation, licensing, enforcement, and the development of technologies to improve sanctions administration.

For businesses operating internationally, the Publication serves as a reminder that sanctions compliance requires careful consideration of each jurisdiction’s unique legal standards and compliance with one regime does not necessarily ensure compliance with the other.