Regulatory gap analysis: FCA Sanctions Systems & Controls Review

The FCA has published its latest findings on firms’ sanctions systems and controls, and the message is clear: sanctions compliance needs to be more than list screening.

Over the last few years, UK sanctions regimes have become broader, faster-moving and more complex. The FCA’s review highlights that, while many firms have strengthened their sanctions frameworks since 2022, significant weaknesses remain across governance, risk assessment, due diligence, screening, alert management, trade sanctions, asset freezing, licence compliance and breach reporting.

The FCA found that firms’ financial sanctions controls are generally more mature than their trade sanctions controls. It also identified recurring weaknesses in areas such as outdated policies, poor local oversight of group or third-party arrangements, insufficient sanctions management information, incomplete or unclear risk assessments, weak customer due diligence, inadequate screening calibration, delayed alert handling, and failures relating to frozen assets and licence conditions.

These findings are a reminder that firms need to look beyond whether they have a sanctions policy or screening tool in place. The key question is whether the framework is operating effectively in practice.

Firms should be asking whether sanctions risk is properly understood across the business, whether senior management has meaningful oversight, whether screening systems are appropriately configured and tested, whether alert handling is timely and well evidenced, and whether controls are capable of identifying sanctions evasion, including trade and sectoral sanctions risks.

The review also reinforces the importance of clear ownership, effective MI, strong audit trails, role-specific training and robust assurance. Where firms rely on group systems, vendors or outsourced providers, they must be able to demonstrate appropriate oversight, challenge and control.

To support this, we’ve developed a practical Regulatory Gap Analysis aligned to the FCA’s sanctions findings. It enables firms to assess their sanctions framework against regulatory expectations and quickly identify where key weaknesses, control gaps and potential breaches may exist.

Avyse Partners are an official content partner of the International Compliance Association. The ICA is the leading professional body for the global regulatory and financial crime compliance community.  ICA Members can gain access to Member-only content developed in partnership with Avyse that shares insights and best practice to help you meet the challenges of today and tomorrow.  Not yet an ICA Member? Join here