Sanctions News Update
September 2026
The beginning of September brought a major UK policy shift on Israeli settlements, an aggressive new wave of US sanctions on Iran's aviation sector and Cuba, a string of EU court rulings, and continued deadlock at the UN Security Council over Iran. Here’s the latest:
United Kingdom
The UK had its most consequential fortnight of the year so far, dominated by a major foreign policy shift alongside routine enforcement activity.
Israeli settlement sanctions.
On 9 September 2026, Foreign Secretary Ed Miliband announced a significant expansion of UK measures relating to Israeli settlements in the occupied West Bank.
The package includes:
a future ban on imports originating from Israeli settlements;
restrictions on services supporting settlement expansion, including construction, infrastructure, financing and real estate;
a UK advertising ban relating to settlements;
expanded restrictions on arms and other exports where they are assessed to materially contribute to the occupation; and
further Global Human Rights sanctions designations.
The measures will not all take effect at the same time. The new designations are already in force, while the trade measures are expected to be implemented through secondary legislation over the coming six to nine months.
Key takeaways:
This is a new, standalone regime running to two different timeframes:
The Global Human Rights designations are live now, so should be incorporated into existing screening systems.
The trade measures (goods and services) are six-to-nine months out and will arrive via secondary legislation. This gives firms time to consider whether their existing Israeli exposure is likely to be impacted once the new regime take effect.
OFSI's £4.7m Citibank London penalty
OFSI's public penalty notice, published 2 September 2026, provides one of the most useful sanctions case studies of the year,
OFSI found that Citi processed 970 payments worth a combined £19.7 million that OFSI considers breached the Russia Regulations and the Global Anti-Corruption (GAC) Regulations.
OFSI grouped the breaches into eight separate matters, which can be summarised as follows:
Payment to corporate clients majority-owned by designated persons - 244 payments (circa £6.5m) through accounts Citi failed to restrict promptly, partly because a backlog of sanctions alerts went unresolved for weeks, and partly because staff temporarily raised the internal threshold for restricting an account to require confirmed 50%+ ownership by a designated person. OFSI considered this temporary arrangement increased the risk of accounts being missed.
Sovcomflot-linked entities - 328 payments (circa £5.4m) that slipped through because the bank's screening system didn't recognize "PAO Sovcomflot" as a match for "Sovcomflot" on OFSI's list. This was considered a basic calibration gap. A wind-down general licence was in force for much of this period, but because Citi never assessed whether it actually applied to these payments Citi wasn’t considered to have had an appropriate control system.
Internal charges - 177 low-value transactions (circa £135k) where Citi deducted its own fees from frozen accounts, because the type of restriction applied blocked customer and third-party debits but not the bank's own internal charges. A general licence permitting certain routine fee deductions on frozen funds existed, but again was never checked against these payments in advance since no alert was triggered.
Russia-related correspondent banking - several distinct batches (approx £26k, £729k, £4m and £1.2m) where designated banks were added to payment chains after screening had already run. Bank Identification Codes hadn't been added to internal watchlists, or return-payment messages only showed the next bank in the chain rather than the ultimate (designated) beneficiary. As with the Sovcomflot payments, wind-down general licences covering transactions with these banks were in place for most of this period, but were never assessed in advance because the payments weren't flagged as involving designated persons in the first place.
Alert mishandling - 9 payments (circa £500k) involving straightforward human error, including one case where a handler mistook a designated bank's role as beneficiary when it was actually the remitter.
An interest payment (circa £1.5m) returned to a correspondent bank in the bank's role as Principal Paying Agent, after staff failed to recognize that the issuing SPV had become owned by a designated person.
GAC correspondent banking payments (circa £300k) where an internal escalation was initially routed to the wrong team and the case was closed without further action.
OFSI also identified 53 late frozen asset reports, some delayed by as much as 518 days, averaging 274 days between the bank having reasonable cause to suspect it held frozen funds and actually reporting them.
Key takeaways:
Test screening against real-world name variants, not just exact matches.
Account restrictions must cover internal fee deductions too.
General licences need upfront, documented assessment.
Ownership/control calls need solid evidentiary support.
Frozen asset reporting delays are a separate aggravating failure.
Voluntary disclosure discount depends on being prompt and complete.
OFSI issues new FAQ: Crediting interest or other earnings on a frozen account.
Following the Citi Bank penalty, OFSI has updated its FAQs on interest and other earnings on frozen accounts.
The guidance confirms that interest may only be credited to the same frozen account on which it accrues. There is no general exemption allowing interest to be transferred to a separate nominated account.
Why it matters: firms holding frozen assets should make sure their account structures and payment processes distinguish between a permitted credit to the frozen account and a prohibited transfer elsewhere.
United States
OFAC had an unusually active two weeks, with major actions across Iran, Cuba and terrorism-related designations.
Operation Economic Outcast: Treasury's new campaign against Iran
On 24 August 2026, the US Treasury announced the launch of "Operation Economic Outcast," a broad campaign to ‘cut off every economic lifeline sustaining the Iranian regime and the Islamic Revolutionary Guard Corps (IRGC)’. The scale of the opening action includes: five new sectoral determinations, nearly 60 designations, multiple general license suspensions, and coordinated State Department and FBI actions.
The core structural change: five new sectoral determinations.
Under Executive Order 13902, OFAC now has authority to sanction foreign persons, regardless of location, simply for operating in five sectors of Iran's economy: digital assets, technology, gold, aviation, and shipping. This is a materially different tool than a named designation, it doesn't require identifying a specific individual, only that a person operates in one of these sectors in connection with Iran. It builds on existing sectoral determinations already covering Iran's financial and petroleum/petrochemical sectors.
Nearly 60 designations across four distinct networks:
A procurement network spanning Hong Kong, China, Malaysia and Iran. A layered set of front companies and intermediaries that sourced sensitive dual-use technology (laser optics, accelerometers) for Iran's Malek Ashtar University and its ballistic missile/nuclear research programs, plus a separate logistics chain that moved these goods.
A cyber group responsible for compromising US critical infrastructure, energy, defense, healthcare, IT and financial sector targets, since at least 2023.
A shadow-fleet shipping and oil-revenue network spanning the UAE, Hong Kong, Singapore, Switzerland and Greece, inclusive of: vessel brokers, bunkering service providers, and financial intermediaries (including a Greek-national-run bunkering operation) that kept Iranian crude moving to East Asian buyers.
A Shamkhani-linked commodities trading network notable for having acquired a French cooking-oil refinery in 2024, apparently as a legitimizing investment to make the network look like an ordinary commodities business.
Other actions the same day:
OFAC suspended several general licenses that had authorised personal remittance payments to Iran and Iranian participation in US cultural and academic exchange programs.
OFAC issued new guidance on the sanctions risk of "bowing to Iranian demands" regarding shipping in the Strait of Hormuz.
The State Department designated seven members of Iran's defense leadership and two entities, and separately designated Iran's Ministry of Intelligence and Security under multiple authorities.
The FBI's Rewards for Justice program offered up to $10 million for information on foreign state-directed cyber actors targeting US critical infrastructure.
Key takeaways:
Sectoral determinations widen the net beyond named parties. Firms operating in digital assets, technology, gold, aviation, or shipping with a sufficient Iranian nexus, could now fall into scope for sanctions risk even without a specific SDN match.
This appears to be sustained campaign and not a single event. Firms should expect additional Iran-related designations on a rolling basis, and should not treat 24 August as a one-off.
Correspondent banking exposure to UAE, Hong Kong, Singapore, Switzerland and Greece-based entities in shipping/commodities trading need careful consideration given how many of the designated intermediaries are based in those jurisdictions.
Cuba
Treasury and the State Department designated several state-owned Cuban entities, along with Fidel Ernesto Castro Calis, grandson of Raúl Castro. Cuba General License 4A was also issued alongside the action, authorising transactions for thrid party diplomatic and consular missions in Cuba.
Compliance deadline reminder
OFAC reminded US persons holding blocked property as of 30 June 2026 that they must file the 2026 Annual Report of Blocked Property by 30 September 2026.
European Union
Court rulings.
The EU's General Court delivered two significant judgments in the space of a week:
September 3 — Inter Rao Lietuva: The Court clarified that member states may maintain their own national lists of entities assessed as owned or controlled by designated persons (even where those entities aren't listed under EU sanctions directly), provided national authorities rely on solid, objective evidence and respect fundamental rights.
September 9 — Abramovich v Council: The Court dismissed Roman Abramovich's latest challenge to his continued listing, rejecting his procedural arguments and his claim that he was targeted for his public profile rather than his 28.64% stake in steel group Evraz. This is Abramovich's third unsuccessful challenge (following losses in December 2023 and September 2025); a separate challenge to the EU's most recent six-month renewal of his listing remains pending.
Guidance update. The European Commission refreshed its Russia/Belarus sanctions FAQs following the 21st sanctions package: the crude oil price cap remains fixed at $44.1/barrel until 15 July 2027, the Sakhalin-2 maritime transport exemption to Japan is extended to 31 March 2028, and new guidance was added on LNG import exemptions and reporting requirements.
UN / Other Jurisdictions
Iran: Security Council standoff.
Council members clashed over the legal status of Iran's UN sanctions. Russia and China continue to argue that Resolution 2231 expired on 18 October 2025, and dispute the legitimacy of last year's "snapback" that reinstated sanctions and revived the 1737 Sanctions Committee. The US and E3 (France, Germany, UK) maintain the reactivation was valid. The Council voted 11–2 (with two abstentions) to proceed with a scheduled briefing over Russian and Chinese objections,a procedural vote that cannot be blocked by veto.
Looking Ahead
The UK is expected to publish the detailed legal instrument implementing its Israeli settlement measures "in the next few weeks."
The EU's existing Russia sanctions list (roughly 2,600 individuals/entities) was due to expire 15 September 2026, pending resolution of the Slovak veto. This deadline has since been extended for an additional 7 days unti 22 September 2026.
The EU's import ban on long-term pipeline gas supply contracts takes effect 30 September 2026.
OFAC's 2026 Annual Report of Blocked Property is due 30 September 2026.
Expect continued friction at the UN Security Council over the Iran 1737 Committee.
