FOCUS ON: Sanctions

IPA Insolvency Practitioner newsletter AML Digest, December 2025

The UK Government imposes sanctions on countries, organisations or individuals as a tool to attempt to stop or deter a country, organisation or individual from acting against the best interests of the UK, or breaking international laws and protocols.

What does this mean for insolvency appointments?

Where there is a sanctioned entity either in, seeking to enter, an insolvency process, or where a sanctioned entity is a director, person with significant control (PSC), creditor etc. of a company or individual in insolvency, the IPA has always advised that this automatically raises an appointment to a higher risk.

This means:

• Enhanced Due Diligence (EDD) must be undertaken
• The appointment should be noted to your AML Nominated Officer
• The appointment should be kept under regular review

Members may find that the impact of a sanctioned entity is most likely in relation to the payment of a dividend from an estate. Members should:

• Check the list of creditors when a dividend can be paid
• Consider any creditor which is not the ‘usual’ – i.e. HMRC, utilities, known UK clearing banks etc.
• On a risk basis, consider checking names of any remaining creditors through the UK Sanctions list to ensure that there are no sanctioned entities who are due a dividend

I have a case that involves a sanctioned entity

Firstly, make sure that your Nominated Officer is fully aware and do not allow any action in relation to the relevant entity to proceed.

You will need to contact the Office for Financial Sanctions Implementation (OFSI). OFSI advise that ‘where a transaction involves a person or organisation who is subject to financial sanctions (whether directly or indirectly), you must obtain a licence to allow the activity to take place without breaching financial sanctions. You should not assume that a licence will be granted or engage in any activities prohibited by financial sanctions unless you have a valid licence’.

How do I apply for a financial sanctions licence?

All of the information and guidance on licence applications and general licences which allow certain transactions can be obtained from the OFSI website.

IPs’ sanctions reporting requirements

From 14 May 2025, IPs were added to the list of relevant firms with obligations to report to OFSI. The obligation arise from the Sanctions (EU Exit) (Miscellaneous Amendments) (No. 2) Regulations 2024. 

The amendments also clarify that the prohibitions on “making funds available to any person for the benefit of a designated person” includes making funds available for the benefit of a person owned or controlled (directly or indirectly) by the designated person.

What is required?

As of 14^th May 2025, IPs are obliged to report to OFSI – as soon as reasonably practicable – if the IP knows or has reasonable cause to suspect (from information which came to the IP in the course of carrying on the IP’s business) that:

• a person is a designated person (this is someone who is listed on the UK sanctions list), or
• a person has breached a prohibition or failed to comply with an obligation under financial sanction regulations (or Treasury licencing requirements), or
• the IP holds funds or economic resources for a prohibited person or designated person (the Russian sanctions regulations require reporting in relation to “prohibited persons” and “designated persons”, but regulations for other countries may refer only to “designated persons”).

From 14^th May 2025 if an IP makes a report to OFSI about a “customer” of the IP, then the IP must also report to OFSI the nature and quantity of any funds or economic resources held by the IP for that customer at the time the IP first had knowledge of suspicion. If an insolvency appointment is over a designated person or prohibited person (which may be an individual or other legal entity), as an IP you will have to report to OFSI the nature and quantity of funds or economic resources held by you in relation to that appointment.

If an IP informs OFSI that that a customer is a designated person or that the IP holds (or suspects they hold) funds or economic resources for a prohibited person (or which are controlled by a designated person) and the IP continues to hold them, the IP must, by 30^th November in each year, report to OFSI the nature and quantity of the funds or economic resources held by the IP as at 30^th September in that calendar year.

What does this mean for insolvency appointments?

The obligations to report apply where the knowledge or reasonable suspicion arises in the course of carrying on business. A list of relevant appointments is outlined in the CCAB Supplementary Guidance for IPs at para F.3.3:

• Agreeing to act as liquidator or provisional liquidator of a solvent or insolvent company or LLP;
• Agreeing to act as nominee in a company voluntary arrangement not preceded by another insolvency procedure;
• Agreeing to accept an appointment as administrator or special administrator;
• Agreeing to accept appointment as an administrative receiver (in Scotland, receiver);
• Agreeing to act as nominee or supervisor in an individual voluntary arrangement;
• Agreeing to act as a trustee (including interim trustee) in a bankruptcy, a sequestration or under a trust deed;
• Accepting instructions to prepare, or assist in preparing, a proposal for a company or individual voluntary arrangement where appointment as nominee will be sought;
• Agreeing to act as liquidator, provisional liquidator or administrator of an insolvent partnership;
• Agreeing to act as trustee of a partnership under Article 11 of the Insolvent Partnerships Order 1994;  
• Agreeing to act as nominee or supervisor in relation to a partnership voluntary arrangement.

Does this cover all IPs’ work?

The obligation to report applies where the knowledge or reasonable suspicion arises in the course of carrying on an IP’s business.

It is considered that appointments as an LPA Receiver or to undertake an independent business review would not be ‘IP business’ and you would therefore not be acting as an IP as per S388 of the Insolvency Act 1986 or Article 3 of the Insolvency (Northern Ireland) Order 1989 and reporting obligations would not apply.

What must I report and how?

OFSI have provided guidance on reporting procedures.

The detail required includes specific information on the designated person, basis for suspicion and details, nature and amount or quantity of economic resources held.

Russian sanctions

There will be additional requirements to report regarding “prohibited persons” under Russian Sanctions. OFSI require you to report as soon as practicable if you know, or have reasonable cause to suspect, that you hold funds or economic resources for a person to whom financial services must not be provided under Reg 18A(1) of The Russia Sanctions (EU Exit) Regulations 2019.

‘Prohibited persons’ are: Central Bank of the Russian Federation, National Wealth Fund of the Russian Federation, Ministry of Finance of the Russian Federation, a person owned or controlled directly by one of these entities or acting on behalf of, or at the direction of, one of these entities.

If – as a relevant firm – you are holding funds or economic resources, you must complete a reporting form template and submit to OFSI. The form must be submitted when making an initial report and thereafter no later than 30 November in each calendar year. The report must advise OFSI of the nature and amount or quantity of the funds or economic resources held by the IP/firm as at 30 September in that calendar year.

What should you do?

Firstly, you must make sure that your Nominated Officer (also known as the Money Laundering Reporting Officer (MLRO)) is made aware of this reporting requirement prior to 14 May 2025 so that they can ensure they are aware of what is required and can circulate details around teams.

The IPA has issued a number of articles and details on IPs taking steps to understand whether any entity over which an appointment is to be made includes any entity on the Consolidated Sanctions list. This should be made a check as per due diligence work to ensure that you know what your reporting duties are.

It is believed that the number of appointments that meet the reporting criteria will be small and, other than due diligence, there should be a limited impact on most of an IP’s work. There is a risk that the small number of impacted cases results in reporting responsibilities being missed, however failure to comply with the reporting requirements is an offence. There are severe consequences for failing to report and you must ensure that you have a robust and effective due diligence policy that all staff understand and adhere to, and clear reporting lines if the need to make a report to OFSI arises.

Sanctions list

Finally, a reminder that from 28 January 2026, the OFSI Consolidated List is no longer going to be supported and updated. This means from 28 January 2026, no new sanctioned entities will appear on the list.

The Government will only update one sanctions list – the UK Sanctions List – from that date. The search tool works in a very similar way to the OFSI list and holds the same information.

You can start to use the UK Sanctions list immediately and must ensure that any procedure for due diligence is updated so that the UK Sanctions List is now highlighted as the relevant list to search for sanctioned entities.

The search tool can be accessed here.

Four tips for sanctions compliance

1. Awareness of sanctions obligations – Insolvency Practitioners must be vigilant when handling assets or transactions that could involve designated persons.
2. Reporting requirements – As of 14 May 2025, Insolvency Practitioners are legally required to report suspected sanctions breaches or frozen assets to OFSI.
3. Policies, procedures & controls – IPs must be able to evidence that they have robust policies, procedures and controls in place to ensure compliance with sanctions obligations. These should include:
   1. Documented staff awareness and training on sanctions risks.
   2. Due diligence processes to assess potential appointments that may be impacted by sanctions.
   3. Clear internal reporting mechanisms for identifying and escalating sanctions concerns.
4. Risk and compliance – Understanding broader sector risks can help mitigate breaches and ensure appropriate engagement with OFSI where necessary.