The opinions expressed here are those of the authors. They do not necessarily reflect the views or positions of UK Finance or its members.

On 13 January 2025, OFAC and OFSI reaffirmed their commitment to an enhanced partnership by publishing a Memorandum of Understanding (MoU). The two agencies have grown closer in recent years, to address the increasing scale of sanctions and the growing complexity of their implementation. Their partnership became especially crucial following Russia's full-scale invasion of Ukraine, which prompted all G7 countries and allies to intensify their efforts to design, communicate, and implement sanctions in close coordination with each other and allied nations. This MoU builds on and solidifies joint efforts initiated in October 2022, aimed at benefiting both countries through the exchange of best practices and the strengthening of working relationships at all levels. 

Overview of the MoU

The primary goal of the OFAC-OFSI MoU is to facilitate the exchange of information between the two agencies regarding the implementation and enforcement of sanctions.

The MoU emphasises collaboration in the following key areas:

• Communications: The two agencies agree to encourage their respective teams to maintain ongoing, ad-hoc communication to ensure effective coordination, as appropriate, and in compliance with all applicable laws.
• Requesting information: Information requests should clearly outline the purpose of the request, specify the applicable legal basis and/or relevant laws under which the information is sought, and provide a rationale for the request.
• Alternative information sharing mechanisms: The agencies may periodically evaluate and adopt other appropriate mechanisms for sharing information as needed.
• Controls and safeguards: The MoU requires both agencies to adhere to all applicable laws and regulations in carrying out their activities, particularly regarding the handling of personal data. Information must be shared confidentially, properly managed and transmitted, and redacted or withheld when necessary.
• Third-party sharing, prior written consent, and notification: The agencies will seek consents to provide or disclose information, even where constrained by agreements by third parties. Unless legally required, the agencies will not disclose information obtained from each other to any third party outside of the US Department of the Treasury or HM Treasury without prior written consent from the other agency.

Despite the above, nothing in the MOU obliges the parties to share information, with broad carve-outs included for ‘sovereignty, security, financial or economic interests or other national interests.

The future of the relationship

While the MOU emphasises the strong alignment between the U.S. and the U.K. in enforcing sanctions, the advent of a new U.S. administration may yet change how the two agencies collaborate. For years, OFAC has taken the lead in enforcing sanctions and leveraging them as a foreign policy tool, often with the support of U.S. allies. However, the new U.S. administration’s evolving approach to international relationships – and its willingness to employ punitive measures, as demonstrated during the brief crisis with the Colombian government over repatriation flights – could create a misalignment between the U.S. foreign policy objectives and those of its allies. This, in turn, may impact collaboration between OFAC and OFSI in unintended ways. For example, the U.S. administration may consider lifting some Russia sanctions as part of a peace deal with Ukraine, potentially straining relationships with European allies – including the UK – who see them as a vital economic pressure tool on Russia.

What does this mean for firms?

Notwithstanding the possibility of changes that can be brought by the new U.S. administration, the primary purpose of the MOU is to emphasise the strong collaboration and alignment between the U.S. and the U.K. in enforcing sanctions. This is crucial to ensure that sanctions are understood and implemented effectively by all institutions and operators.

At the same time, the increased collaboration between the two agencies could elevate compliance risks for entities, particularly those with an international presence. Given the U.S.’s traditionally stricter stance on sanctions enforcement, organisations must establish a robust risk-based sanctions compliance program to ensure compliance with all applicable regimes.

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