Significant compliance conflicts have emerged following China’s introduction of their Anti-Foreign Sanctions Law (AFSL) [passed on 10 June 2021].  Recently, imposition and enforcement of China’s AFSL have intensified, moving the framework away from being a latent deterrent, towards a practical legal risk that UK financial institutions need to manage. The implications and practical considerations around responses to the law must become increasingly integrated into the strategic policy making of financial institutions. 

The Anti-Foreign Sanctions Law 

The Anti-Foreign Sanctions Law provides China with a legal basis to impose countermeasures including asset freezes, visa bans, and transaction prohibitions, on foreign entities or individuals that implement or assist with foreign sanctions or other measures China considers discriminatory against its interests. Article 12 of the AFSL also creates a private civil right of action, allowing infringed Chinese entities to initiate litigations in PRC courts to seek compensation for their losses.

The first jurisdictional enforcement action under China’s AFSL took place in the Nanjing Maritime Court, where a Chinese manufacturer successfully sued a Swiss counterparty that had suspended payments to comply with US sanctions, issued by the Office of Foreign Assets Control (OFAC). To resolve the court case, the Swiss company applied for a specific payment licence from OFAC and submitted a counter-guarantee of over RMB 99 million. China used this case as a model application of the AFSL blocking extraterritorial foreign sanctions to actively deter future sanctions.

More recently, in May 2026, China’s Ministry of Commerce issued its first Blocking Order against US sanctions, which aimed to block Specially Designated Nationals listings, asset freezes, and transaction bans imposed on five petrochemical companies. These developments reflect a trend that urges assessment and consideration of China’s AFSL for UK multi-national firms. 

Implications for UK Financial Institutions

The implications of the law for financial institutions are becoming increasingly prominent, primarily due to emerging compliance conflicts. The UK’s Russia sanctions regime, imposed under the Russia (Sanctions) (EU Exit) Regulations 2019 within the Sanctions and Anti-Money Laundering Act legislative framework, now includes Chinese entities which supply dual-use goods and technologies to Russia’s military-industrial complex.

Many UK firms must also consider US OFAC sanctions, whether because of a direct US nexus or the risk of secondary sanctions and potential loss of access to the US financial system. However, China’s Blocking Order could put UK firms in a difficult position: complying with US sanctions may create exposure to Chinese penalties; meanwhile, disregarding US or UK sanctions may create enforcement risk in the US, UK, or both. This may be particularly relevant to internationally active banks based or operating in London with significant business interests in Asia.

Practical considerations for firms

An understanding of the architecture around these regulations is vital for firms to effectively mitigate these risks. Mechanisms interact in a coordinated legal framework where the Ministry of Commerce (MOFCOM) formally places entities onto the official countermeasures list and administers targeted countermeasures under the AFSL, including retaliatory actions such as asset freezes and travel bans, as well as using blocking orders, as a separate tool under the 2021 Blocking Rules, to direct domestic parties not to comply with extraterritorial foreign restrictions.

Therefore, looking ahead, firms should engage in due diligence to assess whether any counterparties, customers, suppliers, or other entities in their organisation’s China-related supply chain appear in Chinese AFSL countermeasures lists or Blocking Orders. This may require deep supply-side tracing, as AFSL countermeasures are not limited to entities meeting a conventional majority-ownership threshold. Where appropriate, firms should consider whether their governance and operating structures adequately manage potentially conflicting UK and Chinese legal requirements. On top of this, a firm can assess whether a Ministry of Commerce exemption or OFAC specific licence can be used.

Overall, firms must balance UK/US sanctions compliance against potential Chinese legal exposure, particularly where terminating a relationship due to a foreign designation may trigger AFSL risk. This requires clear internal ownership of conflict-of-law decisions and defined escalation procedures.

Conclusion

Overall, China’s AFSL has shifted from a largely symbolic framework to a practical legal risk that firms can no longer safely treat as theoretical when designing global sanctions policies. This reflects a shift towards a multipolar environment where competing legal and economic centres of power challenge the assumption that the US, UK and EU sanctions frameworks will always dominate cross-border compliance decisions.

At the same time, the US dollar remains central to international reserves and cross-border payments, meaning multinational firms in China rely on access to the dollar for their daily global operations. Consequently, these limitations have generated a wide breadth of statutory discretion and limited enforcement precedent in China, creating uncertainty over how consistently or extensively the AFSL framework will be applied.