UK’s OFSI says company domicile is important factor in sanctions enforcement

The UK’s financial sanctions authority has issued new guidance clarifying how it determines whether companies are ‘domiciled’ in sanctioned jurisdictions, emphasising that incorporation location carries ‘significant weight’ but other factors also matter for enforcement decisions.

Domicile matters because it determines whether a company is legally considered to be ‘connected with’ a sanctioned country, affecting whether it is subject to asset freezes, transaction bans, and other financial restrictions under UK law. 

The Office of Financial Sanctions Implementation said it ‘applies the term “domiciled” on a case-by-case basis and considers all evidence available when forming a view’ when determining whether entities fall under UK sanctions jurisdiction.

‘During an assessment we will attach significant weight to an entity’s place of incorporation and constitution, as we consider this to represent a substantial connection between the entity and a given jurisdiction,’ OFSI stated in its updated frequently asked questions.

‘We would also take into account additional factors such as the location of an entity’s i) registered office, ii) controlling shareholders or directors, iii) central management or control, and/or iv) primary business operations, taking a balanced view of the facts of a case,’ the guidance states.

OFSI emphasised that it considers ‘the domicile of a subsidiary company to be independent to the domicile of its parent company’, meaning sanctions authorities will assess subsidiary companies separately rather than automatically applying parent company domicile determinations.

The clarification comes as UK sanctions enforcement has expanded significantly, particularly targeting Russian and Iranian entities involving complex ownership structures that give rise to jurisdictional questions.

The guidance aligns with broader UK efforts to tighten sanctions compliance standards and reflects a growing crackdown on the misuse of trusts, foundations, and complex ownership structures to obscure links to sanctioned regimes.

https://www.gov.uk/government/publications/uk-financial-sanctions-faqs/uk-financial-sanctions-faqs