Sanctions relief readiness: How firms can manage reopening, reversal and regulatory divergence

For much of the past decade, sanctions compliance has been optimised for escalation. New designations, sectoral measures, ownership tests and evasion typologies created a familiar operating sequence: screen, investigate, escalate, freeze or block where required, and report.

Sanctions relief is the removal, suspension, amendment or relaxation of sanctions restrictions through legal mechanisms such as delisting, licences, waivers, exemptions or changes to sanctions legislation. Relief may apply to particular countries, sectors, entities, individuals, goods, services or transactions. However, sanctions relief does not necessarily remove the residual risks associated with money laundering, terrorist financing, proliferation financing, corruption, export controls or reputational exposure. Managing sanctions relief, therefore, requires a different capability.

Once a legal change takes effect, firms may need to permit activity that was previously prohibited while still managing residual sanctions, money laundering, terrorist financing, proliferation financing, export control, corruption and reputational risks. Political signalling can give firms advance notice, but it is not itself legal permission. Controls should change only when the relevant law, designation, licence, waiver or exemption becomes effective.

The challenge is to use the warning period to prepare, and then to implement legally effective relief in a controlled, evidence-based manner.

Syria sanctions relief: What partial reopening looks like

In April 2025, the UK amended its Syria sanctions framework, lifting restrictions on certain sectors, including financial services and energy production, while retaining sanctions on members of the former regime and actors involved in the illicit Captagon drug trade.^[1]UK bolsters support for Syrian people by amending Syria sanctions – GOV.UK The EU followed in May 2025, lifting economic restrictive measures on Syria, except those based on security grounds, while extending listings linked to the Assad regime, adjacent actors and adding new human rights designations following violence in Syria’s coastal region.^[2]Syria: EU adopts legal acts to lift economic sanctions on Syria, enacting recent political agreement – Consilium The US Treasury’s Office of Foreign Assets Control (“OFAC”) initially issued Syria General License 25 (“GL25”) in May 2025, authorising transactions previously prohibited by its Syrian sanctions regulations and describing this as immediate sanctions relief intended to support new investment, private sector activity and reconstruction.^[3]Treasury Issues Immediate Sanctions Relief for Syria | U.S. Department of the Treasury

On 24 August 2026, the State Department formally rescinded Syria’s designation as a State Sponsor of Terrorism^[4]Removal of Syria’s designation as a State Sponsor of Terrorism and Associated Sanctions List Updates; Iran-related Designations; Updates to Iran-related General Licenses | Office of Foreign … Continue reading and revoked Hay’at Tahrir al-Sham’s (“HTS”) designation as a Specially Designated Global Terrorist, a group established as the interim government of Syria.^[5]Syria one year after Assad: Forming an interim government – House of Commons Library OFAC also removed HTS from the SDN List and revoked General Licence 25 because it was no longer required.^[6]Removal of Syria’s designation as a State Sponsor of Terrorism and Associated Sanctions List Updates; Iran-related Designations; Updates to Iran-related General Licenses | Office of Foreign … Continue reading The United States nevertheless retains list-based sanctions against Bashar al-Assad and his associates, human rights abusers, Captagon traffickers, proliferation-linked persons, terrorist groups and other destabilising actors.

The legal direction appears to steer towards economic reengagement, but significant residual risks remain real and relevant. Syria remains under FATF increased monitoring^[7]Jurisdictions under Increased Monitoring – 19 June 2026, while targeted sanctions, counter-terrorism restrictions, export controls and restrictions concerning particular goods, persons and end uses continue to apply across relevant jurisdictions. The result is not a return to “ordinary” country risk. Rather, it is a transition from broad country-based restrictions to a more targeted and fact-sensitive control environment.

In practice, a country level relief or a delisting does not wipe the slate clean. Firms still need to understand what has changed, what restrictions remain, which jurisdictions’ rules apply and whether the activity falls within their risk appetite.

The 24 August US measures may encourage renewed commercial interest as significant previous legal barriers fall away. However, firms will still need to identify the remaining targeted restrictions and decide how they will manage the associated residual risks.

Syria illustrates that broad sanctions relief creates a more targeted and fact sensitive control environment, rather than a full return to ordinary country risk. Firms considering reentry must identify the restrictions that remain, assess residual financial crime and geopolitical risks, and confirm that the activity is consistent with both applicable law and risk appetite.

Iran sanctions relief: Lessons from reversal and re-escalation

The Iran Memorandum of Understanding (“Iran MoU”), signed by the United States and Iran in Islamabad on 17 June 2026, was designed as a political framework for a ceasefire, a 60-day negotiation process and phased sanctions relief. It was not, by itself, a green light to transact.

OFAC subsequently issued General Licence X^[8]Issuance of Iran-related General License | Office of Foreign Assets Control for the specified Iranian-origin oil and petroleum activity. On 7 July 2026, however, OFAC revoked and replaced it with General Licence X1^[9]Issuance of Amended Iran-related General License | Office of Foreign Assets Control, which permitted only limited wind-down activity through 17 July and did not authorise new purchases or loading after 7 July. The 60-day Iran MoU period expired on 17 August 2026 without a final agreement.

The pace and sequence of these events are important. Political agreement, legal effect and reversal can follow in quick succession. Treating the Iran MoU itself as permission would have meant acting too soon; failing to track the replacement of General Licence X would have meant stopping too late.

The direction hardened further on 24 August 2026. OFAC announced additional Iran-related designations, expanded the sectors potentially exposed under Executive Order 13902, suspended several previously available authorisations^[10]OFFICE OF FOREIGN ASSETS CONTROL Suspension of Certain Iranian Transactions and Sanctions Regulations General Licenses and issued General Licence BB to permit limited wind-down activity until 8 September 2026. These measures reinforce the practical point that relief can be reversed not only through the withdrawal of a headline oil authorisation, but through wider changes affecting remittances, educational and sporting activity, professional exchanges and other previously permitted activity.

The Iran developments also illustrate the need to distinguish between political commitments, executive licensing actions, statutory sanctions relief and durable legal normalisation. The scope of executive authority may differ across sanctions measures, while licences or waivers may be time-limited, conditional, revoked or replaced. Firms should therefore identify the precise legal instrument on which they rely rather than treating a political agreement as a single, comprehensive source of authority.

Iran demonstrates how quickly political agreement, legally effective relief, revocation and winddown can follow one another. Firms should treat political announcements as a trigger for preparation, but change controls only in reliance on the current legal instrument and with the operational capability to respond promptly if relief is narrowed or reversed.

Sanctions relief checklist: Key questions for firms

• Which jurisdiction permits the activity, and which legal regimes still apply?
• Which persons, entities, sectors, goods, services, end uses and territories remain restricted?
• Does the relief depend on a licence, waiver, exemption, derogation, reporting obligation or expiry date?
• Do ownership and control rules, secondary sanctions exposure or correspondent banking dependencies change the practical position?
• Is the activity lawful but still outside the firm’s risk appetite?
• Can the firm exit, freeze or wind down safely if the relief is narrowed or reversed?

These questions create divergence risk. Activity may be lawful under one regime but prohibited under another, or lawful everywhere relevant but unsupported by a clearing bank, insurer or risk committee. The result is not necessarily a compliance failure. It is a governance decision that should be explicit, consistent and capable of being defended.

The Iran example demonstrates the full relief lifecycle within a compressed period: political agreement, legally effective authorisation, revocation, wind-down and wider reescalation. Firms must govern each stage according to the current legal instrument, including its scope, conditions, expiry and wind-down provisions. One of the key lessons to take away if that political announcements should trigger horizon scanning and operational preparation, not automatic market re-entry.

FCA sanctions findings and sanctions relief readiness

The ability to answer these questions depends on the quality of a firm’s existing sanctions compliance and control framework. In May 2026, the FCA published findings from its assessment of more than 150 supervised firms.^[11]Sanctions systems and controls in our firms: our findings | FCA It identified recurring weaknesses in due diligence, alert management, customer and transaction screening, frozen assets management, licence compliance, governance, management information (“MI”), risk assessment, calibration and assurance testing.

These findings are usually read through the lens of detecting prohibited activity, but they are equally relevant when restrictions are relaxed. Weak list management may fail to remove a restriction promptly, while weak ownership analysis may allow activity involving a person who remains designated. Weak licence governance can result in firms either blocking activity unnecessarily or processing transactions outside the scope of an authorisation. Weak management information may leave senior management unable to distinguish newly permitted exposure from uncontrolled risk.

The FCA also found that financial sanctions controls were generally more mature than trade sanctions controls. This is especially relevant in areas such as reconstruction, energy, transport, commodities and infrastructure, where a bank may see only part of the underlying goods, route, vessel, end user or financing chain.

Divergence should be assessed not assumed

Recent CJEU case law illustrates the point. In Case C-81/24, Jenec, the Court held that inclusion on a US OFAC sanctions list is not, by itself, sufficient to justify refusal to open a basic payment account in the EU. A third-country sanctions listing may be a relevant risk factor, but it cannot replace an individualised AML/CFT assessment under EU law. The broader implication is that EU firms should be cautious about treating third-country sanctions status as a substitute for their own documented risk assessment.^[12]InfoCuria – Cour de justice de l’Union européenne

The judgment appears relatively narrow. It does not remove any applicable US sanctions exposure, correspondent banking constraint or lawful institutional risk appetite. It does, however, reinforce the need to document whether a decision is driven by a binding legal obligation, an assessed financial crime risk or the firm’s own risk appetite. Applying a third-country sanctions list automatically, without that analysis, may increase the risk of inconsistent decisions, customer challenge and litigation.

A hypothetical scenario

In this hypothetical example, a UK bank is asked to finance generators for a Syrian infrastructure project. Neither the Syrian purchaser nor the project company is designated, and the relevant UK trade restriction has been lifted. However, the payment would pass through an EU correspondent, the equipment contains US-origin components, and a person linked to the former regime partly owns one of the subcontractors.

A sound decision would not stop at the purchaser’s screening result. The bank would identify the applicable UK, EU and US rules; test ownership and control; understand the goods, end use, route and intermediaries; confirm whether any licence or export authorisation is required; assess correspondent and insurer appetite; record the residual financial crime risks; and set conditions for drawdown, monitoring and exit. The scenario demonstrates controlled re-entry, not a presumption that all Syria-related activity is prohibited or permitted.

The example shows why apparently similar Syria-related transactions may produce different decisions depending on the parties, goods, ownership structure, payment route, applicable jurisdictions and evidence available to the firm.

Early re-entry will test the wider financial ecosystem

Reported investment activity in Syria provides an early indication of how these issues may arise in practice.

In June 2026, Reuters reported^[13]Syria signs deal with ConocoPhillips, Novaterra to revive gas production | Reuters that the Syrian Petroleum Company, ConocoPhillips and Novaterra Energy signed an agreement in Damascus to develop new gas fields and expand production at existing Syrian assets. It was also reported that ConocoPhillips had previously joined TotalEnergies, QatarEnergy and the Syrian Petroleum Company in a technical review of offshore Block 3 near Latakia.^[14]ConocoPhillips set to sign deal with Syria to revive gas production, FT reports | Reuters

The significance of these developments extends beyond Syria’s energy sector. If the projects proceed, they may test whether:

• correspondent banks will process the associated payments;
• insurers will underwrite the relevant infrastructure and political risks;
• export credit support will become available;
• required technology transfers can proceed;
• contractors can obtain trade finance; and
• investors consider political reversibility risk manageable.

In practice, sanctions relief is often constrained less by the law itself than by the wider financial ecosystem.

A project may therefore be legally permissible while still struggling to secure:

• dollar clearing;
• risk committee approval;
• insurance capacity;
• supply chain participation, or
• long-term financing support.

For a financial institution considering such activity, the practical questions include:

• Can the firm distinguish a delisted Syrian state entity from an entity that remains owned or controlled by a designated person?
• Can its systems identify residual exposure across the UK, EU, US, UN and other applicable regimes?
• Can it evidence why a transaction falls within the scope of an amended regulation, licence, exemption or derogation?
• Does its country-risk assessment distinguish legal reopening from wider financial crime and geopolitical risk?
• Do its correspondent banks, insurers, clearing banks and internal risk committees have a compatible risk appetite?

Can its management information show senior management what activity has become permissible, which controls apply and where exceptions or refusals continue to arise? These questions are not academic. The FCA found that some firms relied heavily on group arrangements, screening vendors or third parties for sanctions compliance, but could not demonstrate adequate local oversight, governance or assurance over those arrangements. It also found that some sanctions policies focused too heavily on asset freezes and did not adequately reflect sectoral sanctions, trade measures or other restrictions.^[15]https://www.fca.org.uk/publications/good-and-poor-practice/sanctions-systems-and-controls-our-firms-our-findings In a relief scenario, that weakness cuts both ways. Firms may either block lawful activity, undermining policy objectives and commercial opportunity, or fail to implement sufficient controls to newly permissible activity because the system treats delisting as a full risk reset.

Neither outcome is good governance. The core challenge is not sanctions risk alone, but political reversibility risk:  the possibility that activity encouraged today becomes commercially, legally or politically unsustainable tomorrow.

The residual risk gap after sanctions relief

A particularly vulnerable period may be the interval between a legal change and full control recalibration. Lists may be updated before policies, customer risk ratings, training, transaction rules, licence procedures, management information and risk appetite are aligned.

A firm may then make one of two errors. It may continue to block lawful activity without a defensible basis, potentially creating customer, conduct and litigation risk. Alternatively, it may treat a delisting or country-level relief as a full risk reset and overlook residual designated parties, ownership and control, excluded end uses, export controls or licence conditions.

The risk is not removed by relying on a group function or screening vendor. The FCA expects firms to understand and oversee outsourced or group arrangements, maintain clear ownership and obtain assurance that controls operate as intended.

Previous sanctions programmes also demonstrate that relief can be reversed or remain incomplete. OFAC’s Venezuela General Licence 44 temporarily authorised certain oil and gas activity in October 2023 before General Licence 44A replaced it with a wind-down authorisation in April 2024.^[16]Issuance of Venezuela-related General License and Frequently Asked Questions | Office of Foreign Assets Control Sudan similarly demonstrates that the lifting of comprehensive sanctions does not necessarily remove targeted sanctions or other applicable restrictions.^[17]Sudan and Darfur Sanctions | Office of Foreign Assets Control

The real question is whether firms can switch sanctions off safely

Effective sanctions relief frameworks require more than list updates. They require firms to distinguish between legal permissibility, residual financial crime risk and approved risk appetite. A transaction may be newly lawful but remain outside risk appetite. A counterparty may be delisted but still warrant enhanced due diligence. A reopened jurisdiction may continue to present risks of elevated money laundering, terrorist financing, proliferation, corruption or human rights. Authorisation under a licence or exemption may also require clear evidence of scope, purpose and applicable restrictions.

For many firms, sanctions compliance is becoming less binary and more dependent on judgement, governance and documented decision-making. Partial relief, differing approaches across jurisdictions and the possibility of policy reversal increase the importance of clear ownership, robust risk assessment and effective oversight.

The FCA’s recent findings provide a useful benchmark against which firms can assess their readiness for sanctions relief.^[18]https://www.fca.org.uk/publications/good-and-poor-practice/sanctions-systems-and-controls-our-firms-our-findings Firms may wish to consider whether their controls remain overly focused on asset freezes, whether trade sanctions controls are sufficiently mature, whether management information captures emerging exposure, and whether risk assessments clearly distinguish between inherent risk, residual risk and risk appetite.

Institutions are likely to be judged less by the speed of their response than by the quality of their governance, risk assessment and decision-making. Firms should be able to evidence:

• the rationale and legal basis for entering or re-entering a market;
• the rationale for restricting or declining activity;
• the controls applied to manage residual risk;
• the governance and risk considerations underpinning those decisions;
• how the firm would stop or wind down the activity if the position changed.

The strongest firms will not necessarily be those that re-enter first. They will be those that can demonstrate that re-entry was lawful, controlled, consistent with risk appetite and capable of being reversed if the legal or geopolitical environment changes.

What firms should do now

Firms should review their sanctions governance, sanctions screening, ownership and control assessments, trade sanctions controls, licence management processes and risk appetite frameworks to ensure they can manage sanctions relief in a controlled and defensible manner. The ability to demonstrate effective sanctions risk management may become as important during sanctions relief as during sanctions escalation.

How HKA can help

HKA can help firms conduct targeted sanctions relief readiness reviews, including governance, risk appetite, systems calibration, trade sanctions controls, licence reliance, MI, escalation pathways, correspondent banking dependencies and evidence standards. We can also support scenario planning exercises for jurisdictions where sanctions relief, divergence or snapback could materially affect business strategy, sanctions compliance obligations or financial crime exposure.

If your sanctions or financial crime function is assessing market re-entry, responding to cross-border regulatory divergence or testing its ability to implement and reverse sanctions relief, contact HKA to discuss a targeted readiness review or scenario exercise focused on control gaps, residual risk and defensible governance decisions.

The sanctions landscape discussed in this article reflects developments as of August 2026 and may continue to evolve.

About the author

Noémi Klein is a Director in HKA’s Financial Crime Investigations & Compliance practice, with more than a decade of international experience across banking, consulting and payments. She advises financial institutions and senior leaders on sanctions, anti-money laundering and wider financial crime compliance, and has led complex regulatory investigations and reviews, risk assessments, remediation initiatives and major transformation programmes across multiple jurisdictions. Her experience combines strategic advisory expertise with a practical understanding of how evolving legal requirements, regulatory expectations and geopolitical developments translate into effective governance, controls and commercial decision making. Noémi helps organisations identify emerging exposure, strengthen their financial crime frameworks and develop proportionate, operationally workable responses as sanctions regimes evolve and regulatory requirements diverge.