UK publishes legislation for tougher sanctions on Iran

The UK government has introduced sweeping new legislation designed to crack down on state-backed proxy organizations, with Iran squarely in the crosshairs. The National Security (State Threats) Bill, published in June 2026, gives authorities the power to designate foreign organizations acting on behalf of hostile states and impose serious criminal penalties on anyone who supports them.

Supporting a designated entity could land someone in prison for up to 14 years.

What the bill actually does

The legislation creates a formal mechanism for the UK to label specific foreign organizations as proxies of hostile states. Once an entity is designated, providing it with financial support, material assistance, or operational backing becomes a criminal offense carrying that 14-year maximum sentence.

Up to ten Iran-backed proxy groups are expected to be designated within the bill’s first year, following recommendations from the Independent Reviewer of terrorism legislation. The bill represents a philosophical shift in how the UK approaches state threats, moving beyond reactive measures focused on human rights abuses toward a more proactive framework targeting hostile state operations and nuclear non-compliance.

This isn’t being built from scratch. The UK has already designated over 550 individuals and entities under its Iran sanctions regime since 2023, targeting networks linked to the Islamic Revolutionary Guard Corps and other organizations involved in illicit activities.

On the financial enforcement side, the Office of Financial Sanctions Implementation (OFSI) has signaled plans to raise the maximum fine for sanctions violations to £2 million.

The threat picture driving the legislation

The bill didn’t emerge in a vacuum. MI5 has reported a 35% increase in state-sponsored threats, a figure that reportedly helped accelerate the legislative timeline. Multiple sanctions packages have already been issued in 2026 targeting human rights abuses and illicit finance tied to Iran.

The UK’s approach combines asset freezes and travel bans against individuals directly linked to Iran’s aggressive actions with this broader structural legislation.

Energy market implications

Iran remains one of the world’s significant oil producers, and any tightening of sanctions enforcement carries ripple effects across global energy markets. Roughly one-fifth of the world’s oil passes through the Strait of Hormuz.

The OFSI’s planned increase in maximum fines to £2 million also sends a signal to the broader compliance industry. Financial institutions operating in or through the UK will likely need to invest more heavily in sanctions screening technology, transaction monitoring systems, and dedicated compliance personnel.

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