The New UK National Security Designation Powers: What Businesses Need to Know for Counterparty Risk

The UK Government has gained and started exercising new powers to designate bodies whose activities are perceived as a threat to national security, creating new compliance risks for businesses with a nexus to the UK. 

On 8 July 2026, the UK Parliament passed the National Security (State Threats) Act 2026 (the State Threats Act). The State Threats Act aims to deter “foreign power threat activity” (including conduct such as espionage and sabotage) carried out by proxies for foreign states. Welcoming the new legislation, Foreign Secretary Yvette Cooper said:

As foreign states increasingly seek to back threats on our streets, we are cracking down on those who try to undermine our country and its security.

Who can be designated under this new State Threats Act? 

A body may be designated if the Home Secretary reasonably believes that it is involved in “foreign power threat activity” and designation is necessary to protect the safety or “interests” of the UK. A body is defined as including any association or combination of persons, so organisations rather than individuals appear to be the target of the new designation power. The designation power is modelled on the proscription powers under section 3 of the Terrorism Act 2000, which provides that an organisation may be proscribed if the Home Secretary believes that it is concerned in terrorism.

Using this power, the first bodies designated under the State Threats Act are the Islamic Revolutionary Guard Corps, the Islamic Movement of Companions of the Right and the Main Intelligence Directorate of the General Staff of the Armed Forces of the Russian Federation Volunteer Corps. The UK Government has linked these groups to actions targeting the UK and its allies.

New offences

The State Threats Act creates three new offences (found in sections 17A-17C) associated with “supporting”, “assisting”, or “obtaining… material benefits” from a designated body. In summary, the new offences are:

• Supporting a designated body: it is an offence to meet with, invite support for, or express an opinion or belief that supports, a designated body for a purpose that is prejudicial to the safety or interests of the UK.
• Assisting a designated body: it is an offence to engage in conduct which is intended to materially assist, or which the person knows or should know is likely to materially assist, a designated body in carrying out activities in the UK, or activities outside the UK which are prejudicial to the safety or interests of the UK, including by providing, directly or indirectly, information, goods, services or financial benefits.
• Obtaining material benefits from a designated body: it is an offence to obtain, accept or retain a material benefit provided directly or indirectly by a designated body, including information or financial benefits.

As made clear in the Explanatory Notes, the offences are based in part on existing counter-terrorism and espionage offences in the Terrorism Act and National Security Act. By way of example:

• The ‘supporting’ offence is informed by section 12 of the Terrorism Act, which criminalises supporting the activities of a proscribed terrorist organisation. A difference under the State Threats Act is that support for a designated body is only prohibited where conduct is for a “prohibited purpose”, meaning a purpose which is prejudicial to the safety or “interests” (not defined) of the UK. The Explanatory Notes suggest that supporting the functions of a diplomatic mission or providing humanitarian assistance would not be prohibited.
• The other new offences are informed by National Security Act provisions which prohibit assisting, or obtaining material benefits from, foreign intelligence services. 

The offences carry sentences of up to 14 years’ imprisonment or an (unlimited) fine. Companies can be found guilty of these offences. At present, the UK Government has not announced which agency will be primarily responsible for enforcing the State Threats Act, but the expectation is that the new criminal offences will assist both the police and the intelligence agencies to disrupt hostile activity. 

What this means for businesses

Similar to UK sanctions legislation and terrorism-financing offences under the Terrorism Act, the new offences have extra-territorial reach and apply to conduct outside the UK by a UK person (i.e. a UK individual or company).

For UK and multinational businesses, compliance with the Act may need to be integrated into existing measures addressing counterparty risks such as sanctions and counter-terrorism financing risks: 

• Know Your Customer (and Supplier and other Counterparty) screening: screening processes should be updated to identify entities designated under the State Threats Act. Business will likely to do this as part of existing processes to identify entities designated under international sanctions regimes or proscribed under the Terrorism Act. As with sanctions and counter-terrorism risks, processes will need to grapple with the risk of direct and indirect engagement with designated bodies, for example, where a counterparty may be at risk of being regarded as controlled by or otherwise associated with a designated body such as a de facto local or regional authority or a paramilitary organisation.
• Additional compliance considerations: even where a single entity is designated under multiple legislative regimes, businesses should be aware that those regimes have different effects. For example, in addition to considering whether money or property may be used for the purposes of terrorism under the Terrorism Act, businesses will need to consider whether their commercial activities involving a person constitute “assisting” a designated body whose activities abroad are prejudicial to the safety or interests of the UK. This analysis may not be straightforward and there is limited guidance on how these new offences are intended to be enforced and prosecuted.  
• Increasing use of ‘list-based’ measures: finally, the passage of the State Threats Act reinforces the UK Government’s willingness to use proscription-based and sanctions-like measures to advance national security and foreign policy objectives. The proliferation of different types of designations will need to be closely monitored to ensure existing compliance processes (screening, KYC and counterparty due diligence) are kept up to date. The focus of the Iranian designations under the State Threats Act adds an additional dimension to the UK’s overarching approach to Iran-related measures. To date, the UK has maintained a more limited sanctions regime targeting Iran than the US or EU and continues to give effect to the Blocking Statute, which prohibits UK persons from taking steps to comply with certain US sanctions imposed upon Iran.