City might hope that such sanction would act, in the short term, as a deterrent to others but it could prove to be counterproductive in the long run. It would put City in danger of gaining an unwanted reputation among top young English players as a place that they should avoid at all costs.
It's perfectly apparent that Sancho wants to move a) back to London and b) to a club where, in his opinion, he will get an earlier opportunity to play first team football. City might be able to reassure him about the latter (though I doubt it) but there's nothing that they can do about the former. So it seems highly unlikely that he could be persuaded to change his mind. It's also more than possible, after he went AWOL, that City no longer want anything further to do with him bar negotiating the fee and sell on percentage.