The UML is the de facto standard for system specification, but offers little specialized support for the specification and analysis of policies. This paper presents Deontic STAIRS, an extension of the UML sequence diagram notation with customized constructs for policy specification. The notation is underpinned by a denotational trace semantics. We formally define what it means that a system satisfies a policy specification, and introduce a notion of policy refinement. We prove that the refinement relation is transitive and compositional, thus supporting a stepwise and modular specification process. The approach is exemplified with access control policies.