From Thursday October 10, 2024, the UK has an additional new sanctions regulator following the official launch of the Office of Trade Sanctions Implementation (“OTSI”).  First announced in December 2023, its establishment was confirmed last month with the publication of The Trade, Aircraft and Shipping Sanctions (Civil Enforcement) Regulations 2024 (the “Regulations). 

Sitting within the UK Department for Business and Trade (“DBT”), OTSI will be responsible for the civil enforcement of many UK trade sanctions and will act as a sister agency to the existing Office of Financial Sanctions Implementation (“OFSI”).  

What will OTSI enforce?

OTSI will have the power to investigate and bring civil enforcement action for breaches of certain trade sanctions, such as:

  • the provision of prohibited services (e.g., prohibited professional and legal services under the UK’s Russia sanctions regime);
  • the movement, acquisition and making available of sanctioned goods and technologies outside of the UK;
  • the provision of prohibited technical assistance, brokering services or financial services or funds in connection with sanctioned goods or technology outside of the UK;
  • any suspected circumvention of the aforementioned trade sanctions; and
  • compliance with any associated notification or reporting requirements. 

OTSI will not be responsible for the criminal enforcement of the above trade sanctions, which will stay with HM Revenue & Customs (“HMRC”). HMRC also retains responsibility for enforcing export controls (such as military and dual-use controls) and trade sanctions with respect to physical exports/imports and transfer of technology out of/into the United Kingdom (i.e., those which fall within its remit as the UK’s customs authority). OTSI will be responsible for issuing licences relating to the provision of standalone services, including professional and business services. The Export Control Joint Unit (“ECJU”) will remain responsible for licensing the export of goods, software and technology from the UK.   

Other agencies will be responsible for certain specified trade-related civil enforcement, namely OFSI retains responsibility for the Russian oil price cap mechanism and OFCOM is responsible for the civil enforcement of the internet services prohibitions under the UK’s Russia and Belarus sanctions regimes. The Department for Transport will be responsible for the civil enforcement of shipping and aircraft sanctions.

Civil Enforcement Powers

OTSI will be able to determine most breaches of trade sanctions on a strict liability basis, meaning that any defence that a person did not know or have cause to suspect that an offence had been committed will not protect them (this is not the case for some offences, for example circumvention of trade sanctions for which OTSI would need to prove that the person acted knowingly). This standard now mirrors the standard for the civil enforcement of the UK’s financial sanctions regime following changes in June 2022.

OTSI will be able to impose monetary penalties, with the maximum monetary penalty for breaching trade sanctions regulations being either £1 million or 50% of the estimated value of the breach – whichever is greater.  For aircraft and shipping sanctions, the Department of Transport can impose monetary penalties up to £1 million or 50% of the estimated value of the aircraft or ship used in connection with the breach (again, whichever is greater). OTSI therefore has the power to issue very substantial fines on entities falling afoul of the regulations.   

OTSI can also publicise information about the imposition of a civil monetary penalty.  This aligns OTSI with OFSI’s approach and is a divergence from HMRC, which publishes limited information about its enforcement. 

OTSI has published guidance about how it will assess suspected breaches of trade sanctions, which includes non-exhaustive mitigating factors that it may consider when enforcing an established breach.  These factors include: timely disclosure of any breaches; compliance with OTSI information requests; good record-keeping compliance; no previous record of having breached sanctions; and having proportionate compliance systems in place relative to the size, sanctions exposure and resources of a business.

Information Gathering Powers 

OTSI has been granted broad powers to request information, including where it may reasonably require information for the purposes of exercising its functions; monitoring compliance with, or detecting evasion of trade sanctions, or investigating a suspected breach or failure to comply with a trade sanctions obligation.  It can also request information about a person’s compliance with a trade licence. There are associated offences for failure to comply with these information provisions. 

Reporting Obligations

Finally, there are new reporting requirements in relation to suspected breaches of the trade, shipping and aircraft sanctions.  For trade sanctions, these requirements apply to (among others) financial institutions and legal practitioners.  For aircraft and shipping sanctions, the requirements apply to aircraft operators, people chartering aircrafts or ships by way of business, masters or pilots of vessels, and harbour authorities.

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Photo of Dj Wolff Dj Wolff

David (Dj) Wolff is the co-chair of Crowell & Moring’s International Trade Group and a director with Crowell Global Advisors, the firm’s trade policy affiliate.

At Crowell & Moring, he serves on the steering committee for the International Trade Group, where his practice

David (Dj) Wolff is the co-chair of Crowell & Moring’s International Trade Group and a director with Crowell Global Advisors, the firm’s trade policy affiliate.

At Crowell & Moring, he serves on the steering committee for the International Trade Group, where his practice focuses on all aspects of compliance with U.S. economic sanctions, including day-to-day compliance guidance, developing compliance programs, responding to government inquiries, conducting internal investigations, and representation during civil and criminal enforcement proceedings. Dj works regularly with non-U.S. clients, both in Europe and Asia, to evaluate the jurisdictional reach of U.S. sanction authorities to their global operations, identify and manage the potential conflict of laws that can result from that reach, as well as to support client’s design, implementation, and evaluation of a corresponding risk-based sanctions compliance program. Dj also regularly leads teams in diligence efforts on trade and related regulatory areas on behalf of his U.S. and non-U.S. clients in the M&A arena, having successfully closed more than 30 deals with an aggregate valuation of several billion dollars over the last 18 months.

Dj is ranked by Chambers USA in International Trade: Export Controls & Economic Sanctions. He has previously been recognized by Law360 as a Rising Star in International Trade (2020), by The National Law Journal as a “DC Rising Star” (2019), by Who’s Who Legal: Investigations as a “Future Leader” (2018 and 2019), Acritas Star as an Acritas Stars Independently Rated Lawyers (2019), by Global Investigations Review as one of the “40 under 40” in Investigations internationally (2017), and WorldECR as one of the five finalists for the WorldECR Young Practitioner of the Year award (2016).

Photo of Sophie Davis Sophie Davis

Sophie Davis is an associate in Crowell’s London office and advises clients on a range of sanctions, export controls, and trade compliance matters. Sophie has particular experience advising multinational corporations and financial institutions on how to comply with rapidly evolving trade and financial

Sophie Davis is an associate in Crowell’s London office and advises clients on a range of sanctions, export controls, and trade compliance matters. Sophie has particular experience advising multinational corporations and financial institutions on how to comply with rapidly evolving trade and financial sanctions across a range of EU and UK sanctions regimes, assisting corporate clients with complex sanctions issues arising from their continued operations in, or divestments from, Russia, and supporting clients with licensing applications and responding to investigations.

Sophie also assists companies on compliance with anti-bribery and anti-money laundering laws, foreign direct investment requirements, human rights, environmental and sustainability regulatory requirements. Prior to joining Crowell & Moring, Sophie worked in the international trade and regulatory team in another top international law firm, based in London, as well as for a leading New Zealand law firm.