UK Office of Trade Sanctions Implementation New Enforcement Powers and Increased Reporting Obligations

By: Michael Ruck, Petr Bartoš, Rosie Naylor, and Helen Phizackerley

The new Trade, Aircraft and Shipping Sanctions (Civil Enforcement) Regulations 2024 (the Regulations), came into force on 10 October 2024.

Under the Regulations, the Office of Trade Sanctions Implementation (OTSI) will have new powers to investigate alleged breaches of trade sanctions and to take enforcement action in relation to:

• The provision and procurement of sanctioned services;
• The movement, making available or acquisition of sanctioned goods and technology outside the United Kingdom; and
• The provision of ancillary services for the transfer, making available or acquisition of sanctioned goods and technology outside the United Kingdom.

OTSI’s Main Powers

Civil Monetary Penalties
OTSI will have the power to impose civil monetary penalties up to £1 million or 50% of the estimated value of the breach, whichever is the greater. Breaches will be determined on a strict liability basis and penalties will be imposed based on the balance of probabilities.

OTSI may publish reports of cases where civil monetary penalties have been imposed. Such reports can include information on who the penalty has been imposed upon, an overview of the facts of the case, why the penalty has been imposed, the aggregate value of the breaching transactions and the penalty value imposed on each person.

Power to Request Information
OTSI will have the authority to request disclosure of information to monitor compliance, detect evasion and investigate a suspected breach or failure to comply with an obligation.

If the individual or organisation does not have the requested information, they must take reasonable steps to obtain such information and to keep it in their control.

It is an offence not to comply with a request for information.

Reporting Obligations

New reporting obligations will apply to those deemed “relevant persons”. Relevant persons will be required to report any known or suspected breaches as soon as practicable that have become apparent during the course of their business. Relevant persons include financial services companies, lawyers, notarial service providers and money transmitting companies.

It is an offence for a relevant person not to comply with the reporting obligations and they may be subject to a fine, imprisonment or both.

What This Means for Businesses

The Regulations markedly extend the UK government’s ability to respond to violations of trade, aircraft and shipping sanctions by enhancing its monitoring, detection and investigatory capabilities. This is significant as it illustrates the UK government’s commitment to sanction compliance and its intention to intensify enforcement efforts.

OTSI’s ability to impose civil penalties makes it essential for companies to ensure compliance with UK trade sanctions. To minimise the risk of violation, companies that fall within OTSI’s newly expanded remit should consider conducting renewed risk assessments, implementing procedures to respond to potential requests for information and preparing policies that assist with relevant reporting obligations. If companies or individuals suspect a breach of trade sanctions, they should consider reporting it to OTSI as soon as possible to minimise the risk of civil penalties.