UK announces new sanctions agency – OTSI – to launch in 2024

On 11 December 2023, the UK government announced the creation of the Office for Trade Sanctions Implementation (OTSI) as part of the Department for Business and Trade. OTSI is set to launch in early 2024 and will sit alongside the Office for Financial Sanctions Implementation (OFSI), which is responsible for administering financial sanctions. In announcing OTSI, Sanctions Minister Anne-Marie Trevelyan said it would “further strengthen the UK’s sanctions system and allow us to maximise the impact that trade sanctions have on those who continue to flout the global rules.”

The remit of OTSI’s activities will cover the civil enforcement of trade sanctions (including Russia-related trade sanctions) with powers to investigate potential trade sanctions breaches, issue civil penalties and refer cases to HMRC for criminal enforcement where applicable.

What are trade sanctions?

Trade sanctions are controls on the import, export, transfer, movement, making available and acquisition of goods and technology, and the provision and procurement of services related to goods and technology and certain other non-financial services.

Examples of trade sanctions include controls on the export and import of certain goods such as military goods and technology, controls on the provision of certain services such as financial services relating to controlled goods and technology, and controls on other trade related activity such as services relating to ships and aircrafts. The legal services prohibition contained in Regulation 54D of the Russia Regulations is another example of a trade sanction aimed at controlling the provision of legal services in specific circumstances. We wrote about how the legal services prohibition operates.

Who currently administers trade sanctions? 

At present, trade sanctions are implemented and administered by the Export Control Joint Unit (ECJU) and the Import Licensing Branch (ILB), both of which sit within the Department of Business and Trade. ECJU is also responsible for administering the licensing provisions on behalf of the Secretary of State for all trade sanctions, except those relating to imports which are implemented and administered by the ILB. The government announcement makes no reference to licensing activities that could otherwise be in breach of trade sanctions and the expectation is that ECJU and ILB will remain responsible for the licensing of exports and imports of goods and services. 

What enforcement measures can currently be taken in respect of trade sanctions breaches? 

The contravention of trade sanctions is a criminal offence pursuant to The Customs and Excise Management Act 1979 (CEMA). Under CEMA, the maximum sentence on indictment is of seven years’ imprisonment or a fine (or both), but The Sanctions and Anti-Money Laundering Act 2018 (SAMLA), by virtue of Section 17(6) enables secondary legislation passed under it, such as the Russia Regulations, to increase the maximum penalty to 10 years imprisonment. Any breach of the trade licensing provisions or information requirements in connection with general trade licences is also triable either way and carries a maximum sentence on indictment of two years’ imprisonment and/or a fine.

HMRC conducts investigations into trade sanctions breaches and has the power to impose civil penalties under its compound penalty scheme.

The creation of OTSI signals a desire on the part of the UK government to “clamp down” on trade sanctions breaches. This is particularly relevant in light of the much-reported circumvention of trade sanctions via third-country trade and concealment of origin of relevant goods. Minister Nusrat Ghani stated in the press release:

“[…] we are leaving no stone unturned in our commitment to stopping Putin’s war machine. That means clamping down on sanctions evaders and starving Russia of the technologies and revenues it needs to continue its illegal invasion […].”

OTSI will step into the shoes of HMRC when it comes to investigations and civil enforcement powers, but HMRC will retain the mandate to investigate more serious breaches and refer them to the CPS where criminal prosecution is warranted.

The establishment of a trade sanctions-specific enforcement body is a clear indication that increased enforcement is on the horizon for those who breach or circumvent trade sanctions. Like OFSI, the ECJU has had to deal with an increased workload since the start of Russia’s invasion of Ukraine, and the delegation of the enforcement aspect of its duties to OTSI will enable more resources to be dedicated specifically to the investigation and enforcement of trade sanctions breaches, which will likely result in an increase of such actions. 

OTSI and OFSI 

It remains to be seen whether OFSI and OTSI will be the new double act in the scene of UK sanctions administration and enforcement.

OFSI has played an increasingly prominent role in the last two years and the creation of OTSI indicates that the UK government see no sign of the prominence of sanctions decreasing. OFSI has managed to spotlight the importance and role of financial sanctions and has sought to increase its engagement with industry actors. We expect that OTSI will seek to mirror OFSI in seeking to engage with relevant industries, providing guidance and of course, bringing enforcement action for breaches of sanctions. 

Contact Details for OTSI can be found below.

Office of Trade Sanctions Implementation (OTSI)
Old Admiralty Building, Admiralty Place
London
SW1A 2DY
United Kingdom

DBT-OTSI@businessandtrade.gov.uk