On December 11, 2023, Nusrat Ghani, the UK’s Minister for Industry and Economic Security, unveiled a new unit dedicated to the civil enforcement of the UK’s trade sanctions.
Known as the Office of Trade Sanctions Implementation (OTSI), the unit has been set up to enforce the UK’s trade sanctions with Russia, but it also applies to all trade sanctions currently in place by the UK Government.
What is OTSI?
The Office of Trade Sanctions Implementation (OTSI) will oversee and enforce civil compliance with trade sanctions, with the authority to levy financial penalties for violations.
OTSI will also have an advisory capacity, specifically in “trade sanctions business engagement and guidance.”
Historically, trade sanctions investigations have been conducted by His Majesty’s Revenue and Customs (HMRC). While OTSI will handle civil enforcement, HMRC will continue to manage criminal enforcement for more severe infractions.
The Export Control Joint Unit is expected to continue issuing export licenses, as there is no mention of a shift in this responsibility in the OTSI framework.
OTSI will be integrated within the UK’s Department of Trade and Business and is anticipated to be fully operational later in 2024, pending regulatory measures that empower it to administer financial penalties. How big these financial penalties will be remains unclear.
Will OTSI only apply to Russian sanctions?
In short, no. Though breaches of Russian sanctions may have led to OTSI’s creation, it will also apply to all trade sanctions currently in place by the UK Government.
Russian sanctions have been driving this agenda, however. In Nusrat Ghani’s speech, the Minister explicitly stated that OTSI aims to “starve Russia of the technologies and revenues it needs to continue its illegal invasion.”
Whether or not the focus will initially be heavily invested in Russia, or there will also be significant focus on other countries with trade sanctions in place – like Argentina, or the Democratic Republic of Congo – is to date unclear.
Though the fact that the Government published OTSI guidance on exporting to Iran in March 2024 suggests that we are likely to see it applied rigorously across all sanctioned nations.
There is also likely to be a focus on countries that Russia is using to circumvent trade sanctions. A UK Government red alert published in December identified Belarus, China, Serbia, Turkey, the UAE, and Uzbekistan as continuing to support Russia’s war.
OTSI vs OFSI
How similar OTSI’s enforcement approach will be to the Office for Financial Sanctions Implementation (OFSI) will hopefully become clearer in the months ahead.
OFSI, since 2022, under the Economic Crime (Transparency and Enforcement) Act 2002, has had the power to issue civil monetary penalties on a strict civil liability basis for violations of financial sanctions.
The UK government is shifting towards a more proactive model, as evidenced by a 175% increase in the resources allocated to OFSI’s enforcement team in 2022-2023. By April 2023, OFSI’s enforcement unit was actively investigating 172 cases.
This is not likely to slow down, either. Nor is it UK-specific. International Law Firm Holman Fenwick Willan’s research reveals that 80% of lawyers predict that the enforcement of international sanctions will increase in the next 12 months.
What Trade Compliance professionals should do to prepare for OTSI
To prepare for OTSI, Trade Compliance professionals should get ahead now. Here are some things you should do to make sure you are prepared.
1. Assess UK trade sanctions risk
Evaluate which jurisdictions you currently supply to or through, from the UK. Highlight any potential risks – both in terms of supplying to Russia on the first hand, but also to other countries with trade sanctions in place. Also, factor in those highlighted in the UK Government’s red alert – Belarus, China, Serbia, Turkey, the UAE, and Uzbekistan.
2. Assess third-party risk
Update your KYC and vetting procedures to ensure suppliers and customers are up to date with the potential risks that may come with OTSI – again, focus on the countries that currently have trade sanctions in place, and those issued in the Government’s red alert.
3. Make information visible and accessible to the business
Ensure your business partners and employees can easily identify, ask questions, and get answers about major warning signs that certain transactions or customers may present an elevated risk of trade sanctions violations or evasion. Firstly, you will need to update your policies. But you also need to make this knowledge accessible to avoid potential risk.
How Policy AI can help ensure you comply with OTSI
With OTSI on the horizon and hundreds of other global trade compliance regulations to keep on top of, it can take a lot of work to ensure your organization remains fully compliant.
BRYTER’s Policy AI tool can help you make your policies accessible to your business – delivering instant, accurate answers to complex compliance questions on tariffs, customs, and imports in seconds.
When someone in your business wants to know if they can purchase technology goods from Taiwan, or supply goods to Uzbekistan, they can ask our tool the question directly through Microsoft Teams, Slack, or in an email, and Policy AI will give a fully referenced answer based on your own policies.
You can also compare your own policies to official regulations. So, when OTSI regulations are released in full, you can stress-test your own policies against them and understand where you have gaps, and which parts of your policies you need to update.
Policy AI works by using proprietary AI Agents who have been trained on understanding compliance and trade sanctions information. This means unmatched quality of answers based specifically on the information you provide – no hallucinations.
And, most importantly, all answers are fully referenced making it easy to verify.
