Clifford Chance

On 11 December 2023, the UK government announced the creation of a new enforcement unit, the Office of Trade Sanctions Implementation ("OTSI") that will have new civil enforcement powers for trade sanctions breaches – mirroring those which already exist for financial sanctions.

OTSI (to be distinguished from, but which is to be based on OFSI, the Office of Financial Sanctions Implementation) will be responsible for the implementation and civil enforcement of trade sanctions against Russia.

The unit, which will sit within the Department for Business and Trade ("DBT"), will be a new authority tasked specifically with implementation of existing and new trade sanctions, including those on Russia, currently the preserve of the Export Control Joint Unit of DBT and HMRC.

The unit will have powers to:

• investigate potential breaches of trade sanctions;
• issue civil monetary penalties for breaches of trade sanctions; and
• escalate matters to HMRC for criminal enforcement when necessary.

Those powers will be set out in legislation which is yet to be enacted, but which is expected to contain similar authority for the imposition of civil penalties as currently exists in connection with breaches of the UK's financial sanctions, including without regard to the knowledge of defendants.

OTSI's remit will apparently include investigating activity by those who may be attempting to circumvent sanctions by sending goods through third countries.

As well as enforcement, OTSI will be providing "guidance to business and supporting compliance". As in relation to financial sanctions, the guidance will need to be scrutinised carefully for those in the private sector as it likely will form a basis for OTSI to determine when to take enforcement action.

A red alert issued by the National Crime Agency last week set out examples of red flags that could indicate sanctions evasion or circumvention relating to the export of high-risk goods. It is hoped that when it comes into being, OTSI will issue practical guidance for the industry that is based on consultation with those who are tasked with following it on a day to day basis.

OTSI will launch in early 2024, once a legal framework has been established, and will work alongside OFSI and other UK government departments.